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Rathbone Brothers falls after weak markets hurts its investment performance in the final quarter of 2018

In a trading update or the three months ended 31 December 2018, the FTSE 250-listed firm said its investments fell by £3.52bn in 2018, after a £2.86bn gain in 2017
Wealth growing
However, Rathbone saw its total assets under management (AuM) as at December 31 rise by 13% to £44.09bn, up from £39.15bn a year earlier

Rathbone Brothers PLC (LON:RAT) saw its shares fall on Thursday after the wealth manager said weak markets hurt its investment performance in the final quarter of 2018, leading broker Peel Hunt to trims it target price and estimates for the group.

In a trading update or the three months ended 31 December 2018, the FTSE 250-listed firm said its assets under management and administration (AuM) fell by 6.8% to £38.5bn, down from £41.3bn a year earlier, primarily reflecting weaker investment markets. 

READ: Rathbone to acquire Scotland's largest independent wealth manager Speirs & Jeffrey for £104mln

However, Rathbone saw its total AuM as at December 31 rise by 12.8% year-on-year to £44.1bn, up from £39.1bn a year earlier.

It added that net investment inflows over the period increased to £8.5bn, up from £2.1bn in 2017, boosted by the inclusion of £6.8bn of funds under management from the acquisition of Speirs & Jeffrey last year.

Rathbone agreed to buy the Scottish wealth manager in June 2018, paying an initial £104mln in cash and stock. It said it intends to pay a further contingent share consideration of 600,000 new Rathbone shares in the second quarter of 2019, rather than by December 2019 as previously anticipated.

Looking ahead, the investment group said: "Whilst market conditions can reasonably be expected to be volatile in 2019, we will continue to invest selectively for the longer term in the skills and infrastructure necessary to improve our operational efficiency and deliver high-quality services to our clients." The company is due to release its 2018 results on February 21.

In late afternoon trading, Rathbone shares were 5.8% lower at 2,340p.

Impact on forecasts ‘relatively modest’

In a note to clients, analysts at Peel Hunt reduced their target price for Rathbone to 2,900p, down from 3,075p previously, but maintained a ‘buy’ rating on the stock.

They said: “Although the end of 2018 was more challenging than expected, the impact on forecasts is relatively modest.

“We now expect PBT/EPS of £91.4m/135.8p (from £95.3m/141.6p). By contrast, consensus stands at £93m/143.5p.

“However, 2019 forecasts will be more impacted given the lower starting point for AuM – we subsequently downgrade our forecasts by 12%. We now expected £95.4m/132.0p from £108.1m/149.5p previously.”

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