IG Group Reports 5% Decline in Revenue in Q1-FY19 as Impact of Regulatory Crackdown Felt

IG GroupIG Group (LON: IGG), Europe’s largest CFD brokerage firm has reported its first-quarter earnings results for FY 19, registering a drop in revenue what could be an early sign of the effects of the regulatory crackdown. IG Group has May 31st fiscal year end and the latest quarterly result shows if of June to August 2018 period. 

During the quarter, the revenue for the company came in at £128.9m, which is 5 per cent lower compared to the same period last year which was at £135.2m and is 13 per cent lower compared to previous month. The fall in revenue was driven by the decline in derivatives trading of 12 per cent and 8 per cent in EMEA and UK region respectively. Also, there is a ban on binary options for two months that kicked in at the beginning of July. Breaking up the revenue, IG Group reported an increase in revenue from its APAC region where it booked 7 per cent gain to £35.5 million.

IG Group had predicted that it would suffer a 10 per cent decline in revenue generation from the changes in the structure of leverage trading that was introduced by ESMA. It seems the predictions are as per the line although the sample size is quite less. IG Group also said that the heightened level of volatility which led to robust client activity in the first half of this year failed to continue into the FY 19. 

The group said that the more than half of the revenue in the first quarter has been generated by professional traders who don’t fall under the purview of latest regulatory guidelines. During the quarter it also received the license from the German regulator the German unit to offer financial services to EU clients in the run-up to Brexit. Increase in total group clients somewhat remains flat with a 3 per cent increase to 129,000, helped primarily by growth in share dealing and investment clients. The number of clients in UK and EMEA region declined, in which UK reported 13 per cent drop and EMEA reported 10 per cent drop.