TP ICAP facing slight risk of downgrades but overall picture remains promising

Down 2% at 314p (£2.27bn) - Trading Statement

This large global broker has issued a solid trading update.

Key points:

• Year-to-date revenue +9% at constant currency rates, +7% at actual currency rates

• Q3 better than that at +11% (constant rates), +11% (actual rates).

Q3 performance by division

Global Broking (responsible for more than half of total revenues) led the way with 16% growth in Q3.

Energy & Commodities grew by 7%, while Liquidnet fell 1% and the high-margin data division Parameta Solutions was flat year-on-year.

For some context, in H1 the divisional breakdown of revenue and profits between broking and Parameta was as follows. These were the two largest contributors to the group's profits:

• Global Broking: £770m revenue, £159m adj. EBIT

• Parameta: £97m revenue, £36m adj. EBIT.

Outlook

TP ICAP is "comfortable with full year 2026 market expectations for adjusted EBIT, subject to foreign exchange movements."

These expectations are for £367m of adjusted EBIT (range £357-378m).

Commentary

The broking division enjoyed "strong momentum" helped by "strong strategic execution" and "supportive market conditions".

E&C is "well-positioned for a recovery in its markets", which is an acknowledgement that these markets have not yet recovered. This is due to "depressed levels of activity in global Oil futures markets". This seems paradoxical as Iran-related price volatility would have initially increased volumes, but the subsequent lack of physical flow has apparently depressed volumes. Perhaps this division could be a future beneficiary of a peace deal with Iran?

Liquidnet "continued to execute well" although "equities block trading market was subdued, as the Middle East conflict continued to weigh on market risk appetite and client trading behaviour". Another division that would benefit greatly from the cessation of hostilities, perhaps?

Parameta saw ARR grow 5% year-on-year. It sounds a little quiet in Q3, but there is some good news for Q4: "subsequently, Parameta Solutions has closed its largest US buy-side new logo contract to date".

Estimates

Cavendish says that they do not expect material changes to their forecasts after today's update. I think there could be slight downgrades in store, given that Cavendish say that they "are looking for further revenue growth" in Parameta and Liquidnet by year-end.

Graham's view

My impression is that Q3 growth has perhaps been slightly disappointing. The highest-margin division, Parameta, has seen 5% growth in ARR year-on-year and some observers may have been expecting a little more. It's worth noting in this regard that today's "in line" outlook statement referred only to EBIT, and not to revenue.

At the interim results, at a share price of 321p, I maintained our fully positive stance on this share. I'm inclined to do that again today, primarily on valuation grounds:

For a business with such a fine record of profitability and such strategic importance in global financial markets, I view this valuation (9x earnings) as undemanding.

As I noted at the interims, the market has seemed to be a little disappointed with recent updates. Based on the share price reaction then, the market seemed to expect another upgrade (which did not materialise).

Today, again, the market seems a little disappointed and it is fair to think that there could be slight forecast downgrades coming.

But look at the big picture: earnings forecasts have, overall, been quite resilient over the past year.

There are some macro factors beyond the company's control - it can't determine trading volumes - but the track record says that in general the company can generate a solid profit margin in all sorts of market conditions. That will once again be the case in 2026.