LONDON (ShareCast) - (Sharecast News) - Analysts at Barclays and Deutsche Bank both took a fresh look at financial services giant Hargreaves Lansdown following the release of the group's full-year results last week.
Barclays noted that full-year pre-tax profits had come in ahead of expectations on both better revenues and costs, with underlying pre-tax profits down 19% year-on-year at £297.5m - largely due to lower trading volumes and markets - but 5% ahead of consensus estimates as a result better costs.

However, Barclays did note that full-year net new business of £5.5bn was down from £8.7bn a year earlier and short of consensus estimates of £5.6bn, with 92,000 new clients, and highlighted that May and June had seen slower growth, with net new business of £700.0m and 2,000 net new clients. A negative mark-to-market also drove total assets under administration down 9% year-on-year to £123.8bn - 2% below consensus.

Despite this, HL still opted to raise revenue margin guidance for the new trading year on higher base rates, with Barclays stating the group's updated cost guidance implied 2023 costs would be below pre-results consensus, leading it to increase earnings per share estimates by roughly 15% and increase its price target on the stock from 1,175.0p to 1,225.0p.

Deutsche Bank, on the other hand, seemed to take a slightly different view, stating Hargreaves' "weak" fourth quarter, had not provided it with much confidence for 2023.

"Although Hargreaves Lansdown saw a 6% beat in profit before tax (driven by better-than-expected underlying costs), we think the focus is going to be on: (a) the weak flows and customer numbers in the discrete 4Q and (b) guidance for FY23, which could see consensus downgrades related to slightly higher strategic investment spend and muted outlook for flows," said DB.

"Meanwhile, although the cash revenue margin has been raised substantially and is now above consensus, we think the overall revenue margin is in line with expectations and so is unlikely to act as an offset. Hargreaves trades on a 21x 2023e PE - lower than historic multiplies, but we think reflects the sentiment around uncertainty relating to the group's own flows and wider market dynamics."

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