Interdealer broker reports 26% slump in half year profits and sees no imminent improvement
Michael Spencer, the chief executive of interdealer broker Icap, believes the current market conditions are among the worst he has seen in his 36 years in the City.
Reporting a 26% slump in half year profits, he said trading volumes had fallen everywhere - in equities, futures, foreign exchange, commodities, fixed income and over the counter trading. He said:
This has been caused by a combination of factors: global economic weakness, the continuing eurozone crisis, bank recapitalisation and deleveraging, uncertainty over regulatory reform, quantitative easing and near zero rates, to name the main ones.
I do not believe this negative environment will continue indefinitely but equally I do not expect it to improve imminently. It has been a time to weather a hard storm.
The gloomy news sent Icap's shares down 6%, an 18.8p drop to 291.7p. Analyst Gary Greenwood at Shore Capital said:
We would expect the shares to struggle in the short-term given the weak outlook and further earnings downgrade risk.
James Hamilton at Numis said:
Icap are guiding to the bottom of the £300m-£332m underlying pre-tax profit forecast range for the full year. This clearly assumes a substantial recovery in the fourth quarter as guided to this time last year and that did not materialise. Numbers are expected to fall significantly and we expect to (yet again) cut our £312m forecast by 4%-6%. News flow is expected to remain poor. There is no reason to own the share today.
With the general strike across much of Europe, continuing worries about Greece and Spain, as well as the US fiscal cliff, the mood is not particularly upbeat so far. The FTSE 100 has fallen 27.24 points to 5759.01.
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