An unscheduled statement made ahead of forthcoming results? We know what that means – write-downs all round (followed by a share price relief bump.)
But not in this case. Icap, the interdealer broker, on Thursday warned analysts that its first half results, due in November, would be better than they expected. In fact, the period they particularly wanted to alert the City to was their outperformance in the three months from July to September, as the credit squeeze and banking troubles drove trading to frenzied levels. Michael Spencer, chief executive, noted that the surge in trading in July and August, as volatility returned to global markets, was particularly notable versus the summer slump that was the norm in previous years
Profit for the financial year ending March, said Icap, is therefore expected to be at the top end of consensus forecasts, at £305m, despite the impact of the weakening US dollar. That would be a 21 per cent rise.
Electronic spot forex trading rose 54 per cent in the first half on 2006, with record daily volumes in fixed income and foreign exchange on August 16, as global markets swung wildly. It was a day of records across Icap’s trading lines, followed up by another huge trading day on 17th, when the Fed lowered the rate at which it lends to US banks.
The outlook too was upbeat – with Spencer suggesting that the heightened activity could continue albeit not at the exceptional levels seen over the summer. Icap may also buy back more of its own shares.
But what’s this? In London, market makers were tipping Icap shares, up 15 per cent since the beginning of August, to open lower on the update. The banks might do well to rush out their bad news to reassure investors expecting the absolute worst, but those expected to benefit from the market ructions will have to do a hard sell to impress.