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LSEG CEO: Europe has a ‘greater sensitivity’ to recession risks

London Stock Exchange Group CEO David Schwimmer joins Yahoo Finance Live to discuss the IPO market in the U.K., business growth, and recession risks in Europe relative to the United States.

Video transcript

[MUSIC PLAYING]

BRIAN CHEUNG: Welcome back to Yahoo Finance Live. The London Stock Exchange Group reported earnings from the first half of the year noting a slight decline in listings. But CEO David Schwimmer is optimistic that a new wave of IPOs, Initial Public Offerings, could be on the way.

For more on that, let's bring in David, again, CEO of the London Stock Exchange Group. Great to have you on the program this morning, David. First of all, just kind of unpack what you've been seeing in capital markets. Obviously public offerings and companies eager to tap the capital markets a big part of your business. What did that look like over the first half of 2022? And what's your outlook for the remainder of the year?

DAVID SCHWIMMER: It's definitely a slower first half in terms of IPOs given the market environment. Not particularly surprising given the volatility, given the war in Ukraine. But I must say, Brian, in terms of the pipeline, that market will come back. The IPO market closes, it opens. That'll come back.

And then in terms of our overall business, the London Stock Exchange, great part of our business, fantastic business. But less than 5% of our overall revenue. And we've seen great growth across all of our businesses with 7% top line growth and broad based growth across our capital markets division where the London Stock Exchange, itself, exists. Our post trading business, 9%-- plus-9% growth. And then in terms of our data and analytics division, 5% growth. So really across the board, pretty strong performance. I'm really pleased with that.

BRIAN CHEUNG: Yeah, as you mentioned, David, a lot of arms that you have over there at the London Stock Exchange Group. But I do want to just kind of focus still on the market side of things just because you--

DAVID SCHWIMMER: Sure.

BRIAN CHEUNG: --have such an interesting and unique vantage point from that front. I mean, when you say you do expect things to get a little bit better. I mean, you know, we've already seen kind of a rebound so far this summer. But is there anything idiosyncratic to specifically Europe that you've seen as an interesting factor here? When you consider, you've seen the Bank of England's projections over a possible recession happening in that area, broad Eurozone projections showing similar slowdowns as well. How do you think that affects companies that, you know, still want to do capital raising but it's just such an uncertain environment right now?

DAVID SCHWIMMER: Well, one of the things that is a bit different about Europe, particularly relative to the US, is the energy challenge. Europe is more exposed to what's going on in Russia and the gas dependency there. So we'll see how that plays out. I'm not in a position to predict. But that is a greater sensitivity relative to the US.

In terms of some of the other aspects that we've seen in the overall environment, whether that's inflation, recession risk, some of the other challenges, those-- you're seeing inflation in Europe, you're seeing inflation in the US. You're seeing recession risk in all the different markets. But I would say the energy exposure, the gas exposure in Europe is a little bit of a different one.

BRIAN CHEUNG: So let's switch over to data analytics. That's been a very interesting part of your business when we track the evolution with the acquisition of Refinitiv. I believe that was about a year and a half ago or so. So you've seen revenues up about 5%. How important is that data business to what you're doing here? What do you see as the synergies between, you know, a pre-Refinitiv acquisition, London Stock Exchange Group, and a postacquisition?

DAVID SCHWIMMER: Well, it's been a transformational acquisition for us. If you go back prior to our closing of the definitive transaction, the London Stock Exchange Group, the LSEG, was an important provider of execution venues, mainly in equities and largely with a European focus. Geographically, we largely had a European focus.

And in terms of our data and analytics capability, we had the FTSE Russell business and we had some very attractive fixed income analytics capabilities. Today, we are one of the world's leading providers of financial market infrastructure and data on a global basis across asset classes. So instead of being primarily focused on equities, we now have leading execution venues in equities, foreign exchange, and fixed income. Again, on a global basis.

We operate-- we have 25,000 people around the world. We have a presence in 70 countries. And that presence is in the Americas. We have several thousand people in the Americas. We have 10,000-plus people in Asia.

And then as a data analytics provider, we're one of the world's leading providers of financial data and analytics. We're the world's number one provider of real-time data, leading provider of background check, information for banks doing KYC and AML through our world check database. So it's been a transformational transaction for us, really positioned us globally as one of the world's leading providers of, as I said, financial market infrastructure and data across asset classes, across the trade lifecycle.

BRIAN CHEUNG: All right, London Stock Exchange Group CEO David Schwimmer, thank you so much for joining us. Really appreciate it.