Interdealer broker TP ICAP has issued a Trading Update for Q1-2020, indicating a healthy rise in revenues and trading volumes thanks to COVID-19 driven market volatility.
It is interesting to note that the bump in activity at institutional brokers such as TP ICAP was not nearly as much as that seen at Retail brokers such as GAIN Capital, Dukascopy, and Plus500. Each of those brokers seem to have had a near doubling or even tripling in trading volumes and revenues, as traders flocked to their screens while equities tumbled (and then recovered), oil tanked (no pun intended) and FX rates zigzagged through the second half of Q1 and into early Q2.
Also interesting to note in TP ICAP’s release is that trading activity in April 2020 has returned to more normal levels, and has been in line with the Group’s full year guidance.
To the figures for Q1….
More details released by TP ICAP include:
Response to COVID-19 pandemic:
· The Group fundamentally re-engineered its operations during lockdown to maintain continuous global client services and liquidity across all asset classes and desks by tactically deploying new digital technology and changing workflows to allow the vast majority of our employees to work from home.
· This presented significant technological, management and regulatory challenge coming as it did during a period of extremely high volatility and a sharp increase in volumes but the Group continued to serve clients and provide liquidity in the markets in which it operates effectively.
· The Group has not furloughed or reduced any of its permanent workforce, nor has it requested any government aid in any of its global locations as a response to the COVID-19 pandemic.
· In response to COVID-19, we have directed our Disaster Relief Fund toward global and local initiatives that support those affected by the pandemic in the communities where we operate.
· We have donated 20,000 face masks to health authorities in the UK and US and have encouraged all of our UK staff to take part in the 2.6 Challenge which aims to raise funds for UK charities which have seen a decline in donations during the Period.
· Revenue in the Period of £547m was 17% higher than the £469m revenue reported for the equivalent period last year and 17% higher on a constant currency basis.
· Revenue growth reflected higher client volumes due to the volatile market conditions caused by the COVID-19 pandemic at the end of the Period.
Revenue by division:
· Global Broking revenue grew 10% in the Period relative to the equivalent period last year on a reported basis (10% on a constant currency basis) with all asset classes demonstrating strong revenue growth. Rates and equities showed particular strength capitalising on higher volatility and volumes.
· Energy & Commodities performance was very strong across all products and revenue grew 26% in the Period relative to the equivalent period last year on a reported basis (27% on a constant currency basis) as a result of favourable macro conditions amidst increased volatility.
· Institutional Services revenue grew by 85% in the Period on a reported basis (85% on a constant currency basis) as it benefited from new hires, on-boarding new clients and increased client appetite.
· Data & Analytics revenue grew 10% in the Period on a reported basis (10% on a constant currency basis) against a strong prior year comparative period as the business continues to benefit from strategic initiatives to launch new products and deepen its client relationships.
Financial position and liquidity:
· The Group regularly assesses the strength of its financial position and liquidity under different market scenarios and stress scenarios. These assessments have been updated to include both current market conditions caused by COVID-19 and further extreme stress scenarios.
· The Group believes that it has a strong balance sheet, sufficient cash resources and access to incremental liquidity under the various adverse scenarios assessed.
· As at the end of the Period, £250m of the Group’s Revolving Credit Facility (“RCF”), which matures in December 2022, remains undrawn. This facility remains available to meet the Group’s liquidity needs and this can be used for general corporate purposes. The Group has no bond maturities until 2024.
2020 full year guidance and outlook:
· While the Group has performed strongly in the Period, our full year guidance of low single-digit revenue growth remains unchanged at this point. The Group believes that it is too early to fully assess the impact of the COVID-19 pandemic on TP ICAP and its customers. We will continue to monitor the impact on the Group through the remainder of the year.
· The Group notes that much of the targeted investment spending we guided to in March will be deferred and re-evaluated as the Group prudently manages its resources as a response to the adverse impact from COVID-19.
· The Group notes that trading activity in April 2020 has returned to more normal levels compared with levels seen during the period and is in line with the Group’s full year guidance.
2019 AGM, investor update and redomiciliation timetable:
· The Group will host its Annual General Meeting later today.
· The Group has decided to reschedule its announced 17 June 2020 Investor Update. This is to ensure the safety and well-being of our employees, investors and other stakeholders due to the ongoing impact of COVID-19. The Group plans to host an Investor Update during the second half of 2020 and will update on an exact date in due course.
· It continues to be the Group’s intention to restructure the Group under a new holding company in Jersey. The Group is currently in the process of seeking the relevant regulatory approvals, which have taken longer than originally anticipated due to COVID-19, and will in due course seek shareholder approval for the restructuring. The Group currently expects to post the relevant shareholder documentation by the end of 2020 with completion anticipated in early 2021.
Nicolas Breteau, Chief Executive Officer said:
“I would like to take this opportunity, on behalf of TP ICAP, to express our sympathy to all those who have been affected by the COVID-19 pandemic. While these are challenging times for all companies to navigate, I am extremely proud of, and grateful to, my colleagues at TP ICAP who have worked tirelessly since the outbreak started. I am also thankful to our clients who have faced similar challenges to ourselves. We have worked closely with them, and will continue to do so, in order to continue to provide them with the high standards of service they expect from us.
Thanks to the support of our staff and our clients, our Group, as a systemically important market infrastructure provider, has been able to continue to support and provide the essential liquidity to keep the wholesale financial and commodities markets in which we operate open and functioning in an orderly manner.
Today’s strong trading update demonstrates not only the resilience of our business and that critical role we play as part of the global financial infrastructure, but also the professionalism and dedication of our colleagues. We have been tested to the extreme and have responded powerfully. Our Group has performed strongly in Q1, but it is too early to fully assess the impact of the COVID-19 pandemic to our full year outlook. We will use everything we have learned in the past few weeks to strengthen our business further as the financial world slowly returns to more normal conditions and in the meantime we approach the remainder of 2020 with confidence.”