IG Group shares fall as regulatory clampdown hits profit

(Reuters) - Shares of IG Group Holdings Plc IGG.L fell 12 percent on Tuesday after the online financial trading company reported a slump in first-half earnings as new regulations made it harder for some clients to use its trading platforms.

FILE PHOTO: Dealers work on the IG Group trading floor in London, Britain June 30, 2015. REUTERS/Neil Hall

The mid-cap company has seen customer numbers fall after tighter rules in Britain and the European Union for products on which previously anyone with a bank card could make highly-leveraged bets through apps and online platforms.

Shares in rivals Plus500 Ltd PLUSP.L and CMC Markets CMCX.L also fell after IG's results.

IG, which provides online stockbroking and trading services to retail and other investors, saw a 15 percent drop in active clients in both the United Kingdom and the EU.

Pretax profit fell to 113 million pounds ($146 million) in the six months ended Nov. 30 from 136.2 million pounds a year earlier, said IG, which was the world’s first spread-betting firm when it started in 1974 with just three employees.

“Since those measures have been introduced, we have seen a reduction in the volume of trading ... We expected that to happen but that impact has been more significant than we anticipated,” Chief Financial Officer Paul Mainwaring said of the new regulations.

IG’s net trading revenue tumbled 6.5 percent to 251 million pounds.

(Regulation, low volatility hurt UK online trading platforms:

“IG has experienced significant change and will continue to do so in the future. Change will be driven by regulation, by shifting patterns of wealth and by the continued development of financial markets around the world,” Chief Executive Officer June Felix said in a statement.

The company said it expected revenues in the full financial year to fall, and added the “exceptional performance” in previous year’s second half was driven by interest in cryptocurrencies.

“The outlook statement from the new CEO speaks of adapting and thriving in an evolving market, but the company is not replacing the revenues it is deriving from its existing customers,” Liberum analyst Ben Williams said.

Online trading platforms have been focusing on their professional clients as the new regulation takes a toll on their retail customer base. IG said professional clients accounted for about 69 percent of its revenue from the region regulated by the European Securities and Markets Authority.

IG shares were down 6.5 percent at 0925 GMT, the biggest faller on Britain's mid-cap index .FTMC.

($1 = 0.7766 pounds)

Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and Mark Potter