May 15, 2020 / 9:45 AM / 15 days ago

Moscow Exchange nearly doubles profit in first quarter as volatility soars

MOSCOW (Reuters) - The Moscow Exchange nearly doubled its net profit in the first quarter due to huge swings in share prices after a plunge in the value of oil and the outbreak of COVID-19, the bourse said on Friday.

The benchmark MOEX index .IMOEX hit a record high in January before crashing along with global oil prices and the rouble in March when the coronavirus pandemic added fuel to the global sell-off.

The Moscow Exchange, Russia’s largest bourse, said its net profit jumped 90.7% year-on-year to 5.9 billion roubles ($80.67 million) in the first three months of 2020.

“Extraordinary volatility” helped the exchange to post a record fee and commission income of 7.9 billion roubles, a 29.3% increase from a year earlier, said Max Lapin, chief financial officer at the Moscow Exchange.

The exchange noted an ongoing increase in the number of retail clients, echoing a trend at the Saint Petersburg Stock Exchange, which has reported record trading volumes and client activity for April, the first full-month of lockdowns.

Russia imposed the lockdown in late March, leaving millions of people in search of extra income and prompting some to turn to financial markets to try to compensate for job losses and insufficient savings.

The Moscow Exchange said trading volumes on the equities market surged 176% year-on-year in the first quarter, while trading volumes on the derivatives section grew by nearly 80%.

Foreign currency market volumes rose 6.7% year-on-year and jumped 15.5% compared with the fourth quarter, propped up by higher volatility that pushed players to seek bourse-provided guarantees that the interbank market can not offer.

The Moscow Exchange lowered its operating expenses growth guidance to 6-8.5% from 6.5-9.5% for this year after OPEX shrank 1.6% in the first quarter due to just a modest increase in personnel expenses and some savings on the administrative side.

“Costs related to measures to combat COVID-19 were immaterial, thanks to our early transition to remote working,” Lapin said.

Citi analysts said they expected the Moscow Exchange to benefit further from strong trading volumes in April as well as positive operating leverage.

The Moscow Exchange has come under fire in recent weeks from private investors and brokerages after it halted trading of April futures on Light Sweet Crude Oil blend, which are pegged to West Texas Intermediate futures CLc1, at a minimum price of $8.84 on April 20.

Additional reporting by Alexander Marrow; editing by Philippa Fletcher

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