AJ Bell reaps rewards from high interest rates

The firm revealed a 61% jump in profits

Michael Summersgill, chief executive officer, AJ Bell

AJ Bell revealed a 61% jump in pre-tax profits in its half-year results to 31 March 2022, as revenues received a significant boost from interest rates earned on customer cash balances.

The Bank of England raised its base rate from 2.25% to 4.25% during the six-month period, and AJ Bell’s recurring ad valorem revenues responded by leaping nearly 80% year-on-year, owing to the elevated interest rate earned on client’s cash balances.

This explained the 37% increase in company revenues, which grew to £103.6m. Compared to 31 March 2022, revenue from transactional fees decreased by 29%, to £12.9m, following reduced levels of dealing activity in the firm’s D2C offering. Recurring revenues were largely flat, growing by £0.4m.

The company also benefitted from growing assets under administration. As AJ Bell revealed in its trading update in April, total AUA grew to £73.8bn across the half, up from £69.2bn at the end of September 2022. This reflected a steady increase in assets across its platforms and investments business.

AJ Bell Investments saw record net inflows of £900m during the period, but platform net inflows were down by a third on the same date last year, falling to £2bn.

As of 31 March, total AUA sat £300m below the figure at the same point last year.

CEO Michael Summersgill (pictured) argued that the results demonstrated the strength of the firm’s diversified business model, enabling AJ Bell to “perform well across different market conditions”.

Looking ahead, Summersgill said: “We expect full-year revenue margins to be similar to those achieved in the first half, with an anticipated increase in the average interest rate earned being offset by a recent moderation in average customer cash balances from elevated levels seen earlier in the first half.”

He added that AJ Bell expects a slight compression in revenue margins beyond FY23, given the moderation in customer cash balances, and the firm’s desire to lower prices in the future.

See also: AJ Bell names M&G director as chair to succeed Helena Morrissey

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