TP ICAP PLC (LON:TCAP) (LSE:TCAP.L) has released a trading update for the 2016 financial year. The last three months of the year have seen an increase in trading activity versus the previous year. Revenue for the year to 31 December 2016 is expected to be 12% higher than the £796 million reported in 2015, which will be 4% higher at constant exchange rates.
TP ICAP has recorded revenue growth across all of its product lines in Q4. In particular, growth has been evident in its traditional ‘heritage’ products of Interest Rate Derivatives, Fixed Income and Treasury Products. They have benefitted from the higher than average volatility present in the aftermath of the Presidential election and following the US interest rate rise.
The acquisition of the global hybrid voice broking business from NEX Group PLC (LON:NXG) (LSE:NXG.L) completed on 30 December. The integration plan has begun and guidance on the performance of the combined business will be provided at the same time as the release of full year results in March.
In the last three months, TP ICAP has risen by 34%. This is ahead of financial sector peers Barclays PLC (LON:BARC) (LSE:BARC.L), HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L), Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L) and Standard Chartered PLC (LON:STAN) (LSE:STAN.L). Barclays is up 32%, Lloyds has risen by 20%, Standard Chartered has gained 5% and HSBC has risen by 9%.
In my view, TP ICAP has strong relative appeal. As its Q4 results showed, it has historically performed relatively well during periods of high volatility. In my opinion, the volatility recorded since the Presidential election could continue as Brexit talks start and European elections get underway. The recent acquisition could deliver synergies, meaning TP ICAP has long term appeal within what remains a relatively undervalued financial sector in my view.