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Rathbone boosts assets

RESULT: But low interest rates and near-term uncertainty in equity markets raise doubts
July 29, 2010

Rathbone Brothers has done well to boost profits and funds under management especially as the UK equity market plunged 14 per cent in the second quarter and by over 9 per cent in the first half of this year.

IC TIP: Hold at 833p

Despite this difficult backdrop, funds under management (FUM) at Rathbone Investment Management rose by 2.1 per cent to £12.4bn. Fee and commission income grew substantially from £48m to £60.4m, thanks to an agreement last October to transfer certain discretionary investment management assets from Lloyds Banking, which contributed £665m of FUM. The full benefits of the acquisition should be seen next year.

Another positive is that Rathbone's unit trust management side is now showing signs of stabilising, with net redemptions slowing from £180m a year earlier to £41m. What's more, cost-cutting helped to reverse a previous loss of £0.3m into a profit of £0.5m. Inevitably, though, the record low interest rate environment has meant that group net interest income fell from £15m a year earlier to £5.33m.

Based on a FTSE 100 around 5100, KBC Peel Hunt is forecasting full-year adjusted pre-tax profits of £32.7m and EPS of 53.3p (£32.4m and 52.3p in 2009).

RATHBONE BROTHERS (RAT)
ORD PRICE:833pMARKET VALUE:£361m
TOUCH:829-835p12-MONTH HIGH:987pLOW: 731p
DIVIDEND YIELD:5%PE RATIO:17
NET ASSET VALUE:405p 

Half-year to 30 JunPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200914.223.916
201015.825.516
% change+11+7-

Ex-div: 15 Sep

Payment: 6 Oct

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