One of the problems with the financial services segment is that all its constituents react differently to similar market conditions, and finding a coherent story for investors is going to be particularly difficult this year. Trading firms hate bull markets because they depress volumes, so Plus500 (PLUS) has to hope that volatility continues this year. Other companies that seem to make money come rain or shine – London Stock Exchange (LSEG) springs to mind – are going though prolonged business transformations with no guarantee of ultimate success.
Investors in inter-dealer broker TP ICAP (TCAP) will understand that feeling as the company takes its first dive into the world of crypto in the aftermath of the FTX exchange scandal, having received a Financial Conduct Authority (FCA) licence to launch its own exchange. TCAP investors will hope that this venture finally pulls the company out of its gentle slump. Core demand for its inter-dealer services has been under pressure for some time, although having the majority of earnings and costs in dollars has helped its bottom line at a time when the greenback has been all-powerful.
The other question facing the sector is how the private equity market will play out this year against a background of rising rates and low deal volumes. With that in mind, Bridgepoint’s (BPT) investment strategy could be instructive. The company seems to have made some astute calls recently – a big investment in Hobbycraft paid off just before Christmas, with the arts and crafts company, and staple supplier to children’s birthday parties, coming through with a strong trading update. Combined with a £400mn investment in the Hundred, the newest type of short-form English cricket, Bridgepoint seems to be betting that consumers won’t cut down on leisure if it gives them pleasure.
| FTSE 350 Financial Services | ||||||
|---|---|---|---|---|---|---|
| Price | Market | 12-month | Fwd | Dividend | ||
| Company | (p) | cap (£mn) | change (%) | PE | yield (%) | Last IC view |
| 3i | 1,594 | 15,514 | 20.7 | 6 | 3.3 | na |
| Bridgepoint | 240 | 1,976 | -34.7 | 14 | 0.7 | na |
| CMC Markets | 238 | 665 | 0.6 | 11 | 4.9 | Buy, 262p, 9 Jun 2022 |
| IG | 790 | 3,283 | -3.9 | 9 | 6.2 | Buy, 792p, 26 Jan 2023 |
| Investec | 522 | 3,635 | 32.1 | 8 | 5 | Hold, 465p, 17 Nov 2022 |
| JTC | 726 | 1,082 | -3.5 | 20 | 0.8 | Hold, 828p, 13 Sep 2022 |
| London Stock Exchange | 7,324 | 36,775 | 1.4 | 21 | 1.4 | Hold, 8,427p, 5 Aug 2022 |
| Petershill Partners | 170 | 1,930 | -25.1 | 8 | 0.8 | na |
| Plus500 | 1,841 | 1,716 | 26.4 | 9 | 6.5 | Buy, 1,523p, 15 Feb 2022 |
| TP ICAP | 178 | 1,404 | 22.1 | 7 | 6.2 | Hold, 148p, 10 Aug 2022 |
| Source: FactSet | ||||||
