UPDATE 3-Clearing overshadows ICE’s quarterly profit rise

* Q3 adjusted EPS $1.42 vs Street view $1.36

* Revenue up 12 percent to $287.1 million

* Sees key CDS clearing revenues dipping slightly in Q4

* Shares were down 1 percent in early trade
(Rewrites, adds CEO, analysts comments; updates shares; adds
byline)

By Jonathan Spicer

NEW YORK, Nov 1 (BestGrowthStock) – IntercontinentalExchange Inc’s
(ICE.N: ) profit rose a stronger-than-expected 15 percent on the
back of strong commodities trading, but the futures exchange
said revenues from its nascent credit-clearing operation would
slip, undercutting its shares.

ICE, very sensitive to financial regulatory reforms
globally, forecast that revenue from clearing credit default
swaps (CDS) would edge down in the current quarter and finish
the year at the low end of its previous target range.

Regulators are pushing CDS and other derivatives in the
$615 trillion over-the-counter market through clearinghouses,
seen as the biggest driver of future growth for ICE and its
rivals in the United States and Europe.

The company’s shares slid 1 percent to $113.67 early
Tuesday, after having risen 10 percent last month. Analysts
said a lower-than-expected tax rate was behind the profit beat,
and highlighted the weaker CDS clearing prospects.

Edward Ditmire, an analyst at Macquarie, noted the forecast
“would represent the first sequential decline in what is seen
as an early-stage growth story.”

ICE’s profits are driven by a core energy trading business,
which has benefited as its Brent crude futures are increasingly
considered a global benchmark. Futures trading volume in the
third quarter soared 20 percent from a year earlier but was
down from the record high in the second quarter.

“We’re feeling pretty good that we caught the wind of a
global commodity trend here,” Chief Executive Jeffrey Sprecher
said on a conference call with analysts and media.

Demand for commodities, especially in emerging economies,
“are long-term secular trends” that will continue to drive
growth at the 10-year old company, it said.

Atlanta-based ICE, which runs clearinghouses on both sides
of the Atlantic, earned $99.9 million, or $1.29 per share, in
the third quarter, up from $86.9 million, or $1.18 per share, a
year earlier. It was the fifth straight quarter of growth.

Revenue increased 12 percent to $287.1 million, in line
with expectations.

On an adjusted basis, ICE earned $1.42 per share. Analysts
had expected $1.36, according to Thomson Reuters I/B/E/S.

Transaction and clearing revenue was up 12 percent. The
weaker U.S. dollar and renewed investor interest in commodities
— partly at the expense of stocks — helped drive the market
action.

FOCUS ON OTC CLEARING

ICE launched its U.S. credit default swap clearinghouse,
ICE Trust, early in 2009 and has since launched a European
counterpart, both with the support of many of the world’s
biggest dealers. Rivals like CME Group Inc (CME.O: ) are far
behind.

CDS clearing revenue was $18 million in the third quarter,
and ICE forecast $14 million to $16 million in the current
quarter.

The forecast “was a little lower than some people were
expecting, but really not that material,” said Chris Allen,
analyst at Ticonderoga Securities. “These are benign results
for the most part.”

CDS, which insure against borrower default and allow
traders to speculate on credit quality, were blamed for
exacerbating the financial crisis. Global regulators now want
to run most of the OTC swaps market through trading venues and
clearinghouses, which stand between traders and guarantee all
obligations.

ICE’s electronic futures and OTC markets handle energy
products, soft commodities and financials. Its clearing
operations, increasingly the focus for investors, is now ready
to handle sovereign and European Union clearing for buysiders,
the company said Monday.

CME’s quarterly profit came in as expected last week. NYSE
Euronext (NYX.N: ) reports results on Tuesday. [ID:nN28153016]
(Reporting by Jonathan Spicer; editing by John Wallace, Dave
Zimmerman)

UPDATE 3-Clearing overshadows ICE’s quarterly profit rise