ICAP is an interdealer broker and provider of post trade risk mitigation and information services. I have a holding in my income portfolio (epic code: IAP).
ICAP released two announcements today, a trading update ahead of their half-year end and a settlement agreement with the UK Financial Conduct Authority (FCA) and the U.S. Commodity Futures Trading Commission (CTFC).
In their trading update they state that activity levels in global financial markets were encouraging at the start of the financial year, but trading began to ease off in July followed by a more significant decline in August. Although they state that there has been a modest improvement in September overall volumes remain relatively subdued. Management expect group revenue for the six months to be around 1% lower than the previous year and profit before tax to be in line with the previous year.
The settlement agreements with the FCA and the U.S. CFTC relate to the involvement of certain brokers in the attempted manipulation of YEN Libor by bank traders between October 2006 and January 2011. Under the terms of the settlements, ICAP has agreed to pay penalties of £14 million to the FCA and $65 million to the CFTC, totalling £55 million ($87 million). Although the fine is small by comparison to the banks involved (UBS, RBS and Barclays have paid $2.4bn in total), it represents 26% of last year's normalised post tax profits and 3.7% of its turnover. This whole unfortunate episode, that covered a period of 4 years, reflects badly on the culture that exists within ICAP.
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