Icap recovers after WTC attacks

Icap, the word’s largest inter-dealer broker, says that a busy period for its interest rate swaps business during October and November, due to economic uncertainty and volatile interest rates across the globe, helped spur a 22% rise in global revenues, compared with the same months last year. The firm says it is looking for acquisitions, and adds that if current market conditions persist then full-year profits could be higher than the $80 million analysts expect.

Icap reported 36% growth in half-yearly profits from April 1 to September 30 2001 - compared to the same period of 2000 - despite the World Trade Center (WTC) attacks which destroyed its New York offices. Profits before tax, goodwill and one-off items for the six months were £44.6 million - roughly in line with estimates it gave in the wake of the attacks on September 11.

Furthermore, Icap has identified new permanent facilities and hopes that these will be fully occupied and operational by the middle of 2002. Icap expects its material damage and business interruption insurance policies to be in the region of $50 million.

Michael Spencer, Icap chief executive, said: “Up until September 11, Icap enjoyed buoyant trading conditions in all centres. Notwithstanding the impact of the WTC tragedy and destruction of our New York offices, turnover for the first half of the year increased by 14% compared with the prior period, and costs (excluding bonuses) were held at the previous year’s level. Had it not been for the WTC disaster, we believe that pre tax profits would have exceeded £47 million.”

As a result of the WTC attacks, Icap was forced to take out a temporary bank overdraft due to settlement difficulties across financial markets. Consequently, Icap saw an unusually large incidence of counterparties that were unable to accept the delivery of stock on the contracted date. As Icap had already purchased assets to fulfil these contracts, this gave rise to unmatched trades that generated an exceptional cash outflow of £888 million, which was financed by a bank overdraft of £879,305,000 on September 30. But all of these trades have now been settled and the temporary borrowing has been repaid.

Europe, Middle East and Africa was the most profitable region generating £27.8 million, compared to £16.2 million for the same period in 2000, and Asia Pacific moved ahead to £3.6 million from £2.0 million for the same period in 2000. Meanwhile, American profits slipped to £7.8 million from £9.9 million for the same period in 2000.

Although Icap’s electronic broking business has made headway, with 35% of US treasuries broking volumes being transacted electronically, the electronic broking operation continues to be loss making, losing £7.5 million compared to a £3.1 million loss for the same period in 2000.

An interim dividend of 6.0 pence per share will be paid for the six-month period to September 30 2001, compared with a 5.0 pence dividend for the same period in 2000.