Broker TP ICAP cuts operating profit margin outlook
8:11 am Tuesday, March 14th, 2023
(Reuters) -TP ICAP cut its profit margin outlook on Tuesday due to challenges at its loss-making digital trading unit Liquidnet, sending shares in the world’s biggest inter dealer broker lower.
The outlook overshadowed the company’s decision to hike its dividend by 30% after annual profit beat market expectations, and comments it expects trading volumes to stay robust this year as bond volumes rise.
TP ICAP shares were down 9.5% to 161.4 pence at 1147 GMT.
Trading platforms such as TP ICAP, which match buyers and sellers in the financial, energy and commodity markets, benefit from volatility, such as in U.S. Treasury markets in the wake of Silicon Valley Bank’s (SVB) collapse.
Startup-focused SVB became the largest bank to fail since the 2008 financial crisis last week, sending shockwaves across global markets.
The ICE BoFA MOVE Index – one measure of expected volatility in U.S. Treasuries – surged past its COVID-era high and now stands around levels last seen in the financial crisis.
TP ICAP said it expected trading volumes to be strong this year, although moderated from the highs seen at the beginning of the Ukraine war last year.
The London-listed firm, which bought electronic equities trading network Liquidnet in 2021, cut its 2023 capital markets day operating profit margin target to 14% from 18% after Liquidnet division reported a 2022 adjusted operating loss of 24 million pounds ($29.15 million) from a 3 million pound profit in 2021.
The company said it was monitoring its hedge fund clients following SVB’s collapse but that it “was not seeing any secondary impact from the events as of now.”
It reported a full-year pretax profit of 113 million pounds, versus a 24 million pounds profit the year before.
Analysts had expected a pretax profit of 108 million pounds, according to a company-compiled consensus.
($1 = 0.8224 pounds)
(Reporting by Sinchita Mitra in Bengaluru; Editing by Alexander Smith and Mark Potter)
