IG’s client-cash income fell to 10.3% of revenue as its rate sensitivity remained material

IG Group’s public results expose a revenue engine that is easy to overlook when a trading company is assessed only through spreads, commissions and customer activity. In the year to 31 May 2025, IG generated £133.1 million of net interest income from client balances, equal to 12.37% of its £1.076 billion total revenue. In the transitional seven months to 31 December 2025, total revenue was £658.9 million and net trading revenue was £590.9 million. Because IG defines total revenue as those two components added together, the difference reconstructs seven-month net interest income of £68.0 million, or 10.32% of revenue.[1][2]

The decline in share is 2.05 percentage points, not proof of a structural collapse. The periods have different lengths, rates changed, the group acquired businesses and the mix of customer balances evolved. It does, however, show that the interest contribution was already becoming less dominant in the later period. That matters because IG’s FY25 financial statements also quantify a substantial rate exposure: a one-percentage-point decrease in the relevant base rates would have reduced profit before tax by £36.9 million through lower interest income on segregated client funds, under the company’s stated sensitivity assumptions.[1][2]

Revenue that does not come from customer trading losses

Net interest income is economically distinct from net trading revenue. IG says it is driven by client cash balances held off the group balance sheet. The cash remains subject to client-money rules; it is not simply corporate cash available for the group to deploy. IG places or arranges those balances within the permitted safeguarding framework and earns interest, producing income that varies with the size, currency, placement and yield of the balances.[2]

This distinction is important in public discussion of CFD and spread-betting companies. A broker can earn more when customers trade more, but it can also earn interest while customers hold cash. The latter income may rise when policy rates increase even without a proportional increase in transactions. Conversely, rate cuts can reduce the contribution even if account balances remain stable. IG explicitly said FY25 net interest income fell 6% from £142.4 million because lower rates offset stable organic customer cash balances held off balance sheet.[2]

At the end of FY25, IG reported $2.0 billion of off-balance-sheet client cash in its US division, contributing £67.7 million of interest income. Outside the US, it reported £2.5 billion of such balances, including £189 million associated with Freetrade, contributing £65.3 million. The two regional income figures add to £133.0 million; the £0.1 million difference from the group total is consistent with reported figures being rounded to one decimal place.[2]

The regional values should not be converted into crude “interest rates” by dividing annual income by closing balances. The US balance is denominated in dollars while income is presented in sterling, period-end balances are not annual averages, and the disclosed income can reflect different currencies, maturities, counterparties and timing. A quotient would mix stock and flow measures and create a false precision. The defensible finding is that the US and non-US contributions were almost evenly divided, not that one region earned a particular deposit yield.[2]

Reconstructing the seven-month number

IG changed its financial year-end to 31 December, creating a seven-month transitional report. Its summary gives £590.9 million of net trading revenue and £658.9 million of total revenue. A footnote states that total revenue equals net trading revenue plus net interest income. Subtraction therefore produces £68.0 million. This is an original reconstruction from the company’s own definitions, not a separately labelled figure on the summary page.[1]

The same arithmetic gives a 10.32% interest share. For FY25, £133.1 million divided by £1,075.9 million gives 12.37%. The apparent 48.9% reduction in nominal net interest income between £133.1 million and £68.0 million is not a valid year-on-year measure because seven months are being compared with twelve. Annualising £68.0 million would also be unsafe: interest rates, balances and acquisitions do not necessarily recur evenly through the year. The useful comparison is composition within each reported period, with the difference in duration stated prominently.[1][2]

The seven-month share also has to be read alongside stronger trading revenue. A smaller percentage can result from the denominator growing even if interest income remains substantial. IG described the transitional period as one of record financial performance and stronger customer acquisition. The reconstructed £68.0 million was still material; it simply represented a smaller part of the revenue mix than in the May year.[1]

What the £36.9 million sensitivity does—and does not—mean

IG’s FY25 financial-risk note considered a one-percentage-point decrease in the base rate and showed a £36.9 million decrease in profit before tax from interest income on segregated client funds. The prior-year comparable was £35.5 million. The measure is a sensitivity calculation: it isolates a specified movement while holding other relevant assumptions within the company’s methodology. It is not management guidance that profit will fall by that amount when any central bank cuts rates by one point.[2]

The distinction matters because IG operates across currencies and jurisdictions. A simultaneous one-point movement in every relevant rate is different from a cut by one central bank, and actual earnings depend on deposit repricing lags, yield curves, customer cash movements, hedging, money-market fund allocations and competitive decisions about whether to pass income to customers. The sensitivity also concerns profit before tax, while the £133.1 million number is net interest income. Comparing them is informative but not identical to modelling a simple revenue loss.[2]

