Hargreaves Lansdown published a trading update for the three months to 30th of September this week, and to be frank some of the numbers were underwhelming when compared to recent data from the listed companies in the margin trading space.
Of course, stockbroking and asset management earnings have always been seen as being less volatile than those derived from trading. And assets under management or administration are much more highly rated by the market than the cash deposits that clients hold at the likes of IG or CMC Markets.
A net new business figure of £800 million derived from 31,000 new clients were the highlights of the update. Assets under administration grew to £106.69 billion a figure that was up +3.0% since the end of June 2020.
However £2.10 billion of the growth was attributed to market movements rather than asset gathering. The new client numbers were actually lower than in the comparable period in 2019.
Whilst revenues for the quarter came in at £143.47 million +12% above the comparable figures for 2019. Those numbers were boosted by elevated share-dealing volumes and associated commissions.
As far as the market was concerned it was definitely better to travel in Hargreaves Lansdown than to arrive the stock fell by -4.0% taking monthly loses to just under -6.0% and year to date falls to -20.0% for comparison IG Group shares are up just over +12.0% year to date though they are lower by around- 6.0% over the last three months.
Hargreaves Lansdown stock is trading at £16.17 as I write, below the analyst consensus target price of £16.80. However, of the 12 analysts that research the stock 5 have outright sell recommendations, 5 have a hold rating on the broker, and only 2 have a buy recommendation.
And that’s the issue because the problem for Hargreaves Lansdown is to convince investors that the business model can still grow and generate revenue growth in an increasingly competitive environment, in which some of the competition allows their customers to deal or free or at least offsets their costs with an income generated elsewhere.
The low-cost flat-fee model that helped to grow the business served Hargreaves Lansdown well for many years, but the question that needs to be answered now is what comes next and finding the answer to that may prove to be very challenging indeed.
Darren is a veteran of the financial markets with almost 36 years of experience under his belt. He has worked in trading, sales, analytical, and research roles, he has been a regular guest & commentator on financial television channels and publications. During his career, Darren has been fortunate to act for and advise major hedge funds and investment banks as well as HNWI. Darren analyses the markets using a blend of technical and fundamental analysis