ICAP confirms broker staff cuts as revenue falls (updated)

Compagnie Financiere Tradition SA

16/07/2014 17:05

* Confirms cutting jobs in voice broking 
    * 100 brokers said leaving - IFR 
    * Q1 revenue down 14 pct 
 
 (Adds analyst comment, fresh CEO comments) 
    By Clare Hutchison 
    LONDON, July 16 (Reuters) - ICAP Plc  IAP.L , the world's 
biggest broker of transactions between banks, is downsizing its 
so-called voice broking unit to concentrate on investments in 
the more profitable areas of electronic broking and post-trade 
services.  
    Interdealer brokers like ICAP, whose staff match buyers and 
sellers of currencies, bonds and other tradable instruments, 
have been hit hard by regulations that led their traditional 
investment bank clients to cut back on dealing and forced more 
trading on to electronic platforms.  
    ICAP Chief Executive Michael Spencer confirmed on Wednesday 
he was cutting staff in the company's Global Broking division, 
which houses its brokers, although he declined to say how many 
jobs were at risk and which desks would be affected.  
    Citing market sources, Thomson Reuters IFR reported last 
month that the company had begun cutting 100 broking staff, or 
around 5 percent of a 2,000-strong unit.  ID:nL6N0P434U  
    Spencer said the downturn in voice broking, a decade ago the 
main driver of ICAP's profits, was "as bad a drought as I've 
experienced in my entire career. 
    "We decided we needed a fundamental resizing of that 
business for what we believe is the new world order in our 
industry," Spencer said. 
    Ultra-low interest rates have also reduced the scope for 
trading among ICAP's traditional investment bank clients. 
Goldman Sachs  GS.N  and JP Morgan  JPM.N  this week reported 
drops in trading revenue of 10 percent and 15 percent 
respectively in the second quarter. 
    Those declines were not as severe as expected, but Spencer 
quashed any expectations of a quick rebound. 
    "The macro (economic) outlook for all of us remains a 
challenging one ... Volumes, I think, are going to be pretty 
subdued for a while." 
    ICAP shares, which have fallen 21 percent this year in a 
rising British stock market, were little changed at 354.9 pence 
by 1451 GMT. 
    Analyst Gary Greenwood at brokerage Shore Capital saw scope 
for a recovery in ICAP shares in the lonter term, because of the 
company's diversification into higher-margin businesses like 
electronic broking and post-trade services quicker than rivals. 
    "Over time I think ICAP may have a smaller overall revenue 
base than it has had historically, but I think it will have a 
much higher quality revenue base ... Once (investors) start to 
see the bottom in the global broking side, I think the market 
will start to re-rate the shares quite significantly," Greenwood 
said. 
    ICAP earlier reported first-quarter revenue down 14 percent 
from a year earlier. Voice broking turnover fell 19 percent.   
Volume at two of its main electronic trading platforms, 
BrokerTec for fixed income and EBS for currencies, were 10 
percent lower than a year earlier at $707 billion.  
    But EBS Direct, a direct-dealing platform aimed primarily at 
smaller and regional banks, and iSwap, an electronic platform 
for trading interest rate swaps, both achieved record high 
volumes in June. 
    Spencer said customers were increasingly using electronic 
transactions for their activities and the company would be 
investing more in electronic broking, including expanding its 
fixed-income offering and growing beyond spot FX at EBS, as 
outlined by EBS's CEO in an interview.  ID:nL6N0PR1Y2  
    The same goes for ICAP's post-trade and information 
business, which saw double-digit percentage revenue growth in 
the first quarter. 
    The 28-year-old company, which competes with Tullett Prebon 
 TLPR.L , BGC Partners  BGCP.O , GFI Group  GFIG.N  and 
Swiss-based Tradition  CFT.S , has been trying to reposition its 
businesses towards those activities, which now account for 
two-thirds of its operating profit. 
    "We believe that is the future. We remain very bullish for 
the medium-term outlook for electronic broking and post-trade," 
Spencer said. 
 ($1 = 0.5836 British Pounds) 
 
 (Editing by Tom Pfeiffer and David Holmes) 
 ((Clare.Hutchison@thomsonreuters.com)(+44)(0)(20 7 542 
3346)(Reuters Messaging: 
clare.hutchison.thomsonreuters.com@reuters.net)) 
 
Keywords: ICAP RESULTS/