NYSE Euronext Profit Soars 56% on Volatile Markets

Thursday, 03 Nov 2011 02:08 PM

 

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NYSE Euronext on Thursday said the summer's unusually heavy trading helped lift third-quarter profit by 56 percent.

The owner of the New York Stock Exchange and other operations reported net income of $200 million, or 76 cents per share, for the three months ended Sept. 30. That compared with net income of $128 million, or 49 cents per share, in the year-ago quarter.

Adjusted for costs related to the planned combination with German exchange operator Deutsche Boerse, a one-time tax benefit in Europe, and other items, profit came to 71 cents per share.

Revenue rose 20 percent to $1.26 billion, from $1.05 billion last year.

Analysts, on average, were expecting profit of 69 cents per share on revenue of $701.8 million, according to data provided by FactSet.

The strong results come as the exchange awaits a decision by European regulators on the $10 billion all-stock deal to create the world's largest exchange operator that was announced in February.

The two companies reportedly have until Nov. 17 to address objections from the European Union's competition watchdog that center on the potential for the combined company to potentially dominate the trading of derivatives, a very lucrative business for exchanges. Derivatives are complicated financial products that allow investors to bet on developments in things like commodity prices or interest rates.

CEO Duncan L. Niederauer said in a statement accompanying the results that the companies recently took part in a hearing before the EU regulators. "At the hearing, both companies were able to crystallize the compelling nature of our merger, which will bring significant benefits to customers, regulators and intermediaries."

A decision on the deal is expected by late December. The two exchanges have stated the goal of completing the deal by the end of the year.

In conjunction with the deal, both companies last week announced plans to coordinate stock repurchases. NYSE Euronext it will buy back up to $100 million of its stock shares, while Deutsche Boerse AG said it would repurchase shares valued at around 100 million euros ($141.2 million). The two programs will take place simultaneously to preserve the ownership percentages of 40 percent and 60 percent to be held by former NYSE Euronext and Deutsche Boerse shareholders, respectively, in the combined company.

During the third quarter, trading volume on NYSE Euronext exchanges in both the U.S. and Europe surged amid the worst quarter for the markets since 2008. The European debt crisis, the U.S. debt ceiling debate and fears of another recession fueled the volatility.

The higher volume pushed up revenue from derivatives trading by 20 percent to $226 million. Average daily volume of global derivatives rose 33 percent to 9.3 million contracts.

Revenue from cash trading and listings gained 18 percent to $353 million. Average daily volume in Europe surged 40 percent to 1.9 million transactions. Average volume in the U.S. rose 9 percent to 2.6 billion shares traded.

During the most quarter, the New York Stock Exchange led 11 initial public offerings in the U.S., raising $3.2 billion.

The company's revenue from information and technology services increased 11 percent to $125 million during the quarter.

Cost-cutting measures also helping NYSE Euronext's results during the quarter.

Excluding merger-related costs, operating expenses slipped to $416 million, from $419 million last year. Excluding the impact of acquisitions, new initiatives and a $10 million negative impact attributable to foreign currency fluctuations, fixed operating expenses dropped 5 percent, the company said.

NYSE said it expects to meet its full-year guidance for operating expense of less than $1.65 billion, excluding merger expenses and exit costs. Factoring in certain portfolio changes and the impact of currency fluctuations, full-year 2011 expenses are expected to be about $1.68 billion.

In afternoon trading, NYSE Euronext shares gained 95 cents, or 3.7 percent, to $26.48. The stock is down 12 percent for the year.

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