May 1, 2019 / 11:49 AM / 4 months ago

UPDATE 2-CME first quarter earnings top estimates on expenses

(Adds financial details, quotes from CEO and an analyst)

By John McCrank

NEW YORK, May 1 (Reuters) - CME Group Inc, one of the world's largest exchange operators, on Wednesday reported higher-than-expected quarterly earnings, as tight expense management following the company's acquisition of NEX Group helped offset lower trading volumes.

CME, which owns the Chicago Board of Trade and Chicago Mercantile Exchange, closed the $5 billion NEX acquisition in November, adding bonds, swaps and spot currencies to its futures complex, and has been working to integrate the businesses and expand product offerings.

The deal contributed to a 49 percent increase in expenses to $548.6 million, which came in lower than analysts had expected.

"Nearly all items contributed to the expense beat," Daniel Fannon, an analyst at Jefferies said in a note to clients.

Overall, net income fell to $496.9 million, or $1.39 per share, in the first quarter, from $598.8 million, or $1.76 per share, a year earlier.

Excluding one-time costs, including merger and acquisition expenses, the company earned $1.62 per share, topping the mean estimate of analysts by 2 cents, according to IBES data from Refinitiv.

The Chicago-based company said average daily volume fell to 18.6 million contracts from 22.2 million contracts a year earlier, which was the busiest quarter in CME's history.

"Market conditions changed significantly from the prior quarter and, volatility did drop across virtually every asset class," Chief Executive Terry Duffy said on a conference call. "Despite the change in the trading environment, we were able to post our third highest futures and options quarter in our history."

Clearing and transaction fees revenue dropped 2.1 percent to $952.6 million from a year earlier.

Market data revenue surged 37 percent to $130.1 million, including $17 million from NEX.

Total revenue at CME rose 6.4 percent in the quarter to $1.2 billion, with NEX contributing $191 million. (Reporting by John McCrank, Editing by Bernadette Baum and Steve Orlofsky)

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