Home > Finance > IG Group revenue plateaus as OTC derivatives segment dives

IG Group revenue plateaus as OTC derivatives segment dives

| By Richard Mulligan
IG Group said it remains on track to hit financial targets despite a significant drop in revenue from its largest product area.

In a trading update for the three months to 31 August 2023, IG Group said total revenue was £242.9m (€282.4m/$303.0m), up 0.5% on Q1 2023. That came despite an 8.1% drop in over-the-counter (OTC) derivatives, which is the financial trading business’ largest segment by far.

OTC derivatives still accounted for 75.2% of revenue, totalling £182.7m, with the shortfall made up by growth in smaller segments. Exchange traded derivatives grew by 36.8% to £49.8m, with stock trading and investments up 62.5% to £10.4m.

London-listed IG Group – whose CEO stepped down for health reasons last month – said the maintenance of revenue “reflected the benefit of business diversification over the past few years”.

“Similar to trends seen in Q4 FY2023, a decrease in net trading revenue reflected substantially lower volatility across a range of asset classes, which was more than offset by strong growth in interest income, which resulted from a combination of higher interest rates and stable client money balances from the year end,” IG Group said in its statement.

Softer market conditions

Total revenues within the Core Markets+ portfolio reduced by 5.7% to £188.7m, reflecting softer market conditions through most of the quarter. However, IG said client money balances remained strong, indicating clients’ interest in trading when they see opportunities in the market.

Within the High Potential Markets portfolio, Tastytrade achieved another record level of quarterly total revenue, which increased by 48.0% in US dollar terms to $60.0m. Within total revenue, net trading revenue increased by 10.0% and 3.0% in USD and GBP terms. Total client equity on the platform reached record levels with average balances in the quarter up 9% on the prior quarter. It attributed the growth to its continuing success in attracting large balance accounts.

Total active clients across the group in the quarter were 267,000, which was down 4.4% year-on-year. Total client money balances of £4.1bn remained stable on the year-end balances.

IG said: “The group remains confident of achieving its medium-term targets. We are progressing with plans to drive even greater cost efficiency, leveraging the scale advantages that we have as a global group.”

CEO search continues

Referring to the departure of CEO June Felix last month, the group said its board has commenced a comprehensive search process for a permanent chief executive. It said it expects to make an appointment in the coming months.

IG Group also gave an update on the £250m share buyback programme that was announced in July. The first tranche of £100m commenced during the quarter, with 5.9m shares re-purchased for £39.6m so far. The first tranche is anticipated to be completed in December 2023.

In July, IG Group reported a year-on-year decline in net profit for its 2023 financial year despite posting record revenue.

Total revenue during the 12 months to 31 May was £1.02bn (€1.18bn/$1.32bn), up 5% on the previous year. This was also the fourth consecutive year of record revenue – and the first time IG Group exceeded £1.00bn in revenue.

The increase was due to a sharp rise in interest income, which rocketed from £800,000 in FY2022 to €80.8m. IG Group said this was the result of higher interest rates in the market.

Subscribe to the iGaming newsletter