GROUP CHIEF FINANCIAL OFFICER'S REVIEW

EMBRACING CHANGE, CREATING VALUE

 

2024 is the first full financial year following the combination with Investec Wealth & Investment UK (IW&I). The increases in operating income, profit and earnings per share that we report this year reflect both the strength of the underlying business, the benefits of the combination and the extent to which our delivery of the related synergies has exceeded the targets we set for 2024.

Total synergies delivered at 31 December 2024 amount to £30.1 million on an annualised run‑rate basis. This represents 50% of our overall synergy target and is well ahead of the £15 million originally expected for this stage in the integration process, reflecting the organisational and property changes that we have been able to deliver earlier than planned. The synergies delivered in 2024 have arisen over the course of the year, resulting in an overall benefit to 2024 operating profit of £24.6 million.

We remain confident that we will deliver the full £60.0 million of synergies in line with the timeframe that we committed to at the time we announced the transaction. We remain focused on maximising our overall synergy delivery, in addition to maintaining a high degree of cost discipline across the Group.  

The costs of delivering the integration, which are reported as non-underlying costs, remain in line with our expectations. We remain confident that we will complete the integration within our original timeframe and overall cost guidance.

In addition to synergy realisation, business performance benefited from higher levels of Funds Under Management and Administration (FUMA), which increased by 3.7% during the year to £109.2 billion on 31 December 2024 (2023: £105.3 billion).

TABLE 1. GROUP'S OVERALL PERFORMANCE
	2024	2023
	£m (unless stated)	£m  (unless stated)
Operating income	895.9	571.1
Underlying operating expenses¹	(668.3)	(444.0)
Underlying profit before tax¹	227.6	127.1
Underlying operating margin¹	25.4%	22.3%
Profit before tax	99.6	57.6
Effective tax rate	34.2%	34.9%
Taxation	(34.1)	(20.1)
Profit after tax	65.5	37.5
Underlying earnings per share¹	161.6p	135.8p
Earnings per share	63.0p	52.6p
Dividend per share²	93.0p	87.0p
Return on capital employed (ROCE)	4.8%	4.9%
Underlying return on capital employed¹	12.0%	12.1%

1.   Reconcliation between the measure stated and its closest IFRS equivalent is shown in table 4

2.   The total interim and final dividend proposed for the financial year

Our ambition is set firmly on growing our underlying operating margin. We have made significant progress this year with our margin increasing to 25.4% for 2024 from 22.3% in2023 as we continue to realise the benefits of our increased scale.

We have maintained a strong capital base throughout the year as we work through the integration of IW&I and remain committed to our progressive dividend policy. The Board is recommending a total dividend for the year of 93.0p per share (2023: 87.0p per share), an increase of 6.9%. Our policy recognises that this year's dividend is uncovered at statutory profit level. However, this reflects the effect of integration costs that will fall away in future years.

Our results for 2024 include the contribution of IW&I for the full financial year. The comparative figures for 2023 include three months of IW&I's contribution from 1 October 2023, reflecting the timing of the completion of the combination.

The movements in income and costs relative to the prior year therefore largely reflect the additional nine months of IW&I's contribution in 2024 relative to 2023.

Operating income increased by 56.9% to £895.9 million (2023: £571.1 million), of which IW&I contributed £364.5 million (2023: £87.9 million) and the legacy Rathbones Group contributed £531.4 million (2023: £483.2 million). Investment management and asset management fees benefited from higher levels of FUMA, which increased by 3.7% to £109.2 billion during the year.

Interest income increased steadily over the course of the prior year as interest rates rose. The benefit of the higher level of this income at the end of 2023 was carried into 2024 and mostly maintained throughout the year.

Net interest income contributed £63.9 million to operating income in 2024 (2023: £51.7 million). This income relates mainly to the legacy Rathbones Group, as IW&I does not hold banking deposits on its own balance sheet.

Interest relating to client money deposits within IW&I, which increased during the year due to the benefit of a full year of higher interest rates, is recognised within other income. This will be reported as net interest income following the migration of IW&I into Rathbones Investment Management.

Commission income improved as a result of higher transaction volumes relative to the prior year. In particular, we saw an unseasonal up-tick in volumes around the time of the UK Autumn Budget due to a greater propensity to crystallise capital gains ahead of the tax changes anticipated in the Budget.

Underlying operating expenses increased as a result of the inclusion of a full year of the IW&I cost base, net of the benefit of synergies delivered during the year. Expenditure was driven higher by the effects of inflation and related salary increases, which averaged 3.6% and took effect from April (Rathbones) and June (IW&I). Employee costs in 2024 also reflect a full year of the cost of the headcount recruited during 2023. Variable remuneration increased as a result of income growth.

Total headcount includes 101 heads (measured on a full-time equivalent basis) at 31 December 2024 who are dedicated entirely to the IW&I integration project and whose costs form part of the costs to achieve the integration, which are reported as non-underlying costs. Technology costs increased as we develop and enhance our systems across the business, including our client service, operational and data infrastructure capabilities. A portion of the increase is short-term as we implement outsourcing of certain services.

The 2024 FSCS levy of £4.4 million was expensed in full during the first half of 2024. The cost for the year represents an increase of £3.8 million relative to the prior year, inclusive of the levy relating to IW&I. The levy in the prior year was suppressed as a result of the FSCS utilising existing surpluses.

The underlying operating margin, which is calculated as the ratio of underlying profit before tax to operating income, improved to 25.4% (2023: 22.3%). This increase represents a significant step towards our target of delivering a margin in excess of 30% from September 2026, being three years following the completion of the IW&I transaction.

The InvestCloud Client Lifecycle Management system (CLM) was launched into the business in June 2024. Operating expenses for the year include £14.7 million in relation to this system. Total investment during the current and previous financial years up to the point of launch amounted to £45 million, in line with our previous guidance.

Underlying profit before tax, which is net of the CLM costs referred to above, was £227.6 million for the year ended 31 December 2024 (2023: £127.1million), representing an increase of 79.1%

Costs directly related to the integration of IW&I, net of £16.9 million of credits arising on the disposal of 8 Finsbury Circus, amounted to £75.5 million during the year (2023: £36.5 million), which is in line with our guidance.   

These costs are reported within non-underlying costs, which also include amortisation of intangible assets of £44.6 million and acquisition costs of £7.9 million (2023: £6.8 million) relating to deferred consideration payable for the Saunderson House acquisition.

Statutory profit before tax increased by 72.9% to £99.6 million for the year (2023: £57.6 million), after expensing amortisation of client relationship intangible assets of £44.6 million (2023: 25.2 million) and integration related costs of £83.4 million (2023: £44.3 million acquisition-related and integration costs).

The effective rate of tax reduced to 34.2% for the year (2023: 34.9%). The prior year rate was elevated by the effect of disallowable costs relating to the IW&I transaction. Whilst these costs were specific to the transaction and have not recurred in the current year, the effective tax rate for 2024 has been elevated by certain non-underlying integration costs along with the statutory rate of 25.0% applying for the full financial year. Once the integration of IW&I has been completed, we expect the effective tax rate to run at an average of 2 to 3 percentage points above the statutory rate, reflecting normal levels of disallowable costs.

The Board considers underlying and statutory measures of income, expenditure and earnings when assessing the performance of the Group. The underlying balances are considered to provide useful information on business performance, rather than reviewing results on a statutory basis only. These measures are also widely used by research analysts covering the Group.

OUTLOOK AND GUIDANCE

The Group's recurring fee income and overall financial performance remains closely linked to the level of FUMA and therefore the direction of global investment markets. Markets have had a positive impact on FUMA during the year but FUMA and performance remain sensitive to future movements, including those driven by continuing levels of uncertainty in the economic and geopolitical environment.

The reduction in the rate of UK inflation during the year is welcome and we remain focused on ensuring a high degree of discipline in managing our cost base. While 2025 will see a full year of the 2024 annual salary reviews, we expect salary inflation to be lower in 2025 at around 2%.

The lower rate of inflation has led to reductions in central bank interest rates during the second half of 2024. These reductions have so far had a relatively small impact on net interest income, due to the effect on interest earned and interest paid to clients being broadly matched. Should further reductions materialise in 2025 in line with market expectations, we expect to see a modest reduction in our net interest margin, albeit that may be more than offset by higher fee revenues in the event that equity prices react positively to rate reductions materialising.

The UK government announced an increase in the rate of employers' National Insurance Contributions (NIC) in its Autumn Budget, which will take effect in April 2025. The changes announced will increase NIC costs by around £7.0 million per annum from April 2025, based on current levels of remuneration and headcount.

