August 6, 2019 / 6:45 AM / a month ago

UPDATE 2-TP ICAP's profits fall, sees pick-up in trading volumes

* HY underlying profit dips 3.6%

* Says volatility picked up in June, July

* Shares down 1% (Adds comments from call, share reaction)

By Muvija M and Noor Zainab Hussain

Aug 6 (Reuters) - TP ICAP, the world’s largest inter-dealer broker, on Tuesday reported lower first-half profits as its broking business was hit by weak trading results at its investment bank clients, but said trading activity had revived in June and July.

The company, which brings together buyers and sellers in financial, energy and commodities markets, said underlying profit before tax fell 3.6% to 134 million pounds for the six months ended June 30.

Revenue at TP ICAP’s biggest business global broking fell 6% in the first-half, against a backdrop of double-digit revenue declines at major investment banks, its biggest customers.

“Various factors have contributed to this (revenue fall in global broking), including Brexit, U.S. trade tariffs, the softening of the Federal Reserve’s interest rate stance and the potential for increased quantitative easing in the Eurozone,” the company said.

To offset the challenging trading conditions, TP ICAP said it was taking actions to reduce front and back office costs.

TP ICAP, created when Tullet Prebon bought rival ICAP’s broking business, also said it was on track to achieve 75 million pounds of synergies by the end of 2019 as the integration programme nears completion.

Commodities and energy was a bright spot with revenues from this business up by 8% at constant exchange rates, benefiting from acquisitions and new staff in 2018 and more favourable conditions in power and gas.

Chief Executive Officer Nicolas Breteau, who took over as TP ICAP’s CEO last year, said the company had seen a pick up in volumes and activity in June and July.

Finance Chief Robin Stewart said the energy and commodities business had benefited from increased volatility.

“Certainly one of the things that we would note in our business like energy and commodities is when you see issues like oil takers be hijacked in the Gulf and environmental issues that create havoc with refineries in the U.S....That does benefit us, you do see an uptick in volatility off the back of that.”

TP ICAP also flagged challenging conditions in credit markets with a lack of new issuance, as well as restrictions on clients’ balance sheets, both of which resulted in a 14% drop in credit revenue.

Shares in TP ICAP were up 1% by 0920 GMT.

Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; editing by Patrick Graham and Jane Merriman

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