By John McCrank
NEW YORK (Reuters) – Intercontinental Exchange Inc on Thursday reported quarterly profits that beat forecasts, as market volatility and rising interest rate expectations boosted demand for the company’s hedging products, offsetting a slowdown in its mortgage unit.
The New York Stock Exchange-owner’s net income nearly tripled to $1.5 billion, or $2.70 per diluted share, in the fourth quarter, which included a $1.4 billion gain from the spin-off of digital asset exchange Bakkt https://www.reuters.com/article/bakkt-spac-vpc-impact-acqsn-idUSL4N2JM2HS, from $526 million, or 93 cents per diluted share, a year earlier.
Excluding one-time items, ICE, which runs futures and equities exchanges, as well as clearing houses, data services and a mortgage origination business, earned $1.34 per share, topping analysts’ mean estimate by 2 cents, according to Refinitiv IBES data.
The primary driver of the earnings beat came from ICE’s exchange segment, with a big jump in interest rate futures, which are used for hedging against rate increases, Jefferies analyst Daniel Fannon said in a note.
Consumer prices rose 7% last year, more than twice the Federal Reserve’s 2% goal and U.S. central bank policymakers have signaled they will start raising interest rates next month, perhaps at a pace not seen in decades, prompting a rise in market volatility.
“We have a lot of asset classes that we participate in … that will benefit from that volatility, and we tend to see commodity businesses like energy and agricultural commodities be very volatile in inflationary environments,” ICE Chief Executive Officer Jeff Sprecher said on a call with analysts.
Exchanges revenue rose 17% from a year earlier to $1 billion, with interest rate futures up 71%, global natural gas and environmentals up 36%, and cash equities and options up 2%.
Mortgage technology revenues eased 1% from to $346 million, while data services revenues rose 7% to $480 million.
Overall revenue rose 10% to $1.8 billion.
(Reporting by John McCrank; Editing by Paul Simao)