Headcount is expected to reduce over the course of 2025. This reduction will principally result from synergy delivery, along with ongoing cost discipline.

We are making good progress towards delivering an underlying operating margin of 30% from September 2026, notwithstanding the additional headwinds that have arisen since we set out this target, which include ongoing inflationary pressures and the estimated impact of NlCs from April 2025. Delivery of this will be on a run-rate basis from three years following completion of the IW&I transaction, i.e. September 2026.

This margin growth will be underpinned by a combination of:

-   Modest market growth in line with inflation

-    A return to organic net inflows, supported by growth in advice, refreshed marketing and distribution capabilities and growth in our Asset Management business

-    Ongoing cost discipline, in what we expect to be a more normalised inflationary environment

-    Synergy delivery in line with guidance.

We expect the improvement in the underlying operating margin to arise mostly during 2026, with a more modest improvement in 2025. This principally reflects the timing of further synergy benefits, which will be weighted towards the second half of the 2025 financial year, when the cost savings which are linked to the migration to a single operating platform will materialise and we work towards IW&I ceasing to run as a separate, regulated entity. Performance in 2025 will also reflect the increase in NIC costs and a full year of the 2024 salary reviews, which were undertaken in the higher inflationary environment. We also expect to see a flatter seasonal spike in transaction-based commission income in March 2025 as a result of the additional activity that arose on client portfolios ahead of the 2024 Autumn Budget.

We expect to see growth in advice revenues in 2025 as a result of increased advisor capacity following completion of the Saunderson House migration and our continuing focus on advice, along with increased demand following the taxation changes announced in the 2024 Autumn Budget. Net interest income will benefit from the delivery of revenue synergies in the second half of 2025 following the IW&I client migration, with net interest margins expected to see only a modest impact from the reductions in central bank rates that are anticipated. We will be focused on our growth agenda in 2025 to drive improved net flows.

Delivering sustainable value to our shareholders and maintaining a disciplined and efficient approach to managing shareholder capital is of the highest importance to the Board. The Group continues to maintain a robust capital base, with a surplus of capital above the regulatory minimum of £207.2 million at 31 December 2024 (prior to taking into account the proposed final dividend for the year) which supports strategic investment, the ongoing integration of the IW&I business and our progressive dividend policy.

The business remains highly cash generative and we expect to see a further increase in cash generation once the integration of IW&I is complete and we see the full benefits of the combination synergies. As such, we will review our capital allocation policy, including an evaluation of our capacity for surplus returns, following the migration of IW&I onto a single operating platform later this year.

FINANCIAL PERFORMANCE

 

BUSINESS PERFORMANCE: FUNDS UNDER MANAGEMENT
AND ADMINISTRATION (FUMA)

Total Group FUMA increased by 3.7% during the year to reach £109.2 billion at 31 December 2024 (2023: £105.3 billion). The increase is driven predominantly by the effect of positive market movements.

The Group continued to drive strong gross inflows across both the Wealth Management and Asset Management segments. However, outflows remained elevated, reflecting both the economic backdrop and specific factors. Consequently, the Group reported net outflows of £1.4 billion for the year.

FUMA for the Wealth Management segment increased by 3.3% during the year. Gross inflows were strong, increasing by 76.4% relative to the prior year and reaching record levels in the final quarter of the financial year as the business continued to drive new business flows despite IW&I investment teams committing significant time to undertaking the client consent process.

Rathbones discretionary and managed services delivered net inflows of £1.0 billion, representing an annual growth rate of 2.0% (2023: 1.5%). This reflects gross inflows of £6.3 billion, an increase of 23.5% relative to 2023, as the business continued to drive strong levels of new business. In addition to new business flows, Rathbones discretionary and managed FUMA benefited from the final migration of Saunderson House client assets into Rathbones investment solutions. IW&I contributed £4.0 billion (2023: £0.8 billion) of gross inflows during the year. After taking account of elevated gross outflows, IW&I reported net outflows for the year of £1.0 billion (2023: £0.3 billion).

Gross outflows within the Wealth Management segment remained elevated throughout the year. This reflected the continuing general economic backdrop of higher interest rates and the increased cost of living, which has driven existing clients to partially withdraw funds from their portfolios. In addition, IW&I experienced expected outflows relating to Investment Managers who left the business prior to the announcement of the combination. Investment Manager turnover since then has remained low. The level of these outflows reduced over the course of the year, with those in the final quarter being the lowest level for any quarter of the year. The migration of former Saunderson House FUMA into Rathbones investment solutions was completed during the year. Associated outflows of £0.5 billion included £0.2 billion of FUMA relating to clients who did not complete the consent process. Wealth Management outflows were also somewhat elevated in the short term as a result of some net withdrawals of funds by existing clients around the time of the UK government's Autumn Budget.

The Asset Management segment reported net inflows of £0.6 billion (2023: £1.5 billion) for the year, representing a rate of net growth of 4.3% (2023: 13.7%). The segment was affected by the challenging market environment that has continued to impact the UK asset management industry, where substantial withdrawals from UK funds has continued across the sector. Our single strategy funds were not immune from this backdrop, but showed relative resilience with net outflows of £0.6 billion for the year (2023: £0.5 billion outflow), representing 8.1% of opening FUMA (2023: 8.5%). These outflows were partially offset by investment performance. Multi-asset funds continued to deliver net inflows, inclusive of intra-group holdings, of £1.2 billion (2023: £2.1 billion). When adjusted for intra-group holdings, net inflows amounting to £0.2 million for the year (2023: £0.3 million), represented annual growth of 7.7% (2023: 13.8%) net of intra-group holdings. Asset Management FUMA increased by 14.5% for the year overall.

Table 2 presents Group FUMA by Wealth Management and Asset Management segment with associated intra-group holdings. Wealth Management FUMA incorporates our core bespoke discretionary portfolio and managed portfolio services. It also includes direct sales into our range of risk-targeted multi-asset funds, which are designed to be used as wealth management solutions for both our direct clients and those of investment platforms and financial advisors. Asset Management FUMA includes our focused range of specialist 'single-strategy' funds, which are designed to act as individual holdings within investment portfolios.

TABLE 2. SEGMENT FUMA
Year ended 31 December 2024	Wealth Management £bn	Asset Management £bn	Intra-group holdings £bn	Group FUMA £bn
Opening FUMA	96.1	13.8	(4.6)	105.3
Gross Inflows	9.7	4.4	(2.0)	12.1
Gross Outflows	(10.7)	(3.8)	1.0	(13.5)
Net Flows	(1.0)	0.6	(1.0)	(1.4)
Market, Investment Performance & Transfers	4.2	1.4	(0.3)	5.3
Closing FUMA	99.3	15.8	(5.9)	109.2

Table 3 presents separately the FUMA and associated movements in those services and products which support our wealth management propositions.

TABLE 3. BREAKDOWN OF FUMA AND FLOWS BY SERVICE LEVEL
31 December 2024	Opening FUMA £bn	Gross inflows £bn	Gross outflows £bn	Net flows £bn	Transfers £bn	SHL migrated assets £bn	Market & investment performance £bn	Closing FUMA £bn	Net growth (flows) %
Rathbones Investment Management	48.8	5.3	(4.5)	0.8	-	1.2	2.1	52.9	1.7%
Bespoke portfolios	45.0	4.7	(4.1)	0.6	(0.4)	0.8	1.8	47.8	1.4%
Managed via in-house funds	3.8	0.6	(0.4)	0.2	0.4	0.4	0.3	5.1	5.1%
Multi-asset funds	2.5	1.0	(0.8)	0.2	0.1	-	0.3	3.1	7.7%
Rathbones discretionary and managed	51.3	6.3	(5.3)	1.0	0.1	1.2	2.4	56.0	2.0%
Non-discretionary service	0.7	-	-	-	-	-	-	0.7	(2.9)%
IW&I	42.3	4.0	(5.0)	(1.0)	(0.3)	-	2.0	43.0	(2.5)%
Saunderson House	1.6	0.1	(0.5)	(0.4)	-	(1.2)	-	-	(26.8)%
Single-strategy funds	6.7	1.3	(1.9)	(0.6)	-	-	0.7	6.8	(8.1)%
Execution only and banking	2.7	0.4	(0.8)	(0.4)	0.2	-	0.2	2.7	(14.5)%
Total Group	105.3	12.1	(13.5)	(1.4)	-	-	5.3	109.2	(1.3)%

 

