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ICAP is trading at £3.96 with the stock marginally higher since reporting full-year figures in May. Pre-tax profits declined by 4% to £272 million – better than expected – while revenue declined by 5% to £1.39 billion versus £1.42 billion expected.
The interdealer broker has suffered from tighter regulation while investment banks are less willing to take on risk. In the face of tougher rules, governing financial markets, a decline in volatility and the eurozone debt crisis, ICAP has been cutting costs by closing down its credit default swap (CDS) desks in Australia and Hong Kong.
In July the firm released a statement in which revenues declined by 14% between 1 April and 15 July. Cost-cutting to the tune of £28 million has taken place since May, which is partially down to a reduction in headcount.
Traders will be looking for an increase in broking revenues and for the cost-cutting scheme to continue. If the full-year outlook is positive and on track, the stock could be put on a path to £4.40. If not, it could drop back to £3.65.