All about the fees for Curtis Banks

Interims for Sipp-provider Curtis Banks (CBP) displayed the solid foundation the company has built with fees after moving away from a reliance on interest income to generate a significant proportion of its earnings. The fruit of that effort was visible in these results - income from fees charged on its Sipp products made up 70 per cent of total revenue, with over 80 per cent of that now yielding on a recurring basis. The other advantage with fees are the inflation protection clauses that stop their value eroding.

It is fair to say that the company did not have a lot of choice in making the switch, with interest income largely dependent on the whim of the Bank of England’s bank rate doves. For instance, the lowered bank rate of 0.1 per cent in March 2020 meant a 30 per cent reduction in interest income to £4.2m for the period. In addition, the integration of the Talbot and Muir and Dunstan Thomas acquisitions provided the half’s biggest boost, particularly in terms of cash inflows which totalled £7.2m, compared with just £0.4m last year, though management said that the acquisitions would not lead to further cost savings. CBP also reported an aggregate surplus above its minimum regulatory capital requirements of £15.7m.

Broker Singer estimates that CBP’s core business saw fee income grow by 9 per cent, with management setting the target of interest income making up no more than 7.5 per cent of total income. That looks achievable based on the performance so far, though at a PE of 14 for this year, the story looks priced in. Hold.

Last IC view: Hold, 275p, 7 Apr 2021