IG profits soar as markets stabilise

SHARES in IG Group got a lift yesterday after the spread-betting firm said that it expects its full-year adjusted pre-tax profit to rise by 29 per cent to &pound;125m, boosted by higher fourth quarter revenues.<br /><br />The group said in a trading statement that a strong rally in the equity markets led to higher client trading in the fourth quarter, despite a fall in volatility in the equity and forex markets.<br /><br />Gains in the fourth quarter reversed a slump in its revenues in the previous three months in the UK and Australia, lifting total revenue by nine per cent year-on-year to &pound;150m in the UK and by 12 per cent to &pound;28m in Australia.<br /><br />IG said revenues jumped nearly 40 per cent to &pound;257m in the year ending 31 May, with 74,000 new account openings, compared to 42,000 the previous year.<br /><br />However, the company warned the first half of 2010 will be tough given the high levels of market volatility in the first half of 2009, and analysts said increased competition in the spread betting sector could dent revenues per client and push marketing costs higher.<br /><br />&ldquo;This is the nature of the business and our forecasts always err on the side of caution,&rdquo; said analysts at Daniel Stewart.<br /><br />Revenues at the group&rsquo;s Japanese unit were hit earlier on in the year by increased competition.<br /><br />However chief executive Tim Howkins said that there will be no effect from a possible restriction on leverage for forex trading in Japan in the current financial year. <br /><br />The Japanese regulator is proposing new rules to limit the amount of leverage which can be offered to retail forex speculators in Japan. <br />IG&rsquo;s shares closed 11 per cent up at 242p.<br /><br />Credit criteria was tightened in the second half, leading to bad debt charges being below three per cent of revenue, IG said, against 12 per cent of revenue in the first half.