4th Mar 2014 08:46
LONDON (Alliance News) - Interdealer broker Tullett Prebon PLC Tuesday said it swung to a 2013 pretax profit, but its underlying performance was weaker because subdued financial markets and new regulatory changes caused uncertainty for its customers.
Tullett Prebon, which acts as an intermediary between buyers and sellers of bonds, swaps and other products, said it swung to an GBP84.4 million pretax profit, from a GBP38.1 million pretax loss in 2012.
On an underlying basis, which strips out exceptional items such as the GBP123.0 million goodwill impairment charge on the writedown in the balance sheet carrying value of its North American business, Tullett Prebon reported a fall in pretax profit to GBP99.6 million from GBP111.3 million.
The fall in underlying pretax profits was driven by declining revenues, which fell to GBP803.7 million from GBP850.8 million in 2012.
The company has been struggling with a number of regulatory changes and a sustained period of low volatility in financial markets.
Activity in the markets is generally higher during periods of volatility. As Tullett makes its revenue from commissions on facilitating and executing customer orders, lower volatility results in lower revenues. On an underlying basis, administrative expenses fell to GBP699.3 million from GBP732.3 million, as Tullett moved to reduce fixed costs. On a statutory basis, they fell to GBP714.5 million from GBP881.7 million.
Chief Executive Terry Smith said market conditions worsened over the course of 2013 and said he expects them to continue to be challenging.
The market for over-the-counter derivatives, one of Tullett Prebon's areas of business, has faced a number of reforms since the financial crisis, with regulators seeking to reduce risk and push transactions to electronic platforms, with central clearing in order to prevent investors building up dangerous positions that could spark another crisis.
The uncertainty over new regulations has caused big players, such as investment banks, to reduce their risk appetite and work on building their capital levels in order to meet regulators' demands.
Tullett Prebon will pay a full-year dividend of 16.85 pence, unchanged from 2012.
The interdealer broker's shares were Tuesday quoted at 325.13 pence, down 0.7%.
By Samuel Agini; [email protected]; @samuelagini
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