GROUP CHIEF EXECUTIVE OFFICER'S REVIEW

POSITIONED FOR THE NEXT CHAPTER

 

In the first half of 2025, Rathbones successfully completed the planned client and asset migration following its 2023 combination with Investec Wealth & Investment (IW&I), establishing a strong foundation for optimising the business and realising the full benefits of the combined organisation in the second half of the year. As of 30 June 2025, total synergies delivered have risen to £47.2 million per annum on an annualised run-rate basis, with remaining synergies expected to be achieved in the second half of the year. As the bulk of integration activity is now complete, any operational risks have now reduced materially and we are focused on driving operating leverage, embedding efficiencies, and enhancing client experience. We continue to expect that acquisition and integration costs (£23.2 million in 2025 to date) will decline substantially in 2026, supporting future growth in basic earnings per share.

The structural outlook for long-term growth remains strong. Increasing household wealth, an ageing population and softening interest rates all support rising demand for trusted advice and professional investment management, while the Government's recent Mansion House commitment to encourage a stronger investment culture in support of both private savings and the national economy presents us with an opportunity to appeal to new audiences. The increased focus on the importance of retirement planning for all age groups, but especially an ageing and wealthier UK population, will increasingly drive demand for planning and investment solutions that can be simple or highly personalised. In a landscape shaped by inherent complexity and evolving government policy, this need for thoughtful, longer-term wealth planning and investment is more important than ever.

These trends play to the breadth of our offering, which combines proximity and long-term, deep relationships with our clients with objective choice from global investment markets.

We continue to evolve our propositions, building on our blend of investment and planning-led services that adapt to the needs of both clients and advisors.

Last week, we announced the launch of the first in a series of new client propositions, with more planned for the second half of the year. Our entry into the fast-growing Model Portfolio Service (MPS) market introduces a new actively managed investment solution for financial advisors and their clients. This marks an encouraging step in expanding our investment offering and reflects the broader opportunity ahead to enhance our reach and better meet the evolving needs of clients and advisors, enabled by the combination with IW&I.

CAPITAL, PROPOSED SHARE BUYBACK AND DIVIDEND

As at 30 June 2025, Rathbones maintained a strong capital position, with a capital surplus of £178.4 million and a Common Equity Tier 1 (CET1) capital ratio of 17.4%. This reflects the prudent approach that we have taken regarding capital management as we progressed through the IW&I integration process, whilst maintaining our progressive dividend policy. Our capital base remains very strong, providing both stability and flexibility to support future growth and deliver returns to shareholders.

In June this year, we received High Court approval of the cancellation of the share premium account of Rathbones Group Plc as it stood at 31 December 2024, which reclassified the share premium account to retained earnings. This converted a portion of the Group's fixed capital into distributable capital, but had no impact on the Group's consolidated equity, regulatory capital ratios (including CET1), shares in issue, or voting rights. It enhanced, however, our ability to manage the Group's capital efficiently going forward.

During the first half of 2025, we adopted a new capital allocation framework for the combined business, providing an approach to guide how we deploy capital across the integrated Group. This framework balances our ability to maintain the Group's robust financial strength with strategic ambition, ensuring that we maintain appropriate regulatory buffers, while retaining the capacity to invest to drive long-term growth.

Our capital allocation priorities are to:

•    Maintain a strong balance sheet and regulatory capital base.

•    Invest in growth opportunities and strategic initiatives.

•    Deliver a regular, progressive dividend underpinned by earnings growth.

•    Pursue value-accretive M&A opportunities where there is strong strategic and cultural alignment.

•    Where capital exceeds our strategic and regulatory needs, retain the flexibility to return surplus capital to shareholders.

Reflecting this framework - and our confidence in the Group's long-term prospects - the Board has approved an on-market ordinary share buyback programme of up to £50 million. This buyback remains subject to regulatory approval, and is expected to commence thereafter.

Investec Bank Plc (Investec) will not participate in the buyback, though in implementing the buyback, Rathbones will ensure that Investec's voting and economic interest in Rathbones does not exceed that which it acquired as a result of completing the IW&I transaction (at which point Investec had a 29.9% voting interest and a 41.25% economic interest). Owing to share issuances by Rathbones since completion of the IW&I transaction, Investec's voting interest in Rathbones as at 30 June 2025 is 29.3% and economic interest is 40.5%, and it is expected that the buyback will be implemented in full while maintaining Investec's voting and economic interest in Rathbones at or below its original level following completion of the IW&I transaction.

