Volatile markets boost Icap

Michael Spencer's Icap, the bonds and derivatives broker, posted a record profit yesterday after a year of volatility in international markets.

The group's trading volumes have soared as investors and speculators rushed to hedge themselves against all manner of future movements in interest rates, bond values, currencies and even inflation.

Icap offers a wide range of complicated derivative products of the kind that Warren Buffett, the legendary US investor, recently dismissed as "weapons of mass destruction" that make it impossible for investors to judge what risks banks have taken on and which threaten the stability of the financial system.

Mr Spencer, Icap's chief executive, put on a combative performance yesterday, saying investors and companies with a big exposure to a corporate debt would be "irresponsible" not to look at using a derivative product to reduce their losses in the event of a default.

And he dismissed the idea that Icap's strong results in corporate bond broking were part of a "bubble" in bond investment that might be about to burst. "I don't care if bonds go up or down, as long as they are moving," Mr Spencer said, adding that bond issuance has increased steadily over many years and he still expects five to 10 per cent growth in the value of the bond broking market this year.

Icap's profits hit a record £117.5m in the year to March, up from £83.8m last time, when the group's business had been disrupted by the terrorist attacks that destroyed its World Trade Centre headquarters. Group turnover rose 26 per cent to £664.3m.

Icap has recently acquired BrokerTec, an electronic broker set up originally by a consortium of investment banks, for £180m in shares.

Icap says BrokerTec's technology, which creates the world's biggest inter-bank broker, will be fully integrated by September.