31 December 2023	Opening FUMA - proforma basis £bn	Gross inflows £bn	Gross outflows £bn	Net flows £bn	Transfers £bn	SHL migrated assets £bn	Market & investment performance £bn	Closing FUMA £bn	Net growth (flows) %
Rathbones Investment Management	44.3	4.2	(3.8)	0.4	(0.2)	2.4	1.9	48.8	0.9%
Bespoke portfolios	42.9	3.8	(3.5)	0.3	(0.9)	1.1	1.6	45.0	0.6%
Managed via in-house funds	1.4	0.4	(0.3)	0.1	0.7	1.3	0.3	3.8	10.1%
Multi-asset funds	2.2	0.9	(0.6)	0.3	-	-	-	2.5	13.8%
Rathbones discretionary and managed	46.5	5.1	(4.4)	0.7	(0.2)	2.4	1.9	51.3	1.5%
Non-discretionary service	0.7	0.1	(0.1)	-	(0.1)	-	0.1	0.7	(2.9)%
IW&I1	40.8	0.8	(1.1)	(0.3)	(0.1)	-	1.9	42.3	(0.8)%
Saunderson House	4.1	0.1	(0.5)	(0.4)	-	(2.4)	0.3	1.6	(9.5)%
Single-strategy funds	6.5	1.3	(1.8)	(0.5)	-	-	0.7	6.7	(8.5)%
Execution only and banking	2.4	0.3	(0.6)	(0.3)	0.4	-	0.2	2.7	(10.4)%
Total Group	101.0	7.7	(8.5)	(0.8)	-	-	5.1	105.3	(0.8)%
1.   2023 Group FUMA and flows by service level has been prepared on a proforma basis, opening FUMA has been uplifted by £40.8 billion to include IW&I FUMA acquired with effect from 30 September 2023

 

OPERATING INCOME

Operating income increased by £324.8 million in 2024 to £895.9 million, reflecting a full year of IW&I income in addition to the factors which have driven income growth set out below.

Recurring fee income benefited from higher average FUMA and the increasing revenue synergies resulting from the continuing migration of former Saunderson House FUMA into Rathbones investment management and asset management solutions. Transaction-based commission income was driven higher as volumes returned to expected levels during the year. In addition, there was a marked increase in trading volumes around the UK government's Autumn Budget as clients opted to crystallise capital gains ahead of an anticipated increase in the rate of capital gains tax.

Advice fees progressed relative to the prior year, albeit partly subdued by the time committed by advisors to the completion of the migration of Saunderson House clients and assets during the year. The first reductions in the UK base rate had only a marginal adverse impact on net interest income relative to the benefit of the run rate this income reached at the end of 2023 continuing into 2024.

OPERATING EXPENSES

Operating expenses of £796.3 million (2023: £513.5 million) comprise the underlying operating expenses discussed below, together with non-underlying operating expenses.

Underlying operating expenses increased by £224.3 million to £668.3 million (2023: £444.0 million), an increase of 50.5%, reflecting the impact of a full year of IW&I operating expenditure, net of the benefit of realised cost synergies relating to the IW&I combination.

Underlying staff costs increased to £464.6 million (2023: £313.6 million) reflecting inflationary pay rises which averaged 3.6% and took effect in April, other than for the IW&I business which retained its June salary review date for 2024. The increase also reflects a full year of costs in relation to 2023 recruitment. Variable remuneration increased as a result of revenue growth.

Underlying non-staff costs increased to £203.7 million (2023: £130.4 million). Inflation drove most cost lines higher relative to the prior year. Other factors relevant to the increase include the outsourcing of certain technology services to Investec Group (with a related reduction in headcount and staff costs) which was agreed under the terms of the combination with IW&I. Transaction-based costs increased in line with trading volumes. Legal & professional fees increased largely due to regulatory related activities. FSCS levy costs were suppressed in the prior year as a result of the one-off benefit of the FSCS utilising existing surpluses. Levy costs normalised in the year, increasing by £1.8 million. In addition to this, £2.0 million was incurred in IW&I (2023: £nil).

Underlying non-staff costs includes the investment in our InvestCloud Client Lifecycle Management (CLM) system which was launched into the business in June 2024. Development expenditure during the year up to the point of launch amounted to £14.7 million, bringing our total investment to £45.0 million, in line with our previous guidance.

TABLE 4. RECONCILIATION OF UNDERLYING PERFORMANCE MEASURES TO CLOSEST EQUIVALENT IFRS MEASURES
		2024	2023
		£m (unless stated)	£m (unless stated)
Operating income		895.9	571.1
Underlying operating expenses		(668.3)	(444.0)
Underlying profit before tax1		227.6	127.1
Charges in relation to client relationships and goodwill		(44.6)	(25.2)
Acquisition-related and integration costs		(83.4)	(44.3)
Profit before tax		99.6	57.6
Taxation		(34.1)	(20.1)
Profit after tax		65.5	37.5
Operating margin		11.1%	10.1%
Underlying operating margin2		25.4%	22.3%
Weighted average number of shares in issue		103.7	71.3
Earnings per share (p)		63.0p	52.6p
Underlying earnings per share (p)3		161.6p	135.8p
Monthly average total equity		1,363.5	787.9
Underlying monthly average total equity4		1,401.0	798.5
ROCE5		4.8%	4.9%
Underlying ROCE6		12.0%	12.1%
1.   Operating income less underlying operating expenses 2.   Underlying profit before tax as a percentage of operating income 3.   Underlying profit after tax divided by the weighted average number of shares in issue 4.   Monthly average equity adjusted for underlying operating expenses 5.   Profit after tax as a percentage of monthly average total equity 6.   Underlying profit after tax as a percentage of underlying monthly average total equity

 

ALTERNATIVE PERFORMANCE MEASURES

Alternative Performance Measures (APMs) are a financial measure of historical or future financial performance, financial position, or cash flow, other than a financial measure under IFRS.

Charges in relation to client relationships and goodwill (note 8)
As explained in notes 1.14 and 2.1, client relationship intangible assets are recognised when the Group acquires a business or investment management contracts as a result of the recruitment of experienced investment managers who have the capability to attract significant FUMA to the Group.

These intangible assets are amortised over the expected duration of the respective client relationships. Amortisation of £44.6 million has been charged to the income statement (2023: £25.2 million). This represents a significant non-cash profit and loss item which is excluded from underlying profit in order to present an alternative measure that represents largely cash-based results of the financial reporting period. Research analysts commonly exclude these amortisation costs when comparing the performance of firms in the wealth management industry.

Acquisition-related and integration costs (note 5)
Acquisition and integration-related costs are significant non-recurring costs that arise from strategic investments and corporate transactions to grow the business rather than from the business' operating activities, and are therefore excluded from underlying results.

These costs primarily comprise professional fees directly related to the execution of the relevant transaction, certain elements of deferred consideration payable to the vendors of acquired businesses that are conditional upon their continued employment with the Group, and the non‑recurring costs of integrating the acquired businesses with those of the existing Group.

During 2024, £75.5 million of integration costs (2023: £36.5 million, acquisition and integration related) have been incurred in relation to the IW&I integration. This comprised £48.3 million of integration related staff costs (2023: £6.2 million), and £27.2 million of integration costs (2023: £9.0 million), which form part of the total expected costs to deliver the integration and achieve the related synergies. Acquisition related legal and professional costs of £21.3 million were incurred in the prior year relating to the execution of the transaction. No acquisition-related legal and professional costs were recognised as non-underlying costs in 2024.

As part of the process of integrating IW&I with the existing Rathbones Group, certain leasehold properties were planned to vacate earlier than their respective lease expiry dates. During the year ended 31 December 2023, the useful economic lives of these properties' right-of-use assets and their fixtures and fittings were revised to reflect those expected dates of vacation. Consequently, in 2023, the assets' residual values were calculated and their depreciable amounts restated. As a result of the reduced useful economic lives of those assets, accelerated depreciation charges were recognised from the date of the combination to the respective dates the properties are expected to be vacated. All properties were vacated as planned over the course of 2024. This has therefore resulted in higher depreciation charges during the year ended 31 December 2024 than would have been the case had the useful economic lives of the property-related assets not reduced. With a small number of exceptions, the vacated properties have been disposed of either via sublet, assignment or early surrender, which is favourable against the original anticipated costs of achieving property integration. At 31 December 2024, the two remaining vacant leasehold properties have been reviewed for impairment to determine whether their carrying amounts are supported by their recoverable amounts, and impairment charges have been recognised as appropriate.

