Traders look at financial information on computer screens on the IG Index trading floor in London
IG recorded 16% growth in revenue in the year to the end of May thanks mainly to a strong performance by Tastytrade, the US derivatives broker it bought for $1bn last year © REUTERS

Brokerage group IG delivered record revenue and profits, as growth at its US subsidiary made up for a slowdown in do-it-yourself trading as the Covid-19 pandemic waned.

Strong performance at Tastytrade, the US derivatives broker that the group bought last year, contributed the bulk of IG’s 16 per cent growth in revenue in the year to the end of May. Overall revenue from continuing operations rose to £973mn but only rose 1 per cent if the US business is excluded.

Brokers enjoyed a boom in demand at the height of the pandemic as people stuck at home during lockdowns surfed volatile markets and took bets with their extra savings.

The wave of dealing has since receded, but IG managed to keep hold of many of those new clients and benefited from its decision to diversify away from UK spread betting. The results underscore the dominance of the large and vibrant US retail trading market.

“We have seen that the US market continues to be a very strong market for self-directed traders . . . The scale is off the chart,” said June Felix, chief executive.

Investors took a dim view of IG’s decision to buy Tastytrade for $1bn — its largest ever deal — in January last year, with shares falling 10 per cent following the acquisition, partly over concerns that IG had overpaid for the US broker.

But the deal has borne fruit this year as Tastytrade’s net trading revenue grew 15 per cent to £110mn compared with 2 per cent growth in net trading revenue for IG’s core spread betting business to £811mn. 

Rival UK trading groups such as CMC Markets have suffered from the post-lockdown trading slowdown. CMC, which is led by Lord Peter Cruddas reported in June that its annual profits had halved while net operating income fell to £282mn, down from £410mn the year before.

Volatility in global markets spurred by the war in Ukraine and central bank moves against inflation has played a role in brokers’ fortunes, since market turbulence often encourages more dealing.

“Volatility is a factor, but it’s not the only factor,” said Felix. “If there’s sharp, disruptive volatility, that doesn’t always translate to good results for the sector. You can see that if you look at some of the other players in the space who have declined by double digits.” 

IG’s profit before tax rose 7 per cent to £477mn, while its active customer base hit 381,500, “significantly above pre-pandemic levels”. The group announced it would buy back £150mn in company shares by the end of May 2023 as part of a plan to return excess capital to shareholders. IG’s shares rose almost 5 per cent on Thursday morning.

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article