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 issued an IMS today, commenting on their third quarter trading. Market conditions are still challenging, with revenue for the third quarter 6% lower than last year and 5% lower on a constant currency basis, badly effected by a slower December than expected.
Management mention that the ongoing cost savings programme remains on track and their expectations for PBT for the full year remain unchanged, on a constant currency basis (guided as marginally ahead of last year). Although they do state that there are a number of external factors that could affect performance in the final quarter in Global Broking.
Despite the difficult market conditions, they saw a modest improvement in activity in January.
They will do well to achieve market expectations for the year, with the difficult market environment and a number of risks and uncertainties in Global Broking.
I think the key to the future of brokers like ICAP is how management decides to take the business forward. With all of the regulations the big banks are facing there are new opportunities appearing that brokers may fill that diverge from their traditional core business. Whether they have the capital to invest and the will to move away form their core business will i think determine their future success.
ReplyDeleteAlso as the regulation moves more and more to exchange traded products will the brokers find they are no longer needed so much?
I'm still undecided either way!
Would not disagree with your comments, interdealer brokers have virtually no economic moat. So it is not an investment that that one could buy and forget - it certainly needs careful monitoring.
ReplyDeleteInteresting blog you have - I shall make a point of visiting it.