As a result, the Group recognised £5.6 million in relation to accelerated depreciation and impairment charges on property assets during the year. Other associated costs of vacating these properties of £3.0 million have also been recognised. These costs represent additional non-recurring costs in excess of the normal ongoing operating costs incurred in relation to the Group's properties and were recognised as non-underlying operating expenses and are therefore not included within underlying operating profit. In addition to this, a net credit to profit or loss of £4.4 million was recognised during the year in relation to the lease assignment of 8 Finsbury Circus (see note 9 for further detail) within non-underlying operating expenses. These balances form part of the total acquisition and integration costs of £75.5 million referred to above.

Deferred consideration

Deferred consideration costs are significant payments that form part of the total consideration payable under the terms of the acquisition agreement and are considered to be capital in nature, reflecting the cost to acquire the business and the transfer of its ownership. However, in accordance with IFRS 2, any deferred consideration that is payable to former shareholders of the acquired business who are required to remain in employment with the Group for a certain period must be treated as remuneration and expensed to the income statement over the period to which the employment condition applies.

 £3.3 million of deferred consideration payments (2023: £3.9 million) and £4.6 million of integration costs (2023: £2.9 million) were charged to the income statement during 2024 in relation to the acquisition of Saunderson House. In 2023, £1.0 million of deferred consideration payments were charged to the income statement in relation to the acquisition of Speirs and Jeffrey, with no further charges recognised in 2024.

TAXATION  

The corporation tax charge for 2024 was £34.1 million (2023: £20.1 million) (see note 6). The effective tax rate reduced to 34.2% in 2024 (2023: 34.9%). The effective tax rate reflects both an increase in the average statutory rate for the year to 25.0% (2023: 23.5%) as a result of 2024 being the first full financial year following the increase in the statutory rate to 25.0%, and the impact of disallowable legal and professional costs incurred in relation to the relocation of our London premises from Finsbury Circus to Gresham Street.

Once the integration of IW&I has been completed, the effective tax rate is expected to be 2 to 3 percentage points above the statutory rate as a result of normal levels of disallowable costs.

BASIC EARNINGS PER SHARE

Basic earnings per share for the year ended 31 December 2024 were 63.0p (2023: 52.6p). The increase in the year reflects the benefit to statutory profit after tax of the IW&I combination, with 2024 being the first full financial year of the combined business, and the benefit of the synergies delivered during the year.

On an underlying basis, basic earnings per share were 161.6p in 2024, compared to 135.8p in 2023 (see note 12). The increase in the year is similarly due to increased underlying profit after tax resulting from the IW&I combination, partially offset by the increased number of shares in issue.

RETURN ON CAPITAL EMPLOYED

The Board monitors the underlying return on capital employed (ROCE) as a key performance measure. For monitoring purposes, underlying ROCE is defined as underlying profit after tax expressed as a percentage of underlying monthly average total equity across the year.

Assessment of underlying return on capital is a key consideration for all investment decisions, particularly in relation to acquired growth.

In 2024, underlying ROCE was 12.0% (2023: 12.1%). Underlying average total equity increased by £602.5 million in 2024 compared to 2023, reflecting the full year of the higher capital base that resulted from the combination. The marginal reduction in ROCE in 2024 reflects this higher capital base that has applied throughout the year relative to the partial delivery of the overall synergy target during the year. Statutory ROCE was 4.8% in 2024 (2023: 4.9%). In addition, the average statutory rate of corporation tax increased to 25.0% in 2024 (2023: 23.5%), reducing ROCE by 0.2 percentage points.

 

SEGMENTAL REVIEW

The Group operates through two segments: Wealth Management and Asset Management.

TABLE 5. RECONCILIATION OF FUMA BY SERVICE LEVELS TO SEGMENTAL PRESENTATION AS AT 31 DECEMBER 2024
	Wealth Management FUMA (including intra-group holdings) £bn	Intra-group holdings1 £bn	Wealth Management FUMA £bn	Asset Management FUMA £bn	Group FUMA £bn
Rathbones Investment Management	52.9	(5.7)	47.2	5.7	52.9
Bespoke portfolios	47.8	(0.7)	47.1	0.7	47.8
Managed via in-house funds	5.1	(5.0)	0.1	5.0	5.1
Multi-asset funds	-	-	-	3.1	3.1
Rathbones discretionary and managed	52.9	(5.7)	47.2	8.8	56.0
Non-discretionary service	0.7	-	0.7	-	0.7
IW&I	43.0	(0.2)	42.8	0.2	43.0
Saunderson House	-	-	-	-	-
Single-strategy funds	-	-	-	6.8	6.8
Execution only and banking	2.7	-	2.7	-	2.7
Total Group	99.3	(5.9)	93.4	15.8	109.2
1.   Intra-group holdings represent in-house funds of the Asset Management segment held within investment management portfolios managed by the Wealth Management segment.

 

WEALTH MANAGEMENT

The results of the Wealth Management segment described below include the trading results of Rathbones Investment Management, Rathbones Trust Company, Vision Independent Financial Planning, Saunderson House and IW&I.

Wealth Management income is largely driven by income margins earned from FUMA. Income margins are expressed as a basis point return, which depends on a mix of tiered annual fee rates and commissions charged for transactions undertaken on behalf of clients.

FUNDS UNDER MANAGEMENT AND ADMINISTRATION

Year-on-year changes in the key performance indicators for Wealth Management are shown in table 6. Total Wealth Management FUMA including intra-group holdings increased by 3.3% to £99.3 billion as at 31 December 2024, predominately driven by positive market movements.

TABLE 6. WEALTH MANAGEMENT - KEY PERFORMANCE INDICATORS
	2024	2023
FUMA at 31 December1	£99.3bn	£96.1bn
Rate of total net growth (net flows) in Wealth Management funds under management and administration2	(1.1)%	0.3%
Average net operating basis point income margin3	67.5	66.7
Number of Investment Management clients	114,700	114,200
Number of investment managers	678	681
1.   FUMA disclosed on a gross basis (Inclusive of intra-group FUMA). Previously this table was presented on the basis of net FUMA in the Annual Report & Accounts 2.   See table 7 (percentages calculated on unrounded figures) 3.   Income margin based on fee and commission income. See table 11

 

TABLE 7. WEALTH MANAGEMENT - FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Year ended 31 December	2024 £bn	2023 £bn
As at 1 January1	96.1	51.5
Inflows	9.7	46.3
-              organic2	9.7	5.5
-              acquired3	-	40.8
Outflows and transfers	(10.7)	(6.1)
Market movement & investment performance	4.2	4.4
Total Group	99.3	96.1
Rate of total net growth4	(1.1)%	0.3%
1.   Current and prior year FUMA disclosed on a gross basis (Inclusive of intra-group FUMA). Previously this table was presented on the basis of net FUMA in the Annual Report & Accounts 2.  Value at the date of transfer in/(out) 3.  £40.8 billion IW&I FUMA acquired with effect from 30 September 2023 4.  2023 net new business and acquired inflows as a percentage of opening funds under management and administration excludes SHL and IW&I post-acquisition flows

Table 7 reconciles the movement in FUMA during the year. Strong organic gross inflows for the year of £9.7 billion, 10.1% of opening FUMA, demonstrate the continued ability to generate new business. This was achieved across the Wealth Management segment despite IW&I Investment Managers dedicating significant time to integration related activities, including the client consent process, during the year.

Table 8 (overleaf) provides an analysis of FUMA and new business by channel and service level. Bespoke portfolios, whilst delivering strong gross inflows, continued to experience elevated outflows, predominantly reflecting the ongoing economic environment of higher interest rates and a higher cost of living, resulting in partial withdrawals from portfolios. There was also increased activity around the time of the UK Autumn Budget. IW&I outflows include those linked to Investment Managers who left the business prior to the announcement of the combination. Investment Manager turnover has since remained low. These outflows have continued to decline over the course of the year, with the final quarter of 2024 seeing the lowest level of such outflows in the year.

Bespoke portfolios within the advisor linked channel saw net inflows of £0.6 billion (2023: £0.4 billion). Clients utilising the services of Rathbones Financial Planning or Saunderson House continued to see growth during 2024 with combined net flows of £0.3 billion. Within the IW&I line there was £0.2 billion of net flows in respect of clients using an IW&I Financial Planner. The expansion of the IFA network within Vision Independent Financial Planning to 142 IFAs also benefited the Group, with gross inflows of £0.4 billion (2023: £0.3 billion). At the year-end, advisor firms of the Vision Independent Financial Planning network were advising on client assets of £4.0 billion (2023: £3.3 billion).

