Stock exchange in the money as Italian business sees more gains

PROFITS at the London Stock Exchange soared by almost 80 per cent in the past six months despite tough capital markets as it benefited from growth in trading services such as clearing, it said yesterday.

Total income to the LSE increased by 20 per cent to £386.5m and pre-tax profit grew 79 per cent to £179.7m in the six months to the end of September, compared to a year ago.

Less than half of LSE revenues came from its traditional stock listings and trading business, while its burgeoning post-trade services business at its Italian clearing house CC&G generated more than £100m. Its data business also contributed £89m.

LSE chief executive Xavier Rolet said the result vindicated his strategy of diversifying the exchange, but hit back at critics who fear CC&G cannot sustain a revenue boom caused by interest it makes on short-term loans.

“We are trying to create a business model through diversification that can be very resilient in the tough times,” he told City A.M. “Inversely-correlated market products now make up about a quarter of our revenues.”

CC&G revenues were up 225 per cent from a year ago as it lent out the collateral clients posted against trades in Italy’s money market, but Goldman Sachs analyst Chris Turner downgraded the LSE to a sell on fears the income could collapse.

“It is double jeopardy,” Rolet said. “Our share price has already been under pressure because of the perception that we are connected to Italy, and then an analyst decides to slap a sell rating on us.”

Rolet also defended CC&G’s risk management. “Less than 50 per cent of the collateral we collect is on loan in Italy’s money market and it is on 48-hour call,” he said.

Rolet (left) said the IPO market was healthy and the LSE had “raised a lot of capital this year.”

But he warned against a transaction tax proposed by Europe: “We have ample evidence that shows when you impose a tax on transactions it is users who end up getting hurt.”