GAIN Capital reported a disappointing first quarter of this year, related to falling revenues and margins.
Revenues of the company decline by 19% Q/Q, reaching only $92.9 million in comparison with Q4 2014 $114.7 million but still 14% higher since Q1 2014. Net income jumped even 118% over the year to reach $8.3 million, but quarter-on-quarter we could see 52.8% drop.
Nevertheless, first quarter experienced also record volumes, but drop in margin offsets this optimism as pips-earned-per-round-trip-trade saw a decline from 2.3 pips Q/Q to 1.7 pips in Q1 2015. GAIN Capital informs, that most of its volume comes from the EUR/USD currency pair with low-margin,
For investors we can see a positive aspect in the Swiss National Bank issue, which does not seem to hurt GAIN Capital during the first quarter and thus we can expect sustained activity of the forex broker. Compared to other larger brokers, hit by the franc strengthening below the EUR/CHF cap after its removal, we can see GAIN Capital activity during Q1 as stable.
During Q2, earnings will count on UK-based City Index purchase, for which GAIN Capital paid $118 million. Although the index is not highly profitable, it could add to GAIN’s earnings a significant sum.
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