CITY veteran Michael Spencer, chief executive of the world’s biggest interdealer broker Icap, yesterday said civil action against the broker over yen-Libor rate setting was “wholly opportunistic”, as the firm revealed lower full year profits.
Spencer, who founded Icap as Intercapital Group in 1986, said the late addition of Icap as a defendant in a US class action lawsuit seeking damages over the setting of the yen-related benchmark was “entirely without merit”.
“We intend to defend it vigorously,” he said. One of Icap’s broker subsidiaries is the subject of an investigation by the Financial Services Authority, now the Financial Conduct Authority. One person has been suspended and three are on administrative leave.
Spencer said: “After very intensive internal investigations, involving literally many millions of documents, we have no reason to believe that anyone in senior management within Icap was aware of the possibility of improper behaviour.”
Icap said it had not made a provision in accounts for any actions which may arise from the issue.
For the year ending 31 March, it reported a 12 per cent fall in revenues to £1.47bn, driving a 20 per cent slump in pre-tax profit to £284m.
Brokers across the board, including rivals Tullett Prebon and BGC, have struggled to maintain broking revenues given the smaller volume of transactions.
Icap, which gets around two-thirds of profits from electronic broking business, said despite an uptick in trading activity in April and a small increase in May, trends were unlikely to change in the short term.
Credit Suisse analyst Gurjit Kambo said profits would continue to come under pressure due to increasing regulatory changes in the sector.
Shares rose more than 14 per cent as markets ploughed in to buy the stock.