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Shares of the firm slipped as much as 7.5% to 182.34 pence, their lowest level since November last year. Sept 7 (Reuters) - TP ICAP (TCAPI.L), the world's largest inter-dealer broker, reported on Tuesday a 35% plunge in half-year profit as trading in its global broking and energy and commodities businesses tailed off from highs seen during the height of the pandemic. Sees activity pick up on inflation desks - CEO.Company forecasts lower FY operating margin.Breteau said he was "cautiously optimistic" about market conditions for global broking in the rest of 2018, saying major investment banks were returning to more trading activity, while interest rates had begun to rise, and quantitative easing was being slowly curtailed. It reported total revenue of £910 million, a fall of 2% compared to the first half of 2017, though this decline was partly due to exchange rate movements: revenue in constant exchange rates increased 3% over the same period of 2017. energy markets "more than offsetting" growth in oil and European power and gas. By contrast, energy and commodity trading revenues shrank 3% to £167 million, with weaker U.S. Stewart said increased market volatility in the first quarter was responsible, especially in the Americas.
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Brexit and MiFID II would lead to £10 million in additional costs in 2018 and £25 million in 2019, plus £15 million recurring costs thereafter, added CFO Robin Stewart, who expected the broker "to return to strong cash generation by 2020." Global broking revenues for equities increased to £109 million in the first six months, a rise of 20% on a constant currency basis over the same period of 2017, while revenues from rates rose 7% to £284 million.
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Breteau said TP Icap will base its EU business in Paris after March 29, 2019, when the U.K. 'Sitting ducks' for competitors Attempting to chase the £100 million savings target had caused the broker to lose key brokers to competitors, particularly in Hong Kong and Sydney, said Breteau: "Our competitors were frankly delighted when we talked about cutting broker pay: we became sitting ducks for them to target our biggest revenue earners," while "defensive measures to protect ourselves ultimately cost us money." In future, Breteau said the company would pay less attention to the ratio of broker compensation to revenues, saying the measure was "an output of the strategy, not an input," and the firm needed "to give ourselves flexibility to pay the market rate" for staff. The board initiated a detailed review in April "after concern about the way we were managing the integration," and the review found the company was "unable to deliver another £25 million without seriously damaging our business and increasing operating risk," Breteau said. These included centralizing data centers, merging networks, and decommissioning and migrating front office applications. To date Breteau said the broker has spent £103 million on the integration, with £27 million going to consultants, £25 million to severance costs, and £32 million on staff costs associated with the merger." Significant elements of the integration" still remained, with a further likely cost of £60 million, he said. 30 fell to £34 million, a 52% dip from the same period in 2017. The broker's pretax profits for the six months ending Jun. However, unexpectedly high integration costs led the firm to fire CEO John Phizackerley in July replacing him with global broking head Nicolas Breteau, and issue a profit warning. Its 2,746 brokers in 31 countries act as middlemen in illiquid or complicated trades which cannot be made on the open market. 30, 2016 for £1.3 billion, becoming the world's largest broker and changing its name to TP Icap. London-based Tullett Prebon acquired Icap's voice broking and information business dealer on Dec. 7 conference call, as he dialed down expected annual savings to £75 million from £100 million by the end of 2019. Synergies from the 2016 merger that created TP Icap PLC proved a "significant disappointment," the interdealer broker's Chairman Rupert Robson said on an Aug.