Commodities broker Marex posts record profit on market boom
Mining News Pro - London brokerage Marex Group posted record profit last year as prices for energy, metals and agricultural products soared with economies reopening after pandemic lockdowns.
the commodities boom has fueled stellar results for trading houses and boosted volumes for brokers making markets and executing trades. prices have surged even more since russia’s invasion of ukraine, with an index that tracks spot futures up 31% so far this year. that’s pressuring brokers and their clients in the form of margin calls that can abruptly draw on cash reserves.
“volatility in commodity prices just creates a demand for our services,” chief executive officer ian lowitt said in an interview wednesday. “while there undoubtedly are stresses that are created by the liquidity sitting on exchanges, the fundamentals of our business remain in place and solid.”
pretax profit in 2021 rose 29% from the previous year to $79.6 million, while revenue climbed to a record $543 million.
this year is off to a “very strong start,” lowitt said in an earlier statement, with the company expected to benefit from rising interest rates. when companies post cash to brokerages as collateral for trades, some of that is invested in deposit accounts or securities such as treasuries, which pay a higher rate of return when rates are up.
an interest rate increase of about 1% could generate about $30 million in additional profit, chief financial officer paolo tonucci said in the interview.
the company shelved plans for an initial public offering last year and instead acquired volcap trading and arfinco — deals that moved marex into the grains and soft commodity broking space. a return pitch could happen if global markets stabilize, lowitt said.
“it’s on the table, but there are no plans at the moment to do anything,” he said. “if there aren’t other alternatives, we would be happy to come back.”