* Expects 13 pct drop in full-year revenue
* Forecasts 280 mln stg pre-tax profit, down 21 pct
* Cost savings remain on track
* Shares fall 8 pct
By Tommy Wilkes
LONDON, March 27 Interdealer broker ICAP
has warned investors to brace for underwhelming full-year profit
as the latest chapter in the euro zone crisis dashes hopes of
matching the buoyant trading volumes of early this year.
London-based ICAP said on Wednesday that it expects pre-tax
profit for the year to March 31 to be about 280 million pounds
($424 million), in line with the lower end of guidance and
knocking its shares by 8 percent to 296 pence at 0935 GMT.
The profit forecast represents a 21 percent drop on the 354
million pounds it made a year earlier.
Increased levels of volatility, including heavy electronic
trading of the Japanese yen, had helped activity in January and
February, but trading had tailed off this month.
"While we had a better start to the fourth quarter, we are
not yet seeing a sustained upturn, with market activity
remaining fragile and unpredictable," Chief Executive Michael
Spencer said in a statement.
Shares declined against a flat FTSE 250 index, erasing gains
recorded so far in 2013. Analysts had forecast pre-tax profit of
between 280 million and 305 million pounds. In September ICAP
forecast profit of between 307 million to 346 million pounds.
Brokers such as ICAP and rival Tullett Prebon,
which make money by matching buyers and sellers of bonds,
currencies and swaps, have been battling falling trading volumes
since the onset of the financial crisis and many have responded
with cost cuts.
The reduced risk appetite of clients because of the euro
zone debt crisis has combined with more structural issues to
squeeze broker revenues. These have included banks exiting
proprietary trading and the threat of tougher regulations.
"Despite the 60 million pounds of cost savings and the
numerous downgrades, yet again ICAP has disappointed," Numis
analyst James Hamilton said in a note.
ICAP said that its cost-cutting programme remained on track
to produce at least 60 million pounds of annualised savings by
the year end. Revenues are expected to fall 13 percent from the
1.681 billion pounds earned last year.
Further clouding the outlook for ICAP, Numis's Hamilton
said, is uncertainty over the role some of its traders may have
played in the Libor rate-rigging scandal.
ICAP said in January that one of its subsidiaries was the
subject of a Financial Services Authority investigation over
rate fixing. One employee had been suspended and three more put
on administrative leave in connection with the inquiry, CEO
Spencer said in February.
Spencer also said that the company's internal investigation
had found no signs of so-called "wash trades", fake trades used
by banks to reward brokers for their help in manipulating
"We cannot know if either ICAP or any of its employees have
done anything wrong but Libor-driven new regulation of the IDBs
(interdealer brokers) could be negative for shareholders, and
until this is resolved we can see no reason to own the shares,"
Numis's Hamilton wrote.
ICAP gave no update on Wednesday about the Libor