LONDON (ShareCast) - Liberum reiterated its 'sell' recommendation on savings and investment group Hargreaves Lansdown after weighing up the "extreme" pressure on income margin that was revealed in the company's results on Wednesday.

Analyst Justin Bates does see some upside risk from the launch of new cash products or obtaining a banking license, although the latter is at least 18 months away, but he saw downside risk from increasing competition, said the valuation was "too rich" and took a dim view of growth prospects.

"Herein lies the dilemma," he explained in a note on Thursday morning, pointing out that although average assets under management rose 33% year-on-year, net income was only up 8% and adjusted pre-tax profit only up 7%.

"The extreme margin pressure is depressing returns. Despite the attractive long-term asset gathering potential, we see further downward pressure on margins and therefore profits growth.

"We believe the business has reached a stage in its maturity where the 'new normal' for earnings per share growth is circa 10% per annum."

He does not think that justifies the company's price of 30 times forecast earnings - a 78% premium to the sector on 2014 numbers and 84% premium in 2015 - and also sees further margin pressure ahead.

Net income margin has fallen by 46% since 2006 and Bates said he expects further attrition, envisaging an 11% reduction in the full year and 6% fall in 2016.

While net inflows were good, as the business increases in size the absolute level of net inflow growth is having a smaller impact.

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