Interdealer broker GFI Group reported a 21% decline in fourth quarter 2008 revenues to $196.2 million which includes a $14.6 million mark-to-market unrealised loss on forward hedges of future foreign currency revenues.
Excluding this loss, non-GAAP revenues were $210.9 million for the fourth quarter of 2008. In the fourth quarter of 2007, total GAAP and non-GAAP revenues were $247.4 million and $248.0 million, respectively.
Brokerage revenues for the fourth quarter of 2008 were $193.8 million down 19% from $238.2 million in the fourth quarter of 2007. While equity product revenues increased 3% over the fourth quarter of 2007, the financial products business – which includes foreign exchange products – decreased by 37% due to less trading in emerging market interest rate, currency and exotic derivatives.
Credit and commodities product revenues decreased by 21% and 30% respectively, compared with the prior year fourth quarter.
The company says it reduced the number of its brokerage desks and personnel in the period as a part of its restructuring initiatives, resulting in reduced trading across many of its asset classes.
For the full year 2008, total revenues increased 5% to $1.02 billion from $970.5 million in 2007. Net income for 2008 was $53.1 million compared to $94.9 million for full year 2007. On a non-GAAP basis, total revenues for 2008 rose 7% to $1.04 billion while net income was $94.7 million compared with $100.3 million for full year 2007.
Mickey Gooch, chairman and CEO of GFI, says: “While market volatility normally benefits GFI, the extreme market volatility and dislocation that followed the Lehman Brothers bankruptcy in September severely impacted trading conditions in our derivative markets in the fourth quarter.”
He adds: “Financial product revenues declined 37% from the fourth quarter of 2007 due to less trading in emerging market interest rate, currency and exotic derivatives. Dealers scaled back their trading operations in Asia and other emerging markets that had been a growth area for us in past quarters. Full year revenues from financial products were down 7% from 2007 due, in part, to the transfer of our global US dollar interest rate swaps business in March and the restructuring initiative implemented in the fourth quarter.”
GFI says it expects first-quarter brokerage revenue to fall by 34% to 37% and overall revenue to decline by 32% to 35% from year-ago levels.
Gooch concludes: “Despite the substantial challenges in the second half of 2008 and the dramatic changes in our operating environment, we achieved record revenues for the full year, surpassing the billion dollar mark for the first time. We ended the year profitable, with a strong balance sheet and cash position, which increased by over $100 million.”