ICE CEO Says Hiring Points To Rebound In Credit Business
By Nathan Becker and Jacob Bunge, Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- The top executive of IntercontinentalExchange Inc. (ICE)
said Tuesday that he saw signs of a rebound in the credit derivatives market.
Jeff Sprecher, Chief Executive, said banks are hiring more specialists to
handle increased trading by hedge funds and other participants following moves
to clear deals centrally.
Credit derivative volumes started to tail at the end of last year after a
prolonged boom, with regulators pushing users to move away from bilateral trades
deemed as potentially risky.
"There's a real anticipation from the staffing standpoint and the systems
standpoint that this market is going to recover, and recover strongly," said
Sprecher, in a conference call discussing third-quarter earnings.
ICE reported Tuesday that third-quarter profit rose a bigger-than-expected 17%
as demand for the company's derivatives-trading services continued to grow.
ICE reported third-quarter earnings of $87.5 million, or $1.18 a share, up
from $75 million, or $1.04, a year earlier. Revenue jumped 27% to $256.3
million.
Analysts polled by Thomson Reuters had most recently forecast earnings of $
1.15 on $256 million in sales.
ICE shares recently were up slightly at $103.15.
Much of ICE's success came down to strength in its core energy markets in the
U.S. and Europe, but Sprecher said that its nascent credit derivatives clearing
business has already become cash accretive since its launch in March, clearing
approximately $3.5 trillion in contracts.
A continued slump in credit default swap trade, alongside compression of
existing portfolios, has seen the CDS market shrink to nearly half its peak size
of $60 trillion.
The slide in CDS trading activity hurt results from ICE's Creditex unit, which
Sprecher acknowledged the company acquired just ahead of the market's initial
collapse.
He said Tuesday that while it's hard to get a read on the health of the credit
derivatives markets, any rebound will be tied to new lending. Sprecher said he
expects that will happen, "but we're in transition right now."
The company said transaction-fee revenue grew 34% to $229 million, helped by
new products and strong trading volume in the company's futures and over-the-
counter energy segments. Transaction revenue jumped 28% in the futures segment
and 39% in the global over-the-counter business.
ICE also said daily volume for its futures markets rose 1% in October from a
year earlier, and 2009 volume through October was up 11% on year.
Last week, rival CME Group Inc. (CME) reported a 20% gain in profits, but
would have shown a decline had the company owned the New York Mercantile
Exchange in the year-ago quarter for comparison. CME said last year's third
quarter included a spike in volume as people reacted to the financial crisis.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855; nathan.becker@
dowjones.com; and Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@
dowjones.com
(END) Dow Jones Newswires
11-03-091003ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|