Broker TP Icap is in talks with European regulators to potentially shift EU hub from London post-Brexit, as shares sink on weak results

Lucy White
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TP Icap has said it is in talks with a number of European regulators (Source: Getty)

TP Icap, the world's largest interdealer broker, has revealed today that it is in talks with a number of European financial regulators about moving its "EU trading hub" from London post-Brexit.

The firm, which matches buyers and sellers in financial, energy and commodities markets, promised in its full-year results that it would "do what is necessary" to ensure it provides uninterrupted service surrounding the Brexit period in March 2019.

The majority of TP Icap's operations would remain in its London headquarters.

"Our work to prepare for Brexit has been hampered by political uncertainty which persists into 2018," said TP Icap's chief executive John Phizackerley.

"As a result, we have now moved from analysis and planning, to decisions and action without a full understanding of the final outcome of the negotiations between the UK Government and the EU."

Read more: City of London Corporation chief says there will be fewer finance job moves due to Brexit than first thought

TP Icap added that it already has an "extensive continental European footprint" in locations such as Frankfurt, Paris, Amsterdam and Madrid. However costs are expected in relation to making the firm "ready for the impact of Brexit".

Read more: TP ICAP CFO steps down after kickstarting ICAP integration process

The results

Shares in TP Icap plummeted more than eight per cent during morning trading as it announced a set of results which failed to meet expectations.

Though statutory pre-tax profits – which include acquisition and disposal costs and exceptional items – rose from £57m to £72m, underlying profits before those costs increased just 0.43 per cent to £233m.

Meanwhile underlying revenue was up just one per cent at £1,757m.

Analysts at Shore Capital called the figures "relatively weak", with "very hefty exceptional charges". The disappointing numbers came despite TP Icap announcing that it had made £27m of savings, cutting much deeper than the £10m originally planned.

Exceptional charges included a £32m hit from its "cost improvement programme" which saw it exit non-performing brokers and close loss-making offices in Luxembourg and Poland.

A swathe of new regulation which kicked in in January, called the second Markets in Financial Instruments Directive (Mifid II), also dampened operating margin. Though the costs associated with ensuring compliancy were one-off, TP Icap said the "burden of regulatory requirements is unlikely to abate in 2018".

Read more: TP Icap struggles to get systems back up and running after being hit by network outage

Brighter spots

TP Icap has been on a buying spree recently, scooping up SCS Brokers in January and Coex Partners in November. Phizackerley said the dealmaking may continue, as the company looks to add "more breadth and depth" to its Europe, Middle East and Asia businesses, expand in the US and bolt on smaller competitors.

Though volatility – which generally benefits interdealer brokers – was largely low in 2017, TP Icap said there were still "sporadic increases in trading volumes in many product areas". Interest rate hikes helped to increase activity in the rates and foreign exchange and money markets businesses.

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