The migration of former Saunderson House FUMA was completed on 31 July 2024. Gross outflows for the year include £245 million relating to clients who did not complete the migration consent process. £4.4 billion of former Saunderson House FUMA is included within Group FUMA at 31 December 2024.

Switches into execution-only services largely reflect the transfer of clients' funds into probate accounts following their death (£0.2 billion).

TABLE 8. WEALTH MANAGEMENT - NEW BUSINESS BY CHANNEL
	2024 Gross opening FUMA £bn	Gross inflows £bn	Gross outflows £bn	Net flows £bn	Transfers £bn	SHL migrated FUMA £bn	Market movement & performance £bn	2024 Gross closing FUMA £bn	2024 Intra-group holdings1 £bn	2024 Net closing FUMA £bn	2023 Net FUMA £bn
Bespoke portfolios	33.0	3.1	(3.0)	0.1	(0.6)	-	1.5	34.0	-	-	-
Managed via in-house funds	1.4	0.2	(0.2)	-	0.4	-	0.1	1.9	-	-	-
Total direct	34.4	3.3	(3.2)	0.1	(0.2)	-	1.6	35.9	-	-	-
Bespoke portfolios	12.0	1.6	(1.0)	0.6	0.2	0.9	0.1	13.8	-	-	-
Managed via in-house funds	2.4	0.3	(0.2)	0.1	0.1	0.4	0.2	3.2	-	-	-
Total financial advisor linked	14.4	1.9	(1.2)	0.7	0.3	1.3	0.3	17.0	-	-	-
Total discretionary and managed	48.8	5.2	(4.4)	0.8	0.1	1.3	1.9	52.9	(5.7)	47.2	44.5
Execution only and banking	2.7	0.4	(0.8)	(0.4)	0.2	-	0.2	2.7	-	2.7	2.7
Non-discretionary service	0.7	-	-	-	-	-	-	0.7	-	0.7	0.7
Saunderson House	1.6	0.1	(0.5)	(0.4)	-	(1.3)	0.1	-	-	-	1.3
IW&I	42.3	4.0	(5.0)	(1.0)	(0.3)	-	2.0	43.0	(0.2)	42.8	42.3
Total Wealth Management	96.1	9.7	(10.7)	(1.0)	-	-	4.2	99.3	(5.9)	93.4	91.5
1.   Holdings of the Group's in-house funds in Investment Management client portfolios and in-house funds for which the management of the assets is undertaken by Investment Management teams; the corresponding FUMA is reported within Funds

FINANCIAL PERFORMANCE

Underlying profit before tax for the Wealth Management segment increased by 91.8% in the year to £202.2 million. This represents an underlying operating margin of 24.8% (2023: 20.9%. This result reflects a full year of the contribution of the IW&I business (2023 included one quarter of contribution) and is net of the investment in the InvestCloud Client Lifecycle Management (CLM) system, which forms a key part of our digital strategy. Operating expenses for the year include £14.7 million in relation to the CLM system, forming part of our overall multi-year spend on this project of £45 million which we have communicated previously.

Net investment management fee income increased by £225.0 million (64.3%) in 2024. This increase reflects higher levels of FUMA during the year, driven by market growth, and the benefit of the migration of former Saunderson House FUMA into Rathbones investment solutions.

Net commission income increased by 71.3% to £91.8 million (2023: £53.6 million). Transaction volumes returned to normal levels during the year and also saw specific increases in activity around the time of the UK Government's budget in October as clients sought to crystallise capital gains ahead of expected increases in the rate of capital gains tax.

TABLE 9. WEALTH MANAGEMENT - FINANCIAL PERFORMANCE
	2024	2023
	£m	£m
Net investment management fee income1	575.1	350.1
Net commission income	91.8	53.6
Net interest income	62.3	49.9
Fees from advisory services2	54.5	40.5
Operating income	814.2	503.9
Underlying operating expenses3 4	(612.0)	(398.5)
Underlying profit before tax	202.2	105.4
Underlying operating margin5	24.8%	20.9%
1.   Net investment management fee income is stated after deducting fees and commission expenses paid to introducers 2.   Fees from advisory services includes income from trust, tax and financial planning services  (including Vision and Saunderson House) 3.   See table 12 4.  Included within underlying operating expenses are £14.7 million of costs relating to the Group's digital strategy 5.  Underlying profit before tax as a percentage of operating income. Excluding £14.7 million of expenditure on our digital strategy in the year, the underlying operating margin was 26.6%

Net interest income increased steadily over the course of the prior year as interest rates rose. The benefit of the higher level of this income at the end of 2023 was carried into 2024 and mostly maintained throughout the year. The overall level of this income illustrates the continuing benefit of our banking permissions.

Fees from advisory services increased by 34.6% to £54.5 million due to continued growth in the advice proposition. Other income increased by 211.2% to £30.5 million, driven by the inclusion of £26.5 million net interest income generated from client money deposits within IW&I.

Underlying operating expenses were £612.0 million for the year (see table 12), an increase of 53.6% on the prior year. In addition to 2024 including a full year of IW&I costs, costs were driven higher by the effect of inflationary salary increases and recruitment in the prior year, in respect of which a full year has been incurred in 2024. Variable staff costs increased as a result of higher income levels.

TABLE 10. WEALTH MANAGEMENT - AVERAGE FUNDS UNDER MANAGEMENT AND ADMINISTRATION (excluding IW&I)
	2024	2023
	£bn	£bn
Valuation dates for billing
-              5 April	50.2	45.7
-              30 June	50.5	45.4
-              30 September	50.5	45.4
-              31 December	50.7	48.0
Quarterly average1	50.5	46.1
Average MSCI level2	1,894	1,721
1.   Quarterly average FUMA excluding Saunderson House and IW&I 2.  MSCI PIMFA Balanced Index is considered to be a reasonable external comparison to Rathbones'portfolios. Based on the corresponding valuation dates for billing

 

	2024	2023
IW&I AVERAGE FUNDS UNDER MANAGEMENT AND ADMINISTRATION	£bn	£bn
Valuation dates for billing
-              28 Feb	41.9	-
-              31 May	42.9	-
-              31 August	43.2	-
-              30 November1	43.6	40.7
Quarterly average	42.9	-
Average MSCI level2	1,887	1,700
1.   IW&I billing aligned to Rathbones quarterly billing cycle from December 2024  2.  MSCI PIMFA Balanced Index is considered to be a reasonable external comparison to IW&I's portfolios. Based on the corresponding valuation dates for billing

 

TABLE 11. WEALTH MANAGEMENT - REVENUE MARGIN
	2024	2023
	bps	bps
Basis point return1 from:
-              fee income	58.5	57.9
-              commission	9.0	8.8
Basis point return on FUMA	67.5	66.7
1.   Fee or commission income, divided by the average gross funds under management and administration on the quarterly billing dates (see table 10)

 

The method for calculating basis point return on funds under management and administration for the Wealth Management segment has been revised in order to reflect the gross FUMA of the segment from which the segment generates income. This approach aligns with the approach applied to the Asset Management segment. The calculation was previously based on FUMA net of Group's eliminations.

TABLE 12. WEALTH MANAGEMENT - UNDERLYING OPERATING EXPENSES
	2024	2023
	£m	£m
Staff costs1
-              fixed	233.9	147.2
-              variable	129.5	78.2
Total staff costs	363.4	225.4
Other operating expenses	248.6	173.1
Underlying operating expenses	612.0	398.5
Underlying cost/income ratio2	75.2%	79.1%
1.   Represents the costs of investment managers and teams directly involved in client-facing activities 2.  Underlying operating expenses as a percentage of operating income (see table 9)

 

ASSET MANAGEMENT

The financial performance of the Asset Management segment is principally driven by the value of funds under management (FUM). Year-on-year changes in the key performance indicators for Asset Management are shown in table 13.

FUNDS UNDER MANAGEMENT

Following the challenging trading conditions in 2023, 2024 continued to be a tough environment for the industry. The year saw significant net redemptions across the asset management industry (Investment Association (IA) data, December 2024). Industry-wide funds under management grew to £1.5 trillion at the end of December 2024 driven by market returns (2023: £1.4 trillion).

Gross inflows in Rathbones Asset Management fell 4% from £4.6 billion to £4.4 billion in 2024, as Saunderson House assets migrating into Rathbones funds, which made a significant contribution to 2023 inflows and was materially completed in the first half of 2024, delivered a smaller in-year boost than in 2023. Underlying gross inflows, excluding Saunderson House migration, were therefore stronger than 2023. Continued investor concerns over inflation, interest rates and equity market valuations have driven cautious investor sentiment. Despite these macroeconomic impacts on investor confidence, our range of funds, well balanced between multi-asset and single-strategy, has helped serve our clients' changing needs and provided some shelter from the market volatility for our overall FUM. The diverse nature of our multi-asset investment mix, and its obvious continuing appeal to clients in these challenging times, has ensured that positive net flows have continued into these funds, partially offsetting the outflows experienced in the single-strategy funds.

