Company News

UPDATE 3-LSE gets earnings boost ahead of Refinitiv deal vote

* Q3 results boosted by clearing growth

* CFO David Warren to retire at end of 2020

* Refinitiv deal to go through at end of 2020

* Expect EU equivalence extension for clearing in November- CEO (Adds CEO comments from call, analyst comments)

Oct 18 - London Stock Exchange reported higher-than-expected third-quarter income on Friday, putting it in a strong position ahead of next month’s shareholder vote on its planned $27 billion deal to buy data provider Refinitiv.

The results, which include a 19% rise in income from clearing house LCH, also showed how London has kept its central role in clearing euro financial transactions ahead of Britain’s divorce from the European Union.

Since the Brexit vote in 2016, Britain has leapfrogged the United States to become the largest centre for trading interest rate swaps.

Shares in LSE rose 1.5% to 7,148 pence by 0841 GMT, one of the top gainers on London’s blue chip index.

The LSE reported a 12% rise in total income from continuing operations to 587 million pounds ($755 million) in the quarter ended Sept. 30, ahead of the 565 million pounds expected by analysts.

The numbers will be a boost to LSE as it pushes on with a plan to buy data and analytics firm Refinitiv after rebuffing a $39 billion unsolicited approach from Hong Kong Exchanges and Clearing Ltd.

Hong Kong’s bourse scrapped its approach for the LSE earlier this month after failing to convince LSE management and investors to back its plan for a big exchange business spanning Asia and Europe.

LSE expects the Refinitiv deal to go through in the second half of 2020, with shareholders voting on it next month.

“Today’s update from the London Stock Exchange underlines just why it was receiving such amorous glances from its Hong Kong counterpart and potentially why it rejected a £32bn bid as being inadequate,” Russ Mould, investment director at AJ Bell, said.

Refinitiv is 45%-owned by Thomson Reuters, the parent of Reuters News.


Chief Executive David Schwimmer, who took over the reins at the LSE last August, told analysts that he expects the temporary permission put in place to allow EU customers to continue to use the exchange for clearing swaps after Brexit to be extended in November to beyond March 2020.

LCH clears the bulk of euro-denominated derivatives, contracts used by companies and banks to shield themselves against unexpected moves in currencies and interest rates.

“There is a recognition among all the stakeholders in the marketplace about the systemic importance of access to this market ... nothing is going to be clarified around that until after Oct. 31,” he said.

Britain’s Parliament will vote on Saturday on whether to approve Prime Minister Boris Johnson’s Brexit deal, secured this week. Brexit is planned for Oct. 31.

The LSE also said finance chief David Warren would retire and step down from the board by the end of 2020. Warren will continue in his role as chief financial officer through the close of the Refinitiv deal.

LSE, which in 2007 took over Milan’s stock exchange, Borsa Italiana, said it would align its clearing and settlement businesses into one post trade division from the start of 2020. ($1 = 0.7776 pounds) (Reporting by Noor Zainab Hussain in Bengaluru Editing by Rachel Armstrong/Jane Merriman/Susan Fenton)