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Mixed outlook for financial services

General finance covers a broad church from door-step lending through second mortgages to mezzanine finance, but through all this runs a need by consumers and companies alike for funding to oil the economic wheels.

As the financial crises developed, lending levels were hit largely through a reluctance of lenders to lend, and customer reluctance or inability to borrow. True, the low cost of lending has helped to stave off insolvency in some cases, but low interest rates do not automatically mean an abundance of money. Wholesale credit markets are only just beginning to show signs of an initial thaw after freezing up completely. And while attempts have been made to encourage banks to lend more money, many companies have found that raising funds through other means such as rights issues and bond issuance is easier.

For providers of non-standard loans such as Provident Financial, attention will continue to focus on maintaining strict lending criteria, thereby keeping a lid on bad debts. And demand for this type of credit is likely to remain pretty strong as high-street lenders continue to keep the credit drawbridge firmly up.

Mortgage funds are similarly hard to come by, although buy-to-let mortgage specialist Paragon has recently succeeded in setting up a warehouse funding scheme that will allow it to accelerate lending this year. The outlook is a little less certain for inter-dealer brokers such as Icap and Tullett Prebon. Much depends on market confidence which in turn influences trading volume. If growth in major economies look like stagnating, then quieter markets could hit profits.

However, the temptation of having a tax-free bet on which way markets move is likely to prevail, much to the benefit of online spread betting specialists such as IG Group. Customer numbers continue to grow, and leverage restrictions imposed last year apply only to aspects of the business in Japan, and do not affect the UK client base.

COMPANYPRICE (p)MARKET CAP (£m)PE RATIOYIELD (%)1 YEAR PRICE CHANGE (%)LAST IC VIEW
CLOSE BROTHERS GROUP8801,27714.44.421.1
ICAP5593,69115.13.230.1
IG GROUP HOLDINGS5271,90517.03.539.4
INTERMEDIATE CAPITAL GP.3551,4188.54.822.2
INTERNATIONAL PERSONAL.FIN.37095120.81.557.3
INVESTEC5282,83412.23.018.0
LONDON STOCK EXCHANGE.GROUP8792,38213.82.829.2
PARAGON GROUP OF COS.19056810.41.948.4
PROVIDENT FINANCIAL1,0001,35613.96.410.3
TULLETT PREBON4148919.03.734.4

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