Buoyant DIY investing giant Hargreaves Lansdown 'poised to apply for a full banking licence'

Banking status: Hargreaves is thought to be already responsible for about £3.8billion in client cash

Banking status: Hargreaves is thought to be already responsible for about £3.8billion in client cash

Financial services group Hargreaves Lansdown is expected to say it will apply for a full banking licence to take advantage of a growing flood of client money through its business.

Analysts at investment bank Morgan Stanley say Hargreaves, which provides investment and share dealing services, could announce the move at its full-year results on Wednesday.

That would pave the way for the business to pay better rates of interest on clients’ cash portfolios.

Morgan Stanley said: ‘Isa reforms allow for increased cash holdings plus flexibility between cash and investments, and pension reform would also increase client cash. To attract and retain customers, we believe Hargreaves will have to pay more competitive rates on client cash.’

The bank estimates that Hargreaves is already responsible for about £3.8billion in client cash, but as it is not a full bank it cannot hold that cash directly and must place it with other banks.

Gaining a banking licence would enable Hargreaves to hold those deposits on its own account. If Hargreaves took deposits, it could invest the money to earn higher returns and pay higher rates of interest to customers.

 

Analysts at investment bank JP Morgan Cazenove said that Hargreaves will reveal a full-year profit rise of 15 per cent, to £209million.

The bank said the Chancellor’s overhaul of annuities will hit Hargreaves in the short term, but the broker will be able to benefit from moves towards income drawdown arrangements — expected to be a popular alternative to annuities.

Chancellor George Osborne relaxed the rules forcing people to take out annuities, allowing pension savers more choices in how to use their pension pots.

Meanwhile Sir Richard Branson’s Virgin Money is considering bringing forward its long-planned £2billion stock market listing to take advantage of strong investor appetite for new shares.

It is known that Virgin has lined up investment banks Goldman Sachs and Bank of America Merrill Lynch to advise on a listing. Most observers had not been expecting a flotation until 2015, but reports this weekend suggest a announcement could come as early as October.

Sources close to the process said timing would depend on the stock market mood in the weeks ahead.Virgin Money, which is 46 per cent owned by Virgin Group, has four million customers and a mortgage book worth about £20billion.

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