February 1, 2018 / 12:19 PM / 20 days ago

Cost control helps CME Group profit beat estimates

(Reuters) - CME Group Inc (CME.O) on Thursday reported better-than-expected quarterly profit as a tight leash on costs helped the world’s largest futures exchange counter a dip in clearing and transaction fees as fewer people traded during the quarter.

The company’s shares rose 1.8 percent at $156.24 to hit a record high.

Volatility in 2017 hovered near historic lows, crimping trading in stocks, bonds and currencies.

CME, which earns its bread and butter from clearing trades and earning a fees on them, reported a 1.3 percent dip in its biggest revenue stream.

Bitcoin futures contracts, which the company launched in December 2017, have been a “slow grower” according to Chief Executive Terry Duffy.

“On the revenue side, it’s going to be a slow grower, which is fine,” he said on a call with analysts.

“We will not do anything in the near term we think could increase the trade (of bitcoin futures) at the point of introducing additional risk to the system,” Duffy added.

The company said it expects 2018 adjusted operating expense, excluding license fees, to be between $1.10 billion to $1.105 billion. CME’s total expenses fell 2.7 percent to $362.7 million in the quarter.

    CME, like other exchange operators, has been trying to move away from market-sensitive revenue streams and trying to shore up its market data and information services. Revenue from this stream was up 1.9 percent to $102 million.

    The company, which owns the Chicago Board of Trade and other futures exchanges, said 2018 has started “strong” with average daily volume up more than 15 percent to date, driven by broad-based strength across its asset classes.

    “Average daily volumes in the month of January thus far totals 18.7 million, a pace that is 2 percent ahead of our current 1Q18 estimate of 18.4 million,” Jefferies analysts wrote in a note.

    Net income jumped to $2.94 billion from $373.4 million due to a $2.6 billion one-time benefit related to the U.S. tax overhaul.

    Excluding the tax benefit, adjusted earnings were $1.12 per share, beating analysts’ average estimate of $1.09, according to Thomson Reuters I/B/E/S.

    Total revenue fell to $900 million from $912.9 million, a year earlier.

    Reporting by Pallavi Dewan and Taenaz Shakir in Bengaluru; Editing by Savio D'Souza and Supriya Kurane

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