UPDATE 2-Broker ICAP's profits fall 4 pct, seeks to recover from Libor

Wed May 14, 2014 5:06am EDT

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(Adds comments by CEO and analyst, further details)

By Freya Berry

LONDON May 14 (Reuters) - British interdealer broker ICAP said on Wednesday it was recovering from 2013's Libor rate-rigging scandal, but was still grappling with deleveraging by banks and shifts in the regulatory environment.

ICAP's full-year pre-tax profit fell 4 percent to 272 million pounds ($458 million), the company said, exceeding analyst expectations despite a 55 million-pound fine for rigging of the Libor benchmark interest rate last year.

Chief Executive Michael Spencer said last year's fine had been a "shattering experience", and confirmed a Sky News report last week that his bonus had been cut by about 75 percent to 700,000 pounds.

Spencer said ICAP still had no reason to believe its brokers were linked to separate probes that regulators announced last year into manipulation of the foreign exchange market.

"We continue to have professional working relationships with regulators," Spencer said, adding that ICAP had not set aside any funds for possible further fines. "We have no further news on any of these issues."

The Libor scandal and forex probe have added to the tough environment for interdealer brokers, which match buyers and sellers of currencies, bonds and other tradeable instruments.

ICAP and competitors such as Tullett Prebon are already struggling as investment banks cut back on risky trading activities, amid regulatory pressure to shore up their balance sheets.

ICAP's revenue fell 5 percent to 1.397 billion pounds in the year to March 31, the company said. It proposed to keep its final dividend at 15.4 pence a share.

"Deleveraging by financial institutions and litigation has left the broker in a challenging environment showing no sign of improvement," said Marc Kimsey, at Accendo Markets, in a note titled "Inter Broken Dealer?".

"The proposed retention of the 15.4p final dividend is one of few positives noteworthy," Kimsey added.

ICAP has embarked on a cost-saving drive, closing its credit default swap (CDS) business in Hong Kong and Australia last year. It declined to give exact details, but said global broker pay would be reined in.

Spencer said he was optimistic about ICAP's drive to refocus on pre-trade, execution and post-trade services, and that the company could capitalise on a regulatory shift towards increased electronic trading of derivatives.

The firm has launched a series of new products including electronic platform EBS Direct, which Spencer said had seen average daily volumes of $6 billion since launching in November 2013, and on Tuesday reached a new high of $10 billion.

($1 = 0.5939 British Pounds) (Additional reporting by Clare Hutchison; editing by Anjuli Davies and Tom Pfeiffer)

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