Consistent with the Wealth Management segment, we have seen continued higher levels of investors withdrawing funds in response to the wider economic environment. These factors have led to a continuation of the elevated gross outflows experienced in 2023. Strong gross inflows, leading to positive net flows in Multi-asset funds and favourable investment performance offsetting net outflows in single strategy funds, ensured total FUM grew to a record high of £15.8 billion at the end of 2024, an increase of 14% during the year (see table 15).

TABLE 13. ASSET MANAGEMENT - KEY PERFORMANCE INDICATORS
	2024	2023
FUM at 31 December1	£15.8bn	£13.8bn
Rate of net growth in Asset Management FUM1	4.3%	13.7%
Underlying profit before tax2	£25.4m	£21.7m
1.   See table 15 2.   See table 17

 

TABLE 14. ASSET MANAGEMENT - FUNDS UNDER MANAGEMENT BY PRODUCT
	2024	2023
	£bn	£bn
Rathbone Multi-Asset Portfolios	6.9	5.3
Rathbone Global Opportunities Fund	4.1	3.6
Rathbone Ethical Bond Fund	2.0	2.2
Offshore funds	0.7	0.6
Rathbone Income Fund	0.6	0.7
Greenbank Multi-Asset Portfolios	0.5	0.4
Rathbone Active Income Fund for Charities	0.2	0.2
Rathbone Core Investment Fund for Charities	0.2	0.2
Rathbone High Quality Bond Fund	0.1	0.2
Rathbone Greenbank Global Sustainability Fund	0.1	0.1
Rathbone Strategic Bond Fund	0.1	0.1
Other funds	0.3	0.2
	15.8	13.8

 

Volatility managed funds (multi-asset portfolios) dropped, according to December IA data, from being the number one selling sector class but continued to draw strong inflows to December 2024, with £4.0 billion of net sales across the sector, and this trend was mirrored in Rathbones, which accounted for approximately 30.0% of the industry total, with net sales totalling £1.2 billion in the year.

The Group's largest single-strategy fund, Rathbone Global Opportunities Fund, saw a net £0.2 billion outflow over the course of the year, an improvement of 33.0% compared to 2023 outflows (£0.3 billion), as consumer confidence in global equity markets begins to bounce back. This was underscored by a strong market performance for the fund, driving an overall growth in the year of £0.5 billion.

The Global Opportunities fund maintained its excellent industry long-term performance record in the year by maintaining a first quartile position for performance measured over five years, which is a key factor in investors' decision-making.

Rathbone Ethical Bond Fund had net redemptions of £0.2 billion in the year, at a similar level to 2023 (2023: £0.2 billion), as some consumer demand shifted towards funds with passive management styles.

During the year, the total number of investment professionals running the funds increased by three to 26 at 31 December 2024 (2023: 23).

TABLE 15. ASSET MANAGEMENT - FUNDS UNDER MANAGEMENT
Year ended 31 December	2024 £bn	2023 £bn
As at 1 January	13.8	11.0
Net inflows	0.6	1.5
-              inflows1	4.4	4.6
-              outflows1	(3.8)	(3.1)
Market movement & investment performance3	1.4	1.3
As at 31 December	15.8	13.8
Rate of net growth4	4.3%	13.7%
1.   Valued at the date of transfer in or out 2.   Bespoke funds transferred out during 2023 post the switch of Authorised Corporate Director ('ACD') from Rathbones Asset Management Limited to Evelyn Partners, an independent ACD 3.   Impact of market movements and relative performance 4.  Net inflows as a percentage of opening FUM

 

TABLE 16. ASSET MANAGEMENT - PERFORMANCE1, 2, 4
2024/(2023) Quartile ranking³ over	1 year	3 years	5 years
Rathbone Ethical Bond Fund	1 (1)	2 (2)	2 (1)
Rathbone Global Opportunities Fund	2 (1)	3 (3)	1 (1)
Rathbone Income Fund	4 (3)	3 (2)	3 (2)
Rathbone Strategic Bond Fund	2 (1)	3 (3)	3 (3)
Rathbone UK Opportunities Fund	3 (1)	4 (4)	4 (4)
1.   Quartile ranking data is sourced from FE Trustnet 2.   Excludes multi-asset funds (for which quartile rankings are prohibited by the Investment Association (IA)), High Quality Bond Fund, which has no relevant peer group against which to measure quartile performance, non-publicly marketed funds and segregated mandates 3.  Ranking of institutional share classes at 31 December 2024 and 2023 against other funds in the same IA sector, based on total return performance, net of fees (consistent with investment performance information reported in the funds' monthly factsheets) 4.  Funds included in the above table account for 43% of the total FUM of the fund's business

 

FINANCIAL PERFORMANCE
Income of the Asset Management segment is primarily derived from annual management charges, which are calculated on a daily basis on the value of FUM of each fund, net of rebates payable to intermediaries.

Net annual management charges increased to £79.4 million in 2024, reflecting the rise in average FUM. Net annual management charges as a percentage of average FUM fell by 0.7 bps to 53.2 bps (2023: 53.9 bps), as the multi-asset funds, which have a lower annual management charge than single strategy funds, continued to grow their proportion of total funds under management.

Underlying operating expenses detailed in table 18 increased by £10.8 million to £56.3 million (2023: £45.5 million). Fixed staff costs of £7.9 million for the year ended 31 December 2024 were £0.8 million higher than 2023. This reflects general inflationary rises as well as the impacts of staffing changes in the period.

Variable staff costs of £20.5 million were 53.0% higher than 2023. These costs relate to deferred awards which are spread over multiple years; the current year cost does not therefore solely reflect performance in the current year.

Other operating expenses have increased by 11.6% to £27.9 million in 2024. A large part of this cost increase, apart from the inflationary indexing on third-party supplier contracts, relates to the direct impacts on variable costs of the growth in revenues and scaling of the business. For example, administration costs which are directly tied to FUM increased by £0.7 million in the year to £6.8 million. We continue to make enhancements to our Charles River Investment Management Solution, which provides a strong platform from which we can serve our clients and further grow the business. This expenditure forms part of our ongoing technology development and change process.

TABLE 17. ASSET MANAGEMENT - FINANCIAL PERFORMANCE
	2024	2023
	£m	£m
Net annual management charges	79.4	64.7
Interest and other income	2.3	2.5
Operating income	81.7	67.2
Underlying operating expenses1	(56.3)	(45.5)
Underlying profit before tax	25.4	21.7
Operating % margin2	31.1%	32.3%
1.   See table 18 2.   Underlying profit before tax divided by operating income

 

TABLE 18. ASSET MANAGEMENT - UNDERLYING OPERATING EXPENSES
	2024	2023
	£m	£m
Staff costs
-              Fixed	7.9	7.1
-              Variable	20.5	13.4
Total staff costs	28.4	20.5
Other operating expenses	27.9	25.0
Underlying operating expenses	56.3	45.5
Underlying cost/income ratio1	68.9%	67.7%
1.  Underlying operating expenses as a percentage of operating income (see table 17)

 

 

FINANCIAL POSITION

 

SUMMARY OF FINANCIAL POSITIONS

As a banking Group, Rathbones is required to operate in accordance with the requirements relating to capital resources and banking exposures prescribed by the Capital Requirements Regulation, as applied in the UK by the Prudential Regulation Authority (PRA). The Group is required to ensure it maintains adequate capital resources to meet its combined Pillar 1 and Pillar 2 requirements.

