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Spencer: Cash equities unit was a failure

ICAP boss Michael Spencer told analysts the inter-dealer broker’s venture into cash equities was its “biggest failure in a decade” yesterday as it reported a 13 per cent drop in profts.

Icap closed its fledgling European and Asian stockbroking businesses in March after the loss-making division caused the group to issue a shock profit warning. The City firm’s full-year results showed the push into cash equities, launched after Lehman Brothers collapsed in 2008, took £18m from its pre-tax profits and its closure cost £52m in extra charges.

One analyst who was present at the morning’s presentation saluted Spencer’s candour. It was replicated in milder form in his official statement, which said Icap had “learned some valuable lessons this past year”.

Overall pre-tax profits fell 13 per cent to £247m while revenues were up one per cent to £1.6bn. Stripping out impairments from units being wound down, Icap’s profits fell five per cent to £333m.

Slumps in equities and interest rate trading were offset by stronger foreign exchange, emerging markets, credit and commodities lines. Recent market volatility around Greek and Spanish sovereign debt fears has been positive for Icap and the firm’s underlying run rate is likely to be higher than its revenue rate.

Chief operating officer Mark Yallop said Icap was eyeing possible regulatory changes on the separation of retail and investment banking.