40 2GM Wednesday February 23 2022 | the times
Business
Almost £1 billion was wiped from the
value of Hargreaves Lansdown after it
announced an ambitious but costly
strategic plan to win an extra 900,000
customers over five years.
The investment platform, which is
already used by 1.7 million people, said
it would have to suspend special divi-
dends for the next two years to pay the
£225 million bill to push deeper into the
wealth management sector.
A 20 per cent fall in pre-tax profit to
£151.2 million for the six months to the
end of December also weighed on
investor sentiment with Hargreaves
reporting an easing of trading volumes
since the peak of lockdown.
Shares in the FTSE 100 company
ended the day down 203p, or 15.6 per
cent, at £10.95, reducing the value of the
business by £947 million to £5.2 billion.
Chris Hill, chief executive, said that
the wealth management sector was at a
key inflection point, offering a big
opportunity for Hargreaves to grab a
bigger share of a £4 trillion market.
The company would widen and
improve its offering, providing clients
with new tools and “nudges” as well as
broadening the range of Hargreaves-
branded funds and expanding its
regulated advice service.
The aim was to boost client numbers
to 2.1 million by the end of 2024 and to
2.6 million by the end of 2026. Net newGrowth plan leaves Hargreaves in dumps
business growth would accelerate to
10 per cent a year by 2026, it said.
The £225 million capex cost would
comprise £175 million plus £50 million
as the cost of running parallel IT
systems during the move from legacy
systems to new ones. However, it would
then produce annual savings of £55 mil-
lion through reduced IT and data costs,
the company said.
“Hargreaves Lansdown was the
original disruptor and successfully
established the direct-to-consumer
market. The evolvement [sic] of our
proposition and strategy means now is
the right time to target the broader
wealth management market and
rethink how we set a new standard for
how the UK saves and invests.”
Over 30 years the Bristol-based firm
has carved out a powerful position in
investing, offering an online platform
through which retail investors can buy
and sell shares.
Hill said he now wanted to build the
advisory business, which has about
10,000 clients, to 100,000 in five years.
This would be an “augmented” orShare price
£18171615141312Q1 Q2 Q3 Q4 Q1^11Source: Refinitiv^20212022hybrid service using both human inter-
action and automated systems.
Analysts at Jefferies commented that
Hargreaves was now “grasping the
nettle” and sacrificing profitability for
growth in the face of headwinds. But it
added some scepticism saying that the
targets were high, while no other com-
pany had made a success of automated
or so-called robo-advice. “Technology
projects have a tendency to overrun
budgets,” it added.
The ambitious targets from the UK’s
biggest investment platform sent
ripples though the wider industry.
Shares in AJ Bell fell 4.5 per cent,
while abrdn, which is in the process of
buying another popular platform,
Interactive Investor, was down 4.6 per
cent. St James’s Place, the advisory
business, fell 2.4 per cent.
Special dividends have been a regular
boost for Hargreaves shareholders, at
7.8p, 8.3p, 17.4p and 12p in the past four
years. While they will be scrapped for
two years, the ordinary dividend plan is
unchanged. The interim payment is
lifted 3 per cent to 12.26p.Patrick Hosking Financial Editor
HSBC has lifted its bonus pool to
$3.5 billion after its annual profits
jumped and the bank became locked in
a war for talent with rivals.
The FTSE 100 lender said yesterday
that the pool for last year rose by 31 per
cent compared with 2020, when bonus-
es had fallen along with profits follow-
ing the outbreak of the pandemic.
The bonus pool now stands at its
highest level since 2014, pushed up-
wards by what HSBC described as “an
extraordinarily competitive labour
market” in its annual report.
The rise in bonuses came as the Asia-
focused bank posted a jump in annual
pre-tax profit from $8.8 billion in 2020
to $18.9 billion last year, just missing
forecasts of $19.1 billion, after the fallout
from the pandemic proved to be less
severe than originally feared.
Like other lenders, HSBC had been
bracing for a wave of loan defaults from
the crisis and its results in 2020 had
been marred by $8.8 billion of impair-
ments for expected credit losses. How-
ever, last year it was able to release a net
$900 million of its loan provisions after
having fewer defaults than expected,
which helped to lift its annual profits.
Noel Quinn, chief executive, insisted
yesterday that the bank had shown
restraint on bonuses. While profits
climbed by 115 per cent, the increase in
the pool was much smaller and this was
in recognition that “much of that profit
performance” was a result of write-
backs of impairments, he said.
He added that the pool also reflected
competitive pressures the bank faced to
attract and retain staff, particularly in
areas including technology, IT services,
investment and corporate banking.