TABLE 19. GROUP'S FINANCIAL POSITION
	2024	2023
	£m (unless stated)	£m (unless stated)
Own funds1
-              Common Equity Tier 1 ratio2	19.0%	17.8%
-              Total own funds ratio3	20.6%	19.4%
-              Total retained earnings	279.8	263.7
-              Tier 2 subordinated loan notes4	39.9	39.9
-              Total risk exposure amount	2,521.9	2,425.6
-              Leverage ratio5	21.1%	18.7%
Other resources:
-              Total assets	4,290.1	4,224.4
-              Treasury assets6	2,737.4	2,601.0
-              Investment Management loan book7	76.0	101.7
-              Intangible assets from acquired growth8	468.5	502.7
-              Tangible assets and software9	62.5	30.9
Liabilities:
-              Due to customers10	2,352.1	2,253.3
-              Net defined benefit pension asset	0.5	7.0
1.    Stated inclusive of the retained profit for the year ended 31 December 2024 which became verified profit on 25 February 2025, but prior to taking into account the proposed final dividend relating to 2024. 2.  Common Equity Tier 1 capital as a proportion of total risk exposure amount 3.  Total own funds (see table 20) as a proportion of total risk exposure amount 4.  Represents the carrying value of the Tier 2 loan notes 5.  Tier 1 capital as a percentage of total assets, excluding intangible assets, plus certain off-balance-sheet exposures 6.  Balances with central banks, loans and advances to banks and investment securities 7.  See note 16 to the financial statements 8.  Net book value of acquired client relationships and goodwill (note 8) 9.  Net book value of property, plant and equipment and computer software (note 8) 10.  Total amounts of cash in client portfolios held by Rathbones Investment Management as a bank

The Group's Pillar 3 disclosures are published annually on our website (rathbones.com/investor-relations/results-and-presentations) and provide further details about regulatory capital resources and requirements. The Group's key financial positions are set out in table 19.

The Group's CET1 and total capital ratios increased year on year despite a higher Pillar 1 requirement (see table 21). The larger requirement was countered by the increased own funds resources (see table 20) which benefited from a reduction in the deduction attributable to the defined benefit pension schemes following the completion of the buy-in during 2024.

The leverage ratio was 21.1% at 31 December 2024, up from 18.7% at 31 December 2023. The leverage ratio represents our Tier 1 capital (own funds) as a percentage of the Group's total assets (i.e the 'exposure measure'), excluding central bank exposure and intangible assets. Whilst total assets and Tier 1 capital increased in the year due to the IW&I combination, assets excluded from the exposure measure (central bank exposure and regulatory deductions) represented a lower proportion of the balance sheet. This resulted in an uplift to the leverage ratio.

At 31 December 2024, neither Rathbones Investment Management Limited nor the Rathbones Group were subject to a minimum leverage ratio requirement.

CAPITAL MANAGEMENT

The Group continues to maintain a robust capital base, with a surplus of capital above the regulatory minimum of £207.2 million at 31 December 2024 (including retained profit for the year ended 31 December 2024 which became verified profit on 25 February 2025 but prior to reflecting the proposed final dividend relating to 2024) which supports strategic investment, the ongoing integration of the IW&I business and our progressive dividend policy.

As set out in the outlook and guidance section above, we will review our capital allocation policy, including an evaluation of our capacity for surplus returns, following the migration of IW&I onto a single operating platform later this year.

CAPITAL RESOURCES

31 December 2024, the Group's regulatory own funds (including retained profit for the year ended 31 December 2024 which became verified profit on 25 February 2025) were £520.2 million (2023: £471.4million). This figure is prior to taking into account the proposed final dividend relating to 2024. Own funds consisted of both Common Equity Tier 1 and Tier 2 capital (see table 20).

TABLE 20. GROUP'S REGULATORY OWN FUNDS1
	2024	2023
	£m	£m
Share capital and share premium	323.3	317.7
Reserves	1,104.2	1,088.1
Less:
Own shares	(68.1)	(55.6)
Intangible assets2	(878.7)	(911.8)
Retirement benefit asset3	(0.5)	(7.0)
Common Equity Tier 1 own funds	480.2	431.4
Tier 2 own funds	40.0	40.0
Total own funds	520.2	471.4

1.   Net book value of goodwill, client relationship intangible assets and software is deducted directly from own funds, less any related deferred tax

2.   The retirement benefit asset is deducted directly from own funds

 

The Tier 2 eligible own funds equate to £40.0 million of ten-year subordinated loan notes, which were issued in October 2021 and have a carrying value of £39.9 million. The notes introduced a small amount of gearing into our balance sheet as a way of financing future growth in a cost-effective and capital-efficient manner. They are repayable in October 2031, with a call option for the issuer annually from 2026. Interest is payable at a fixed rate of 5.6% per annum until the first option call date, and at a rate of 4.9% over Compound Daily SONIA thereafter.

When taking the capital requirement into account, the resulting capital surplus at the end of 2024 of £207.2 million represents an increase of £72.7 million relative to the surplus of £134.5 million as at 31 December 2023.

CAPITAL REQUIREMENT

The Group's own funds requirement (see table 21) is the combined total of both the Group's Pillar 1 and Pillar 2 requirement. The Pillar 2 requirement consists of both the Pillar 2A, set by the PRA, and the combined regulatory buffer requirement.

TABLE 21. GROUP'S OWN FUNDS REQUIREMENTS
	2024	2023
	£m	£m
Credit risk requirement	75.2	72.3
Market risk requirement	-	-
Operational risk requirement	126.6	121.7
Pillar 1 own funds requirement	201.8	194.0
Pillar 2A own funds requirement	0.6	39.4
Total Capital Requirement (TCR)	202.4	233.4
Combined buffer:
Capital Conservation Buffer (CCB)	63.0	60.6
Countercyclical Capital Buffer (CCyB)	47.6	42.9
Total Capital Requirement (TCR) and Combined buffer	313.0	336.9

 

PILLAR 1 OWN FUNDS REQUIREMENT

Pillar 1 determines a total risk exposure amount (also known as 'risk-weighted assets') for the Group, taking into account expected losses in respect of the Group's exposure to credit, counterparty credit, market and operational risks. The combined exposure amount equates to the minimum requirement for the amount of capital the Group must hold.

The increase in credit risk to £75.2 million in 2024 was due to a revised allocation of the Group's treasury assets along with the consequences of including IW&I exposures.

At 31 December 2024, the Group's total risk exposure amount was £2,521.9 million (2023: £2,425.6 million). The increase was driven principally by the inclusion of IW&I exposures and following increased investment in treasury assets.

PILLAR 2A OWN FUNDS REQUIREMENT

The Pillar 2 requirement supplements the Pillar 1 minimum requirement with firm-specific Pillar 2A requirements and a framework of regulatory capital buffers.

The Pillar 2A own funds requirement is set by the PRA as part of its supervisory review process and the calculation of it remains confidential to the PRA. The requirement reflects those risks that are specific to the firm that are not fully captured under the Pillar 1 own funds requirement. The Group-specific risks that are reflected in the Pillar 2A requirement are set out overleaf:

INTEREST RATE RISK IN THE BANKING BOOK

The Group operates on a non-trading book basis, whereby all assets held are with the intent of holding to maturity. Assets are not actively traded in secondary markets for speculative purposes. The resulting interest rate risk represents losses that could arise for a 2% parallel shift in the Bank of England base rate. The exposure would measure the time to reprice interest bearing assets and liabilities.

CONCENTRATION RISK

Greater potential exposure as a result of the concentration of borrowers located in the UK relative to other overseas jurisdictions.

Further to the completion of the buy-in of the defined benefit pension scheme in 2024, the Pillar 2A risk attributable to the scheme was reviewed by the PRA as part of its supervisory review process and reduced to reflect the transfer of risk. This is reflected in the decreased requirement set out in table 21.

COMBINED BUFFER REQUIREMENT

The Group is also required to maintain two regulatory capital buffers, both of which must be met with CET1 capital.

The capital conservation buffer (CCB) is a general buffer, designed to provide for losses in the event of a stress, and is set by the PRA. The CCB is set at 2.5% of the Group's total risk exposure amount as at 31 December 2024.

The countercyclical capital buffer (CCyB) reflects the credit conditions and overall health of the financial system in a particular jurisdiction. The firm specific CCyB reflects the weighted average of rates for relevant credit exposures. For relevant UK credit risk exposures, the percentage rate that applies is set by the Financial Policy Committee (FPC). For other jurisdictions where the Group has exposures, the percentage rate applicable to each jurisdiction is applied and set by their respective prudential policy makers.

The percentage buffer rate for UK exposures is currently 2.0%. The Group has relevant credit exposures in other jurisdictions where a different rate applies, resulting in a weighted rate of 1.9% as at 31 December 2024.

CAPITAL AND LIQUIDITY MONITORING

As required under PRA rules, we perform an Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) annually for the consolidated Group. Both processes include performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group should hold above the regulatory minimum.

In addition, we monitor a wide range of capital and liquidity ratio statistics on a daily and monthly basis. Surplus capital levels are forecast monthly, taking account of anticipated dividend and investment requirements, to ensure that appropriate buffers are maintained. Investment of proprietary funds is controlled by our Group treasury department.

