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Stricter regulations dent IG Group’s trading revenues once again

Third-quarter revenues were also dented by the absence of last year’s crypto rush this time around
graph
The new rules protect inexperienced traders from racking up large losses

Online trading platform IG Group Holdings PLC (LON:IGG) slumped in early deals on Thursday as new regulations and reduced levels of market volatility dented third-quarter revenues.

Net trading revenue fell 29% to £108.0mln in the three months ended 28 February.

That was the second full quarter since strict new European rules on contracts for difference (CFDs) were introduced in a bid to protect inexperienced traders from potential big losses.

READ: IG in the red as new regs squeeze revenue

On top of the regulatory headwinds, IG said the fall in revenue was also down to reduced market volatility and the impact of the Bitcoin bubble in the year-ago period when every man and his dog seemed to be investing in crypto.

Year-to-date, net trading revenue is 15% down year-on-year to £359.0mln.

IG reiterated its expectation that full-year revenues will be lower than in 2018. It added that it was difficult to predict its performance for the final quarter given the effect of market volatility, but it did commit to maintaining its 43.2p annual dividend.

Full-year operating costs are also expected to remain broadly flat at around £290mln.

Broker thinks results could miss consensus forecasts

“Even assuming that revenues in Q4 recover to the more ‘normalised’ levels seen in Q2, this would imply full-year net revenues of between £480-485mln,” said Peel Hunt in a note to clients.

“This is below consensus estimates, and implies a reduction in consensus profit forecasts of between 5-10% (depending on whether forecasts reflected a weaker February), equating to £190-195mln. Company consensus currently stands at £215mln.”

Peel Hunt said it would review its ‘buy’ recommendation and 775p target price after Thursday’s analyst conference call.

IG shares fell 8.1% to 503.5p on Thursday morning.

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