Rathbones Group LON: RAT reported higher first-half income, profit and funds under management and advice (FUMA), while revising its fourth-quarter operating-margin target after deciding to stop charging fees on the cash element of portfolios.
Group CFO Iain Hooley said FUMA stood at £120.7 billion at June 30, up 10.7% from a year earlier and £5.1 billion higher than at the start of 2026. Operating income rose 8.6% to £487.5 million, while underlying profit before tax increased 14.4% to £123.2 million.
The company’s underlying operating margin improved by 1.3 percentage points to 25.3% in the first half. Statutory profit before tax rose 15.7% to £72.1 million, despite increased non-underlying costs related to the Skilled Person Review announced in June.
Underlying basic earnings per share increased 17.1% to 88.5p. Rathbones declared an interim dividend of 32p per share, up 3.2% from the prior-year interim payment, while maintaining its progressive dividend policy.
Flows improve in wealth management
Group net outflows were £0.9 billion in the first half, compared with outflows of £1 billion in the first half of 2025. Wealth management flows were neutral for the six-month period after the segment generated £450 million of net inflows in the second quarter, following group net outflows of £845 million in the first quarter.
Hooley said the second-quarter improvement reflected lower outflows and better new-business inflows, particularly in discretionary and managed services. Excluding £200 million of tax-driven outflows tied to capital-gains crystallization ahead of the U.K. government’s October 2024 budget, as well as volatile execution-only mandates, wealth management recorded underlying net inflows of about £500 million for the half year.
Asset management continued to face difficult conditions for active U.K. managers, particularly in single-strategy funds. However, multi-asset funds performed relatively better, according to the company.
Advice income grew 11.7% in the first half. Rathbones said clients using both investment management and financial planning produced net inflows in every region during the period, with 4% annualized asset growth compared with neutral wealth-management flows overall. The number of financial-planning clients increased 3%.
Margin target revised after cash-fee change
Rathbones had previously targeted a 30% operating margin in the fourth quarter of 2026, subject to FUMA growth, stable inflation and interest rates in line with market expectations. It has now reduced that target to 28.7% after announcing the cessation of charges on the cash portion of client portfolios.
Hooley said the policy change is expected to lower the wealth-management fee margin by about 1.5 basis points and reduce the second-half operating margin by 1.3 percentage points compared with what it otherwise would have been. The company said it remains on track for the revised fourth-quarter target, subject to the stated market conditions.
The company expects its Salesforce client relationship management system to go live around the end of the third quarter. Once implemented, technology costs related to the project are expected to be about £6 million lower in the second half, with the benefit weighted toward the fourth quarter.
Rathbones completed its extended share buyback program during the period, purchasing more than 3.5 million shares, or approximately 3.3% of shares in issue. Its total capital ratio was 18.3% at June 30, representing a £166 million surplus over the minimum regulatory requirement.
Regulatory program underway
Rathbones said it has made progress mobilizing the regulatory program agreed with the Financial Conduct Authority and KPMG, the appointed Skilled Person. The program includes enhanced due-diligence work and a targeted client review.
The company said it had identified no material client outflows attributable to the program and no employee departures related to the announcement. First-half voluntary attrition was approximately 3% overall and 2% in the front office, which Rathbones said was within normal historical experience.
Rathbones has agreed a revised client-risk methodology with KPMG and begun a file-review pilot, which it expects to complete by the end of August. It then plans to remediate approximately 4,700 enhanced-due-diligence clients currently subject to restrictions, with review work expected to finish by year-end.
Management said the estimated financial impact remains in line with the £60 million incremental cost disclosed in June. In response to analyst questions, Rathbones said the effect on current assets under management was “extremely negligible,” amounting to two pieces of business totaling £1.4 million. It also removed £178 million across 28 opportunities from a gross, unweighted pipeline of about £17 billion.
Strategy initiatives include technology, investment changes
The company said it is advancing initiatives across client service, talent, operating efficiency and brand development. Robert Sears, who joined as chief investment officer in March, has begun reviewing the investment proposition and operating model. Rathbones has approved a governance structure intended to cut the number of investment committees by around 75%.
Rathbones also plans to launch investment-grade and private-market strategies in the second half. It said negotiations with third-party fund managers had reduced the cost of underlying ongoing charges on external funds by an average of one-third.
The MyRathbones digital platform exceeded 60,000 registered users, while the company deployed AI tools across processes including suitability, file reviews and call transcription. Use of enterprise-approved AI tools increased to more than 56,000 hours per month in June from 22,000 hours in February.
In wealth management, Rathbones said its investment performance outperformed the ARC benchmark by 0.3% annualized over three years and 0.2% over five years. In asset management, 71% of assets under management outperformed their benchmark or objective over one year, while 62% did so over three years.
About Rathbones Group (LON:RAT)
With roots dating back to 1742, Rathbones is one of the UK's leading providers of investment and wealth management services for private clients (individuals and families), charities, trustees and professional partners. Rathbones' purpose is to help more people invest their money well, so they can live well.
Rathbones has been trusted for generations to manage, preserve and grow clients' wealth and services include discretionary investment management, fund management, tax planning, trust and company management, financial advice and banking services.
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