As a scale indicator, £36.9 million equals 27.72% of FY25 net interest income and 7.39% of reported £499.2 million profit before tax. Those percentages show materiality, not a predicted outcome. The sensitivity may be nonlinear outside the tested movement, and management can respond through product pricing, balance placement, cost control or hedging. IG’s report separately discusses interest-rate swaps used to manage exposure on its own debt; the client-money sensitivity should not be confused with the fair-value hedge on the group’s £250 million senior notes.[2]

The company’s wording also clarifies the accounting boundary. Segregated client money balances are not recognised on the consolidated statement of financial position, and IG’s ability to control them is restricted by local client-money regulations. Interest earned on those balances can affect profit even though the underlying principal is not a corporate asset. That combination—off-balance-sheet principal, on-income-statement yield—is precisely why conventional balance-sheet screens can miss the exposure.[2]

Client protection and broker economics coexist

Earning interest on safeguarded cash is not evidence that the cash has been misappropriated. Client-money rules commonly require segregation while allowing permitted placements with banks or qualifying funds. IG states that it cannot use segregated balances for its own operations. In some jurisdictions, it also carries specified credit-loss exposures above local deposit-protection arrangements; in others, the legal allocation of bank risk differs. The income and the safeguarding obligation must therefore be analysed together rather than treated as mutually exclusive.[2]

For customers, the practical question is what return, if any, they receive on uninvested cash and whether the broker’s terms permit it to retain part or all of the interest. The annual report quantifies IG’s group income but does not by itself establish the contractual rate for every account type. Products, currencies and legal entities may differ. A responsible comparison would examine customer terms and advertised cash rates alongside the group accounts, not infer an individual customer’s opportunity cost from the consolidated figure.[1][2]

For investors, the exposure can make earnings more diversified during periods of strong rates but more sensitive to monetary easing. Trading revenue often benefits from volatility, whereas client-cash income can benefit from higher policy rates and larger balances. The two drivers may move together, offset each other or diverge. That can stabilise revenue in some conditions and complicate forecasting in others.[1][2]

The changing mix after May 2025

The reconstructed seven-month figure suggests that the rate tailwind was already fading as a share of group revenue. A decline from 12.37% to 10.32% is a relative reduction of about 16.6% in the interest share, although the periods are not directly annual comparators. This composition shift is consistent with lower rates and stronger trading revenue, but the public summary does not decompose how much came from each cause.[1][2]

The transitional period also incorporated more of Freetrade and a broader product mix. Stock trading, investments, futures, options and crypto can alter customer cash behaviour. Acquisitions can add balances with different yield arrangements and costs. A precise bridge would require average client cash by currency, average achieved yield, interest passed to customers, placement costs and the effect of newly consolidated entities. IG does not publish all of those components in the summary.[1][2]

That limitation prevents an overconfident rate forecast. It does not erase the core finding. Net interest income was a double-digit share of revenue in both periods, the later share was lower, and the FY25 sensitivity showed that a broad one-point rate decrease could have a material profit effect under the tested assumptions. Any valuation of IG that treats interest income as incidental would miss a documented part of the business model. Any valuation that capitalises the FY25 rate environment indefinitely would be equally careless.[1][2]

A better disclosure template

IG already provides more information than many brokers by disclosing regional client cash, regional interest contribution and an explicit sensitivity. The analysis could be made more decision-useful with a bridge showing average rather than closing balances, achieved yield by major currency, interest paid or credited to customers, and the portion of income associated with newly acquired businesses. A sensitivity matrix for non-parallel rate moves would also reflect the multinational nature of the exposure better than a single one-point scenario.[2]

The existing data nonetheless support a clear conclusion. Client cash produced £133.1 million in FY25 and an implied £68.0 million in the following seven-month period. Its share of revenue fell from 12.37% to 10.32%, while the company’s last full-year risk test placed £36.9 million of profit before tax at issue under a one-point base-rate decrease. That is not a prediction of a loss, and it is not evidence of weakened safeguarding. It is a measurable earnings dependency that belongs in any serious assessment of the broker.[1][2]

Rate sensitivity is not a forecast of the next reporting period

IG’s disclosed £36.9 million sensitivity applies a one-percentage-point change to specified balances and assumptions at the reporting date. It is a scenario, not management guidance. Actual income depends on when central banks move, how quickly banks reprice deposits, the currencies and jurisdictions of client balances, changes in those balances, hedging and the portion retained under customer terms.[3][2]

That is why the decline in the observed NII share—from 12.37% in the May 2025 year to 10.32% in the seven months to December—cannot be attributed to rates alone. Trading revenue, acquisitions, reporting-period length and client-balance changes also affect the denominator and numerator. The two periods establish a change in mix; they do not isolate one causal variable.[1][3][2]

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