IAP.L Regulatory News (IAP)

ICAP plc - Trading Statement

- Transaction with Tullett Prebon on track

- Solid growth in the Post Trade division

- Continued investment in new product initiatives

- Market conditions remain challenging

London, 9 February 2016 - ICAP plc (IAP.L), a leading markets operator and provider of post trade risk mitigation and information services, announces today its trading statement for the period from 1 October 2015 to 31 December 2015. Results for the year ended 31 March 2016 will be announced on 16 May 2016.

Group revenue from continuing businesses for the third quarter to 31 December 2015 was 5% lower than the same period last year on a constant currency and on a reported basis.

Overall market conditions have remained challenging. Risk appetite remains subdued amongst our clients as they continue to deleverage their balance sheets. The first step in the normalisation of the US interest rate environment was taken as the US Federal Reserve raised interest rates by a quarter percentage point. However, volatility remained relatively benign through the quarter before picking up at the start of the new calendar year.

Michael Spencer, Group Chief Executive Officer of ICAP, said: "Against the backdrop of a difficult market, our business continues to perform well, particularly the Post Trade division which goes from strength to strength. The decision by the Fed to raise interest rates was very welcome, but we are still operating in an environment of ultra-low interest rates and we have some way to go before we return to more normal market conditions. Risk appetite remains subdued and I see few signs that this will pick up any time soon, even after markets began the year with a short burst of extreme volatility.

"The transaction to combine our global hybrid voice broking business with Tullett Prebon is proceeding well, and marks a defining moment in the transformation of the Group into a financial technology business. We have laid the foundations for our electronic and post trade businesses to deliver strong, cash generative returns for the future. I remain confident and excited about the range of opportunities ahead of us and our ability to execute our strategy successfully and provide long-term profitable growth."

Electronic Markets

Revenue decreased by 10% on a constant currency basis (7% on a reported basis) during the third quarter compared to the same period last year. Despite maintaining its leading market position average daily volumes in US Treasuries on the BrokerTec platform were down 11% to $147 billion. This was against demanding comparables in the previous year, which saw an unusually high level of volatility and one of the biggest intraday moves ever. In US repo average daily volumes decreased by 1% to $219 billion and decreased in European repo by 3% to €168 billion.

A tough comparable period for EBS resulted in average daily volume decreasing by 35% to $78 billion for the third quarter as FX volatility did not have the same central bank interventions from the ECB and Bank of Japan witnessed in the same period last year. Since the start of the calendar year, FX volatility has increased as Chinese equity markets sparked a global market sell off. The inauspicious start for global equity markets led to somewhat increased volatility especially in emerging market currencies such as CNH and Asian NDFs albeit comparables for the final quarter of the year remain challenging as they benefitted from the Swiss National Bank action. Strong demand for e-Fix Matching, an electronic FX Benchmark Service, resulted in an increase of more than 300% in average daily volumes in the period compared to the same period last year.

During the period there was ongoing investment in EBS Direct which continues to expand its customer base and product offering. In December, it beta launched FX outrights and swaps, a significant part of the FX market in which EBS has never previously participated. Demand for EBS Direct continues to grow with a record month in January with average daily volumes more than U$20 billion.

Post Trade Risk and Information

Revenues increased 8% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year, driven by continued demand for TriOptima's compression and reconciliation services. In October, TriOptima launched the triReduce CLS Forward FX Compression Service completing the first successful compression cycle for FX forwards and swaps transactions. Following the introduction of new margining rules for uncleared swaps, TriOptima has integrated with AcadiaSoft to deliver an end-to-end solution fulfilling all related regulatory requirements. 

As part of Traiana's strategy to innovate, grow and diversify its business into other asset classes, it recently announced that it has entered into an alliance to offer a repo matching service to deliver efficient, automated processes ahead of significant regulatory change. Activity at Reset remains challenged as revenue is largely correlated to the movement in both actual and forecast short-term interest rates. However, the recent change in the US interest rate has had a positive impact, offsetting the ongoing negative trend.

Euclid Opportunities, ICAP's early stage fintech investment incubator, recently invested in Digital Asset Holdings LLC, a developer of Distributed Ledger Technology ("DLT"). Digital Asset Holdings is at the forefront of developments in this field and ICAP will continue to explore options to use DLT to build next generation products and identify further opportunities for innovation.

Global BrokingRevenue from continuing businesses decreased by 7% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year. Year-on-year revenue performance in November and December was much improved on October. The ongoing structural and cyclical factors affecting the division persist, including further deleveraging by the investment banks. Strong revenue growth from electronic matching sessions continues to develop especially in the Asia Pacific region and the Americas.

The transaction to merge the global hybrid voice broking business with Tullett Prebon is proceeding as expected and it is anticipated that it will take place during 2016. Currently both companies are in the process of obtaining regulatory and competition approval from various authorities. The Circular will be issued in March 2016 followed by a shareholder vote.

Notes:

ICAP plc announced on 11 November 2015 that the Board of ICAP plc has agreed terms with Tullett Prebon for the disposal by ICAP of its global hybrid voice broking and information business to Tullett Prebon, including ICAP's associated technology and broking platforms (including iSwap and Fusion) and certain of ICAP's joint ventures and associates ("ICAP's Global Broking Business" or "IGBB"). Revenue from IGBB decreased by 5% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year, in line with the decline in revenue in Global Broking partly offset by an increase in information revenue.

Investors & Analysts Conference Call:

This will be hosted by Michael Spencer at 08:15am on Tuesday 9 February 2016Dial in number: +44 (0)20 3003 2666Access Code: ICAPA recording of this call will be available at www.icap.com

Contacts

About ICAP ICAP is a leading markets operator and provider of post trade risk mitigation and information services. The Group matches buyers and sellers in the wholesale markets in interest rates, credit, commodities, FX, emerging markets and equity derivatives through voice and electronic networks. Through our post trade risk and information services we help our customers manage and mitigate risks in their portfolios. For more information, please go to www.icap.com.