IG Group, the spread-betting company, lost more than a quarter of its stock market value yesterday after it admitted that some of its high-rolling clients had been burnt by the meltdown in banking shares last month.

Shares of IG collapsed 62.25p, or 27.27 per cent, to 166p, wiping almost £223 million from its market worth, after it emerged that the company was exposed to about £15 million of bad debts run up over the past six months. About £12 million of this was accumulated in October alone, when scores of clients suffered big losses after incorrectly betting on shares of Royal Bank of Scotland, HBOS and other banks.

IG’s bad debt charge for the whole of 2007 was only £4 million.

Tim Howkins, the chief executive of IG, said that about 40 clients had been badly hit and would take time to repay their betting losses – hence the need for the company to make bad-debt provisions.

He told The Times: “The larger debtors are all clients that have been known to us for a long time. They are all names that I have known personally, on first-name terms, for years. They are people who typically have an expansive property portfolio and who, when facing a loss of this kind, would be able to repay it by visiting their bank manager and raising a loan against it.

“They are just finding some of those conversations a bit harder right now and so instead might be selling a property or some shares – but clearly there is a gap while they do this. My guess is that, in two years, we will have collected a good chunk of this money. But obviously, we can’t have that sitting around in the meantime, hence the provision.”

Mr Howkins said that many of the biggest losses had been incurred by clients betting on a rise in shares of RBS – which, on October 3 and October 7, halved in value. He said that clients had also bet unsuccessfully on rallies in a number of larger stock indices.

IG is well-known in the spread-betting industry for being one of the few financial bookmakers that still offers significant amounts of credit.

It is understood to have opened a large number of accounts in August last year when the rival Cantor Index decided to stop offering clients credit – prompting many to take their business elsewhere. City Index, the other big player in the market, is also understood to have cut back sharply on the credit it offers.

Mr Howkins said that IG had changed the terms under which it does business in recent months. He added: “We have moved to a process where the majority of clients are closed out automatically. If they have run up a big loss, we write to them asking for them to put up margin and warning them that, if they do not, they will be closed out. Then, if they do not make their margin call, we close them out.”

Mr Howkins said that, in the past, where IG had made big provisions for large individual debts, it had typically enjoyed good levels of recovery in subsequent years. He said that the company would continue to pursue all outstanding debts vigorously.

Despite the bad-debts setback, Mr Howkins said that the market’s volatility last month had been good for new business. He said that, from September to November, IG expected to have opened more than 22,000 financial spread-betting accounts. He said that this compared with fewer than 10,000 in the same period last year.

IG also confirmed that it expected half-year pretax profits to be approximately £58 million – up from £48 million in the same period last year.

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