ICAP says activity picking up after 'challenging' third quarter

Interdealer broker ICAP saw shares slip into the red on Thursday after revealing that revenues and volumes declined in the third quarter as a result of 'challenging' conditions.

However, with activity picking up in January, the company said it remains on track to deliver a full-year pre-tax profit within current market forecasts of £280-305m.

As highlighted in its first-half report in November, trading during the final three months of 2012 was tough with a "pronounced slowdown" in Global Broking volumes in December.

Group revenues fell 13% year-on-year with total average daily volumes on ICAP's electronic foreign exchange and fixed income platforms, EBS and BrokerTec down 9.0% at $664bn.

The firm said that Global Broking activity levels were affected by the "ongoing economic, monetary and regulatory uncertainty, which further exacerbated the traditional year-end slowdown".

However, activity levels last month improved, with electronic broker volumes up 17% year-on-year. The improvement was sparked by the 'fiscal cliff' resolution in the US, early repayment of loans by banks to the European Central Bank, and an increase in volatility in core currency pairs at EBS, ICAP's electronic FX platform.

"While December was even slower than expected, we've seen a marked improvement in trading volumes since the beginning of January across our entire business, although it is premature to tell if this is the start of a more sustained upturn," said Chief Executive Officer Michael Spencer.

"We remain well positioned for the opportunities that regulatory changes in the market landscape will bring. The push towards more electronic trading and risk mitigation of OTC derivatives plays to our strengths as we have invested in developing the services and technology that our customers will need to meet the new regulatory requirements."

Shares were down 2.13% at 349.3p by 08:30 on Thursday,