IG Group has warned it may not be able to increase its dividend this year following its £30m loss from last week’s turmoil following the Swiss National Bank’s decision to remove its currency cap.
It said the financial impact involved £12m of market exposure and £18m of client credit exposure, adding:
While this was due to an unprecedented and unforeseeable degree of movement in a major global currency and only a few hundred clients were affected, we will seek to learn lessons from this incident which we can incorporate into our risk management approach going forward.
The news came as IG reported a 2.8% rise in profits to £101.4m for the six months to the end of November, with revenues up 8%. During the period, ironically, it opened an office in Switzerland.
The rise in revenues came despite a subdued first quarter, as more volatility in the subsequent three months encouraged more clients to trade. It said:
As is often the case, the record month in October was followed by a subdued patch in November. The second half then began with an unseasonably strong December. Client activity levels rose again as a number of news stories drove sharp movements in financial markets and presented a range of trading opportunities.
These heightened activity levels continued into January.
Then came the Swiss shock, however:
At this stage IG remains on track to meet revenue expectations for the year, although profit and earnings will be negatively impacted by client debts associated with the Swiss franc movement. If full year diluted earnings per share were to be lower than last year purely because of this highly unusual event, the board’s current intention would be to maintain the full year ordinary dividend at last year’s level.
In the market IG shares are currently 28.5p higher at 745.5p, recovering some of the falls since the Swiss franc chaos.
IG has been suggested as a possible buyer for some or all of Alpari, the foreign exchange trader which called in administrators on Monday after its Swiss losses. But James Hamilton of Numis told Reuters:
IG may not be interested because they may already have relationships with a very large number of its customers.
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