ICAP's profits hit by nervy trading

A drop in trading volumes due to ongoing economic fears has hit revenues and profits at the interdealer broker ICAP.

The firm, which matches up buyers and sellers in the wholesale markets, said there had been a slight improvement in business in the first three months of 2012. However, this had tailed off with activity in April and early May slow due to the ongoing euro crisis and regulatory uncertainty depressing trading volumes.

"Some resolution on these important issues would give a big and welcome lift to market sentiment," said Chief Executive Michael Spencer.

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Revenues fell 3% from £1,741m to £1,681m, well below the consensus forecast of £1,713m, as uncertainty in the Eurozone and constraints on market liquidity resulted in a fall in revenue from its voice networks and a marginally lower performance in our electronic business. In contrast, the post trade risk and information business saw strong growth.

Statutory pre-tax profit fell at a sharper rate, dropping by from £233m to £217m, mainly as a result of a increase in the impairment of goodwill of £92m. On an adjusted basis (from continuing operations before acquisition and disposal costs and exceptional items) profit increased by 1% from £350m to £354m.

Basic earnings per share fell 26% to 21.1p, but the company tried to keep investors onside with 10% dividend hike from 19.95p to 22p, better than the 20.57p analysts were looking for. Net debt was reduced from £161m at the end of the prior fiscal year to £82m.

Revenues fell in each of its markets except foreign exchange, where it was up 2%. Credit markets, comprising corporate bonds and credit derivatives, were hit particularly hard with revenues down 15%.

Trade in its biggest market, rates, which includes interest rate derivatives and government bonds, was down 3%.

BC/MM