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UPDATE 2-ICAP debt refinancing costs hit earnings

Published 09/30/2010, 08:40 AM
Updated 09/30/2010, 08:44 AM

* Expects H1 revenues to rise 9 percent

* Increased interest costs set to reduce earnings growth

* Comfortable with analysts' profit forecasts

* Says has benefited from high frequency trading markets

* Shares 2.6 percent weaker

(Adds detail)

By Luke Jeffs and Sudip Kar-Gupta

LONDON, Sept 30 (Reuters) - World No. 1 interdealer broker ICAP Plc said earnings growth was suffering from higher debt refinancing costs, news that overshadowed its upbeat revenue outlook.

Shares in ICAP -- founded by Chief Executive Michael Spencer -- were down 2.6 percent at 426.6pence at 1230GMT.

The broker, which is confident regulatory changes in Europe and the United States will boost its business, said in a trading statement on Thursday it expected revenues for the six months to the end of September to increase by 9 percent.

James Hamilton, at broker Numis Securities, said the statement "implies a deterioration in the cost:income ratio. Some of this will be higher interest costs."

The company added it was comfortable with analysts' current forecasts for its full-year profits.

These range from 333 million pounds ($527.9 million) to 357 million pounds for the full year ending March 2011 and compares with a 2010 profit of 333 million pounds.

"If the pattern of business we have seen during the first six months continues for the rest of financial year, then the current range of analysts' forecasts for ICAP's profit is reasonable," the company said.

ICAP said plans in Europe and the United States to make the murky over-the-counter (OTC) markets more transparent will boost demand for its trading and clearing services.

"ICAP is in a very strong position to work with market participants and lead new initiatives to address regulatory concerns," the broker said.

Brussels plans next year to impose restrictions on the trading of OTC derivatives, including credit default swaps (CDS) and interest rate swaps, in a bid to make these complex markets more transparent and easier to scrutinise.

U.S. regulators are working in parallel to implement the Dodd Frank bill, which was passed by President Barack Obama in July to overhaul swathes of the financial system including.

Earlier this week, the London Stock Exchange said trading volumes had declined over the second quarter, but ICAP said it had benefited from high trading volumes in many of its markets.

The company said its electronic broking and post-trade processing divisions had been boosted by high frequency trading markets, and added that its interest rate derivatives, commodities and emerging markets businesses had performed well. ($1=.6308 Pound) (Reporting by Sudip Kar-Gupta and Luke Jeffs; Editing by Will Waterman and Andrew Callus)

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