Rathbones interim results 2026: profit growth meets an FCA-shaped headwind

Rathbones Group PLC has reported a stronger first-half profit performance, helped by higher fees, commission income and financial planning revenues.

The headline numbers look encouraging. Funds under management and administration, or FUMA, rose 10.7% year-on-year to £120.7 billion, while underlying profit before tax increased 14.4% to £123.2 million.

However, investors also have a sizeable regulatory issue to assess. Rathbones recognised £19.0 million of costs connected with its Financial Conduct Authority Skilled Person Review, and expects the related programme to cost approximately £60 million over two years, net of insurance recoveries.

Here is what matters from the original company announcement.

Rathbones' key first-half figures

Metric	H1 2026	H1 2025	Change
Operating income	£487.5 million	£449.1 million	8.6%
Underlying profit before tax	£123.2 million	£107.7 million	14.4%
Profit before tax	£72.1 million	£62.3 million	15.7%
Underlying operating margin	25.3%	24.0%	1.3 percentage points
Underlying earnings per share	88.5p	75.6p	17.1%
Basic earnings per share	50.4p	42.6p	18.3%
Interim dividend per share	32.0p	31.0p	3.2%
Closing FUMA	£120.7 billion	£109.0 billion	10.7%

Underlying figures exclude items that management considers exceptional or not representative of ongoing operations. In this case, the gap between underlying and reported profit largely reflects charges relating to acquired client relationships, integration costs and the Skilled Person Review.

Encouragingly, reported profit before tax still rose 15.7% to £72.1 million despite those charges.

Revenue growth is translating into better margins

Operating income increased 8.6% to £487.5 million, supported by higher investment management fees, commission income and financial planning advice revenues.

Underlying operating expenses increased 6.7% to £364.3 million. Revenue therefore grew faster than the underlying cost base, lifting the underlying operating margin from 24.0% to 25.3%.

That operating leverage is an important positive. Wealth managers have significant fixed costs, so additional revenue can produce faster profit growth when expenses remain controlled.

The declining cost of integrating Investec Wealth & Investment also helped. Acquisition and integration costs fell from £23.2 million to £9.5 million, with Rathbones expecting these costs to cease during 2027.

Asset growth was driven by markets, not net inflows

The £120.7 billion FUMA figure deserves a closer look.

Group FUMA began the year at £115.6 billion. Rathbones recorded £0.9 billion of net outflows during the first half, but market and investment performance added £6.0 billion.

In other words, investment performance more than offset client withdrawals. That is welcome, but market-driven growth is less controllable than attracting and retaining client money.

There was improvement as the half progressed. Wealth Management moved from £0.4 billion of net outflows in the first quarter to £0.4 billion of net inflows in the second quarter. Discretionary & Managed services contributed £0.5 billion of Q2 net inflows.

This left Wealth Management with broadly neutral flows for the full six months. Management said client asset retention and new business momentum had strengthened.

Asset Management was weaker. Excluding intra-group assets, it recorded first-half net outflows of £0.9 billion, equivalent to an annualised net growth rate of negative 18.4%.

Single Strategy funds were the main problem, suffering £0.6 billion of net outflows during the half. Rathbones attributed this to industry-wide pressure on active equity strategies. Multi Asset funds performed better, recording modest positive net inflows of £67 million.

The FCA programme is the central risk

Rathbones is implementing a programme agreed with the FCA following a Skilled Person Review. A Skilled Person Review is an independent regulatory assessment commissioned under the FCA's powers.

The group booked £19.0 million of related costs in the first half, including a £15.9 million provision. It expects the wider programme to cost approximately £60 million over two years, net of insurance recoveries.

There is further uncertainty. Rathbones said potential client redress cannot currently be estimated reliably, so no provision has been recognised for it. Insurance may cover certain redress and professional costs, but claims remain subject to insurer acceptance and policy limits.

Operationally, Rathbones has redeveloped its customer risk-rating methodology and begun a file-review pilot. It expects to complete review work for approximately 4,700 restricted enhanced due diligence clients by the end of 2026.

The early client response appears resilient. Rathbones said it had identified no material client outflows attributable to the programme, while commercial activity remained stable and colleague retention stayed within normal historical experience.

That is reassuring, but the programme remains a financial and reputational risk until its scope, cost and any redress obligations become clearer.

Second-half margin guidance has been reduced

Rathbones has stopped charging fees on the cash element of client portfolios as part of its response to the review.

Management expects this to reduce second-half income and operating profit by approximately £9 million. It is also forecast to lower the second-half underlying operating margin by 1.3 percentage points.

Consequently, the fourth-quarter operating margin target has been cut from 30.0% to 28.7%. Rathbones still expects to achieve the revised target, subject to assumptions covering FUMA growth, inflation and interest rates.

Lower technology costs following the planned completion of the Salesforce implementation by the end of the third quarter, alongside further cost efficiencies, should provide some support.

Dividends, buybacks and capital

The interim dividend increased 3.2% to 32.0p per share. It is due to be paid on 30 September 2026 to shareholders registered on 4 September.

Rathbones also completed its first £50 million share buyback in February and subsequently launched another programme of up to £20 million, completed on 13 July.

The balance sheet still appears well capitalised, with a capital surplus of £166.0 million and a Common Equity Tier 1 ratio of 16.8% at the half-year point. The progressive dividend policy remains unchanged.

What Rathbones investors should watch next

These results show a business producing higher revenue, stronger underlying profit and improving margins. Wealth Management's return to positive quarterly flows and the sharp decline in integration costs are particularly constructive.

The weaker points are equally clear. Overall group flows remained negative, Asset Management continues to face heavy redemptions, and much of the increase in FUMA came from market performance rather than new client money.

Most importantly, the Skilled Person Review creates uncertainty around future costs, potential redress and reputation. The revised margin target already captures part of the commercial impact, but not every possible outcome can yet be quantified.

For the rest of 2026, the key tests will be whether Wealth Management sustains positive net flows, whether Asset Management outflows moderate, and whether Rathbones can deliver the regulatory programme without costs moving materially beyond its current estimate.