There are three income streams at Rathbone Brothers and investors need to understand how they interact. In the first six months of 2009, client fees fell £3m to £25.4m, reflecting weaker stock markets. Dealing commissions were also down from £15.4m to £13.9m, while interest that Rathbone earns on client accounts was £800,000 lower at £13m. No major surprises there apart from the fact that interest returns held up so well: they did so because Rathbone has a banking licence and even until last August, it was able to obtain one-year interest returns of 5 per cent on institutional deposits.
But that return is now under 1 per cent. So even if fees and commissions go up in the second half as stock markets rally, there's going to be a big fall in interest receipts. Rathbone believes that the figure could fall to between £6m and £7m, compared to £17.1m in the second half of 2008. One further factor to consider is the performance of Rathbone's unit trusts. This side of the business has been dire recently and, in the latest half year, funds under management fell 19 per cent and operating income more than halved to £3.63m.