Strong performance by the London Stock Exchanges (LSE) post-trade services segment contributed significantly to group revenue and growth. Post-trade was an area highlighted in 2009 as a core focus for LSE.
Announcing its interim results for the period, the LSE said total income for post-trade services, including net treasury income, was 106.7 million a 64% increase on the prior six month period. Revenue increased 8% to 52.4 million (H1 2010/11: 48.3 million). Excluding the 4.1 million included in H1 last year from Servizio Titoli, which was sold with effect from the start of the current financial year, total income increased by 75% and revenue increased by 19%.
The LSE said income from the post-trade segment was driven by growth in clearing volumes and increased treasury income from the central counterparty business arising from higher quantum of margin held and improved spreads achieved on cash collateral put on deposit.
Total income at LSE was up 20% at 386.5 million (H1 2010/11: 321.1 million) and revenue was 328.1million (H1 2010/11: 300.6 million), up 9%. Compared to the prior six month period, the group posted a 20% rise in total income and a 79% increase in profit before tax for the six months to September 30, 2011.
Treasury income through the central counterparty business continued the strong performance in the immediately preceding second half period last year, rising from 34.6 million in the prior six months to 54.3 million as a result of stronger trading levels, with a resulting higher quantum of cash margin held, and rising deposit yields. The LSE said it has achieved a significant and sustainable step up in performance, although the high returns achieved in recent months have been elevated by both volatility in Italian markets and continuing low liquidity in the Italian interbank market with consequent high demand for cash from CC&G.
On November 4 2011 the LSE completed the acquisition of a 13.64% stake in CC&G, from Unicredit, for a total cash consideration of 62 million, in cash. Following the acquisition, the group now owns 100% of CC&G and the transaction is expected to be earnings accretive in the current financial year. The group will gain full economic benefit from its increased ownership with effect from April 1 2011 – if the transaction had been completed on that date it would have added 2.3p to first half adjusted EPS, said the LSE.
The Monte Titoli CSD business performed well during the period. Settlement revenues increased 10% on the prior six month period with an 11% rise in pre-settlement instructions. In the custody operations the value of assets under management was stable at 3.0 trillion, with a 9% increase in revenues (excluding Servizio Titoli) arising from charges for other services.
A statement from the group said strategic development of the broad range of businesses within the group, or “leveraging our assets”, remains a key focus and it also continues to work on other plans as part of its “developing opportunities” strategy. Among the initiatives announced or launched during the period were: a new tri-party collateral management (X-Com) commenced testing by Monte Titoli; opening of a settlement link by Monte Titoli with Euroclear UK and Ireland, to assist harmonization of cross border trading; and the selection of the group to provide clearing technology services for a new cross-market central counterparty mechanism for Central and Eastern European capital markets, using CC&G expertise and MillenniumIT software
On September 28 2011 the LSE announced it had entered exclusive discussions with LCH.Clearnet regarding a potential transaction. The LSE said due diligence work and engagement with stakeholders is continuing, with a view to moving towards an agreement, though the process is complex and there can be no certainty that any transaction will result.
Xavier Rolet, chief executive, said: “Our balanced and diversified business, with a well-hedged, inversely-correlated portfolio of products and services, makes us strongly placed to take advantage of growth opportunities that the changing market and regulatory environment is presenting. Partnering with our clients to drive innovation and new services, strong cost control and our continued focus on new opportunities to grow the scale, scope and efficiency of the Group remain core. We are well placed to propel our business forward and successfully deliver on our growth strategy.”
(JDC)