M&G beats profit expectations as rising interest rates boost retail and savings divisions
- M&G beat expectations as rate rise helped its retail and savings divisions
- Shares are up 4.2% this morning, having gained almost 10% this year.
M&G has reported better-than-expected profits thanks to improving market conditions and rising interest rates.
The investment firm revealed a rise in adjusted pre-tax profits from £298m to £390m in the six months to the end of June. This was well ahead of the £284 million expected.
He said it “reflects a strong contribution from [the] retail and savings segment, driven by improved business results with earnings and higher returns on excess assets in the shareholder annuity portfolio following rising interest rates.
Investment firm M&G beat profit expectations as rate rises helped its savings business
On Tuesday, Hargreaves Lansdown also reported higher profits as rising rates gave its savings division a boost.
M&G Stock They rose 4.20 per cent to 207.79 pence on Wednesday morning, having gained 9.53 per cent so far this year.
Net client flows, excluding Heritage’s illiquid portfolio, fell from £1.2bn to £700m but remained positive for the third year running despite headwinds from UK institutional clients.
M&G said it expected refunds from UK customers due to the mini-Budget, with net outflows of £1.4bn, up from £700m on December 31, 2022.
M&G’s assets under management and administration totaled £333 billion in the first half, down three per cent this year and £9 billion below forecasts.
But the investment group said it was on track to achieve its target of generating £2.5bn of working capital by the end of next year and was making good progress on its 2025 financial targets.
Group CEO Andrea Rossi said: “Today’s results demonstrate the underlying strength of our business model, the resilience of our balance sheet, the attractiveness of our propositions, as well as the hard work and commitment of our colleagues to deliver for our clients and execute our strategic ambitions.
‘As we look to the future, I remain confident that we have the right ingredients for success that will allow us to continue to deliver attractive results for our clients and shareholders.
“However, we are not complacent and will continue to focus on ensuring our balance sheet remains strong and we deliver on our purpose and strategic objectives.”
Separately, M&G said it had a renewed focus on its asset and wealth management businesses, with net inflows from Asset Management wholesale clients of £1.3bn.
M&G also said it had re-entered the defined benefit pension market through two deals with a combined premium of £617m.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “This is the first deal to be done in the area since the annuity book closed in 2016 – it is becoming a hot spot for some of the big insurers, so competition is likely to intensify, but it does provide another string to M&G’s bow.’