* Confirms cutting jobs in voice broking
* 100 brokers said leaving - IFR
* Q1 revenue down 14 pct
(Adds analyst comment, fresh CEO comments)
By Clare Hutchison
LONDON, July 16 ICAP Plc, the world's
biggest broker of transactions between banks, is downsizing its
so-called voice broking unit to concentrate on investments in
the more profitable areas of electronic broking and post-trade
Interdealer brokers like ICAP, whose staff match buyers and
sellers of currencies, bonds and other tradable instruments,
have been hit hard by regulations that led their traditional
investment bank clients to cut back on dealing and forced more
trading on to electronic platforms.
ICAP Chief Executive Michael Spencer confirmed on Wednesday
he was cutting staff in the company's Global Broking division,
which houses its brokers, although he declined to say how many
jobs were at risk and which desks would be affected.
Citing market sources, Thomson Reuters IFR reported last
month that the company had begun cutting 100 broking staff, or
around 5 percent of a 2,000-strong unit.
Spencer said the downturn in voice broking, a decade ago the
main driver of ICAP's profits, was "as bad a drought as I've
experienced in my entire career.
"We decided we needed a fundamental resizing of that
business for what we believe is the new world order in our
industry," Spencer said.
Ultra-low interest rates have also reduced the scope for
trading among ICAP's traditional investment bank clients.
Goldman Sachs and JP Morgan this week reported
drops in trading revenue of 10 percent and 15 percent
respectively in the second quarter.
Those declines were not as severe as expected, but Spencer
quashed any expectations of a quick rebound.
"The macro (economic) outlook for all of us remains a
challenging one ... Volumes, I think, are going to be pretty
subdued for a while."
ICAP shares, which have fallen 21 percent this year in a
rising British stock market, were little changed at 354.9 pence
by 1451 GMT.
Analyst Gary Greenwood at brokerage Shore Capital saw scope
for a recovery in ICAP shares in the lonter term, because of the
company's diversification into higher-margin businesses like
electronic broking and post-trade services quicker than rivals.
"Over time I think ICAP may have a smaller overall revenue
base than it has had historically, but I think it will have a
much higher quality revenue base ... Once (investors) start to
see the bottom in the global broking side, I think the market
will start to re-rate the shares quite significantly," Greenwood
ICAP earlier reported first-quarter revenue down 14 percent
from a year earlier. Voice broking turnover fell 19 percent.
Volume at two of its main electronic trading platforms,
BrokerTec for fixed income and EBS for currencies, were 10
percent lower than a year earlier at $707 billion.
But EBS Direct, a direct-dealing platform aimed primarily at
smaller and regional banks, and iSwap, an electronic platform
for trading interest rate swaps, both achieved record high
volumes in June.
Spencer said customers were increasingly using electronic
transactions for their activities and the company would be
investing more in electronic broking, including expanding its
fixed-income offering and growing beyond spot FX at EBS, as
outlined by EBS's CEO in an interview.
The same goes for ICAP's post-trade and information
business, which saw double-digit percentage revenue growth in
the first quarter.
The 28-year-old company, which competes with Tullett Prebon
, BGC Partners, GFI Group and
Swiss-based Tradition, has been trying to reposition its
businesses towards those activities, which now account for
two-thirds of its operating profit.
"We believe that is the future. We remain very bullish for
the medium-term outlook for electronic broking and post-trade,"
($1 = 0.5836 British Pounds)
(Editing by Tom Pfeiffer and David Holmes)