We routinely horizon scan across the regulatory landscape to ensure we maintain our compliance with future changes in prudential requirements. Our preparations for the incoming Basel 3.1 regime and the accompanying Small Domestic Deposit Takers (SDDT) regime are progressing and are a key focus for the Group.

TOTAL ASSETS

Total assets at 31 December 2024 were £4.3 billion (2023: £4.2 billion), of which £2.4 billion (2023: £2.3 billion) represents the cash element of client portfolios that is held as a banking deposit.

RIM TREASURY ASSETS

As a licensed deposit taker, Rathbones Investment Management Limited holds the Group's surplus liquidity on its balance sheet together with clients' cash. Cash in client portfolios held on a banking basis of £2.4 billion (2023: £2.3 billion) represented 3.2% of total Investment Management funds under management and administration at 31 December 2024, compared to 4.7% at the end of 2023. Cash held in client money accounts was £27.6 million (2023: £8.4 million), this increase is due to a higher proportion of client settlements transactions outstanding in the market over year end. These balances are held off balance sheet in accordance with Client Money Rules of the FCA.

The value of treasury assets held with the Bank of England increased to £1.2 billion (2023: £1.0 billion), as did investment in marketable securities which increased in accordance with our treasury policy and risk appetite.

The Group treasury department of Rathbones Investment Management, reporting through the banking committee to the Board, operates in accordance with procedures set out in a Board-approved treasury manual and monitors exposure to market, credit and liquidity risk as described in note 11 to the financial statements. It invests in certain securities issued by a diversified range of highly-rated counterparties. These counterparties must be single 'A-' rated or higher by Fitch at the time of investment and are regularly reviewed by the banking committee.

IW&I TREASURY ASSETS

The manner in which Investec Wealth & Investment Limited (a wholly owned subsidiary of Rathbones Group Plc) holds its surplus client money is governed by the CASS rules. In this regard these monies are off-balance sheet and held in trust on behalf of clients.

The IW&I Cash & Credit Management Committee (CCMC) is mandated by the Operations Committee to consider, approve, and keep under review, the suitability of financial institutions for the placement of firm's and clients' cash deposits in accordance with the CASS rules on client money and assets. Approved institutions are subject to the IW&I Credit Policy and annual due diligence which is undertaken in accordance with the CASS rules. Total Client Money held was £1.3 billion as at 31 December 2024 (2023: £1.3 billion) representing 3.0% of Investment Management funds under management at 31 December 2024 compared to 3.1% at the end of 2023.

Investec Wealth & Investment Limited also hold Firm's money, which is on balance sheet, also subject to the IW&I Firm's Credit Policy Statement and overseen by the CCMC. Total Firms Money held was £155.6 million as at the 31 December 2024 (2023: £161.9 million).

The treasury department of Investec Wealth & Investment Limited is responsible for the cash management of both the Client and Firm's money, reporting to the CCMC and operating in accordance with the Treasury Mandate. The treasury department monitors diversification and liquidity on a daily basis. Approved Institutions, other than Group companies, must have a minimum of S&P Short Term rating of A-2, a S&P Long Term Rating of BBB+ and are reviewed quarterly by the CCMC.

IW&I CLIENT MIGRATION

On migration, IW&I client deposits held on a CASS basis and off-balance sheet will transfer to RIM. These deposits will be held on a banking basis on-balance sheet and managed by the Group treasury department and in line with existing Board-approved limits, as set out in the treasury manual.

LOANS TO CLIENTS

Loans are provided as a service to Wealth Management clients who have short to medium term cash requirements. Such loans are normally made on a fully secured basis against portfolios held in our nominee, with a requirement that the value of the loan is covered two times by the value of the secured portfolio. Loans are usually advanced for five years. In addition, charges may be taken on property held by the client to meet security cover requirements.

Our ability to provide such loans is a valuable additional service to clients who require short to medium term finance, typically for bridging finance when buying and selling their homes.

Loans advanced to clients decreased to £76.0 million at end of 2024 (2023: £101.7 million). As borrowing costs increased, we saw lower demand for new loans as clients looked to reduce outstanding debt and finance their cash requirements from other means, including drawing down from investment portfolios, leading to higher outflows of funds under management and administration.

INTANGIBLE ASSETS

Intangible assets arise principally from business combinations and are categorised as goodwill and client relationships. Intangible assets reported on the balance sheet also include purchased and developed software.

At 31 December 2024, the total carrying value of goodwill and client relationship intangible assets was £973.4 million (2023: £1,010.5 million). During the year, client relationship intangible assets of £11.6 million were capitalised (2023: £352.9 million). A total of £2.4 million of client relationship intangible assets were disposed of in the year

Client relationship intangible assets are amortised over the estimated life of the client relationship, which is generally a period between 10 and 15 years. The total amortisation charge for client relationships in 2024, including the impact of any lost relationships, was £42.2 million (2023: £22.4 million), the increase in the year is predominately due to a full year of amortisation for the IW&I client relationship intangible asset.

CAPITAL EXPENDITURE

Capital expenditure during 2024 amounted to £48.7 million (2023: £4.5 million).

The increase in capital expenditure is driven by property spend, which has increased by £44.0 million year on year due to implementation of the property strategy for the enlarged Group as a result of the IW&I combination.

DEFINED BENEFIT PENSION SCHEMES

We operate two defined benefit pension schemes. With effect from 30 June 2017, we closed both schemes, ceasing all future benefit accrual and breaking the link to salary.

At 31 December 2024 the combined schemes' liabilities, measured on an accounting basis, had decreased to £87.9 million, down 13.1% from £101.1 million at the end of 2023. This decrease primarily reflected an increase in discount rates at the end of the year.

A bulk annuity policy buy-in of the of the Group's retirement benefits was completed during the year for both schemes, fully securing all of their liabilities.  The buy-in was funded by the assets of the schemes, together with a contribution of £3.7 million from the Group.  An asset for the bulk annuity policy was subsequently recognised at a fair value equivalent to the liabilities secured. The reported position of the schemes as at 31 December 2024 was a surplus of £0.5 million (2023: surplus of £7.0 million) with the decrease predominantly due to the cost of the bulk annuity policy being greater than the balance sheet liability of the benefits secured.

 

LIQUIDITY AND CASH FLOW

 

As a bank, we are subject to the PRA's ILAAP regime, which requires us to hold a suitable liquid assets buffer to ensure that short-term liquidity requirements can be met under certain stressed scenarios. Liquidity risks are actively managed on a daily basis and depend on operational and investment transaction activity.

Cash and balances at central banks amounted to £1.2 billion at 31 December 2024 (2023: £1.0 billion). We continue to hold a substantial portion of the Group's overall liquidity with central banks. We continue to hold a substantial portion of the Group's overall liquidity with central banks. The increase during the year is in line with the growth in client deposits. 

Cash and cash equivalents, as defined by accounting standards, includes cash, money market funds and banking deposits, which had an original maturity of less than three months (see note 11 to the financial statements). Consequently, cash flows, as reported in the financial statements, include the impact of capital flows in treasury assets.

Net cash inflows from operating activities in the year largely reflect a £90.2 million increase in banking client deposits (2023: £251.5 million decrease) and a £147.6 million increase in interest received (2023: £111.9 million). Loans and advances to banks and customers decreased by £21.8 million in the year, (2023: £87.4 million) due to the repayment of portfolio lending which is attributed in part to the higher cost of debt.  

TABLE 22. EXTRACTS FROM THE CONSOLIDATED STATEMENT OF CASH FLOWS
	2024	2023
	£m	£m
Cash and cash equivalents at the end of the year	1,459.2	1,302.9
Net cash inflows from operating activities	293.6	(89.4)
Net change in cash and cash equivalents	156.3	(269.8)

Cash used in investing activities included a net inflow of £18.6 million from the purchase of certificates of deposit (2023: net outflow of £241.8 million), as we maintained our proportion of treasury assets held in marketable instruments for the prior year. All investment decisions were made under the existing low risk appetite framework set by the RIM Banking Committee. Included within cash used in investing activities is cash of £185.5 million acquired from the acquisition of IW&I.

The other significant non-operating cash flows during the year were as follows:

-            outflows relating to the payment of dividends of £56.9 million (2023: £71.4 million);

-            outflows relating to payments to acquire intangible assets of £9.7 million (2023: £5.6 million), which includes payments in respect of awards made to recently recruited investment managers in relation to the delivery of new business growth, along with the development of client applications;

-            outflows of £46.9 million relating to capital expenditure on tangible property, plant and equipment (2023: £5.1 million), which relates predominantly to property fit-out costs.