Ewen Stevenson, finance chief, said:
“If you’re specialist in climate stress-
testing at the moment you’re like gold
dust”. Standard Chartered and Nat-
HSBC boosts bonus
pool to $3.5bn after
annual profits double
West also last week announced in-
creases to their bonus pools alongside a
boom in profits.
Quinn was paid £4.9 million for last
year, but he could receive a further £4.1
million in long term share awards
taking his overall package to as much as
£9 million. Quinn, 60, who has led the
bank since August 2019, has been
tasked with reviving the group’s slug-
gish performance and has set out a
strategy of tilting the bank further to-
wards Asia. However, his efforts have
been complicated by the pandemic and
heightened geopolitical tensions over
Hong Hong, the bank’s biggest market.
HSBC said yesterday that its turn-
around will be boosted by an expected
rise in interest rates around the world.
Rates have been at rock bottom for
years, putting severe pressure on len-
ders. This led to revenues at HSBC slip-
ping 2 per cent to $49.6 billion last year
from $50.4 billion in 2020.
However, with inflation soaring, poli-
cymakers are expected to lift rates to
rein-in prices. HSBC said this would
help it to reach one of its main profita-
bility targets sooner than planned: “If
rates follow the path currently implied
by the market, we would expect to
reach a return on tangible equity of at
least 10 per cent for 2023, one year
ahead of our previous expectations.”
That compares with 8.3 per cent in 2021.
The bank unveiled a share buyback
worth up to $1 billion that will start once
a $2 billion buyback that it announced
in October finishes and declared a divi-
dend of $0.18 a share that will hand back
$3.6 billion to shareholders.
Hong Kong continues to impose
strict Covid restrictions. This has led to
speculation that the territory’s status as
Asia’s top financial hub could be
harmed, although Quinn said that he
believed the situation “will not have a
permanent negative impact”. Shares in
HSBC rose ¼p, or 0.04 per cent, at 547p.Ben Martin Banking Editor Regulatory scrutiny
H
SBC is under fresh
regulatory scrutiny,
with an American
watchdog
investigating its
bankers’ use of the WhatsApp
messaging service and the Bank
of England looking at customer
safeguards.
Disclosures in its annual
report, released yesterday, show
that the US Commodity Futures
Trading Commission is
examining “the use of non-HSBC
approved messaging platforms
for business communications”.
Noel Quinn, chief executive,
said: “This is an area that’s been
looked at for many banks in the
US. The regulators are looking,
as they are for other institutions,
at our record-keeping and our
use of WhatsApp and other
things, and that is ongoing.”
HSBC also revealed in the
report that it was subject to an
investigation by the Bank of
England’s Prudential Regulation
Authority “in connection with
depositor protection
arrangements in the UK”.
Ewen Stevenson, the finance
chief, said the investigation
related to the accuracy of the
bank’s reporting on the Financial
Services Compensation Scheme.
The Bank declined to comment.
In 2012, HSBC was fined
$1.9 billion in the US for failing to
stop money laundering by
Mexican drug cartels. In
December it was fined almost
$64 million by Britain’s Financial
Conduct Authority for money-
laundering failings in 2010-18.T
he Venue
Group (TVG)
Hospitality
has raised
$50 million
with the backing of
tech billionaires,
financial professionals
and musicians, as it
goes ahead with its
plans to expand in the
US (Shayma Bakhtwrites). The music
venue company was
set up by a founding
member of the folk-
rock band Mumford &
Sons, Ben Lovett, and
his brother Greg
Lovett, the former
finance director of
Soho House North
America, who closed
the new funding for itsinitial financing round
yesterday.
TVG was founded in
2015 and operates
three venues in
London — Omeara
and Flat Iron Square
in London Bridge and
Lafayette in King’s
Cross — with several
under development in
America.
The first venue due
to open in May is the
Orion Amphitheatre
in Huntsville,
Alabama, which has
an 8,000-personVenue group tuned
up for US expansion
Staley share
awards ‘frozen’
Barclays is expected to announce today
that it has frozen millions of pounds
in share awards to its former chief
executive as he contests the findings of
a regulatory investigation into his
relationship with Jeffrey Epstein.
Directors have decided not to allow a
chunk of shares granted to Jes Staley
several years ago to vest as scheduled,
despite a significant rebound in the
bank’s performance.
The decision is understood to have
been made in recent days as Barclays
directors signed off the 2021 financial
results, according to Sky News. The
annual figures will be announced today,
when details of Staley’s remuneration
arrangements will also be disclosed.
Barclays and a spokesman for Staley
both declined to comment.
In November, Barclays said he was
stepping down because he wanted to
contest findings by the Financial Con-
duct Authority and Prudential Regula-
tion Authority into how he character-
ised his relationship with Epstein, the
late paedophile, to the bank.