With a strong capital and cash position, the buyback represents an efficient use of funds and signals our confidence in the underlying value of the business. It demonstrates our ability to deliver attractive shareholder returns, while preserving capacity to invest in future growth, reflecting the increased pace at which the Group will generate new capital as integration costs fall and synergy benefits are further realised.

Consistent with our commitment to a progressive dividend policy, we are increasing our interim dividend by 3.3% to 31.0p (30 June 2024: 30.0p). The dividend will be paid on 1 October 2025 to shareholders on the register as of 5 September 2025.

PERFORMANCE AND FUMA REVIEW

Despite some market volatility, notably as the first quarter of the year drew to a close, investment markets ended the second quarter positively, with the MSCI Private Investor Balanced Index and the FTSE 100 rising 3.5% and 2.1% respectively since 31 March 2025. Rathbones' funds under management and administration (FUMA) totalled £109.0 billion at 30 June 2025, up from £104.1 billion at the end of Q1 2025 and broadly in line with the year-end position of £109.2 billion. This includes £15.8 billion in our Asset Management segment, Rathbones Asset Management (RAM), compared with £15.4 billion at Q1 2025 and unchanged from the 2024 year end position. 

Net outflows for the first half of 2025 were £1.0 billion (30 June 2024: £0.6 billion), reflecting the peak impact of client migration activity during the period. Encouragingly, flows improved as the half progressed, with Q2 net outflows reducing significantly to £0.2 billion (Q1: net outflows of £0.8 billion). The Wealth Management segment was broadly neutral in Q2 (Q1: net outflows of £0.5 billion), highlighting early signs of the factors that have resulted in elevated outflows receding.

Gross inflows totalled £2.5 billion in Q2 (Q1 2025: £2.7 billion), reflecting a modest decline as investment managers remained focused on integration activities during the early part of the quarter. In the post-migration phase, attention was directed towards embedding clients into Rathbones' systems and ensuring they were smoothly transitioned.

This period also required teams to adapt to new processes and investment systems, which temporarily impacted new business activity. Gross outflows however reduced significantly by 22.9% to £2.7 billion (Q1 2025: £3.5 billion), demonstrating improving asset retention. The improvement in net flows is encouraging and is consistent with our optimism for an improving outlook for net flows as our focus shifts towards the future growth opportunities for the combined business.

Net flows in RIM discretionary and managed propositions, which now include IW&I flows post the successful client migration during the quarter, remained positive at £0.1 billion in the second quarter (Q1: £0.1 billion), with the bespoke service seeing particular improvement against Q1.

The wider asset management industry continues to face a challenging environment, with persistent pressure on active managers from the shift towards passive strategies. Against this backdrop, our single strategy funds have continued to perform well. Net outflows in the second quarter reduced to £0.2 billion (Q1 2025: £0.3 billion), supported by resilient gross inflows and a notable reduction in gross outflows, particularly from our Global Opportunities Fund. Flows into our multi-asset fund range were broadly flat in the quarter, including both internal and external flows. Encouragingly, the greater volatility and less concentrated returns seen in equity markets during 2025 are beginning to offer a more balanced environment for active managers, and we remain confident that our long-term, disciplined investment approach is well positioned to deliver stronger outcomes across market cycles.

During the first half of 2025, six of our multi-asset and single-strategy funds also achieved labels under the Sustainability Disclosure Requirements (SDR). Securing SDR recognition for these funds recognises the rigour of our approach and places us among the leading UK asset managers in terms of the number of labelled funds relative to assets under management and we're proud to demonstrate our long-term commitment to this important area.

UNDERLYING FINANCIAL BUSINESS PERFORMANCE

Despite a challenging start to the year, marked by significant market volatility and a substantial fall in equity markets at the point we charged our first quarter investment management fees, total operating income for the Group increased marginally by 0.4% to £449.1 million (30 June 2024: £447.4 million). While the early impact of lower markets at the end of the first quarter weighed on revenues, this was offset by stronger market conditions and higher average FUMA in the second quarter, which supported growth in recurring investment management and asset management fees.

Net interest income contributed £38.9 million to operating income in the first half of 2025, up from £32.7 million in the same period last year. This increase came despite reductions in the Bank of England base rate and primarily reflects the recognition of additional interest income following the migration of IW&I client assets onto the Rathbones Investment Management (RIM) banking model in the second quarter. There is a corresponding reduction in 'other income', which represents the margin earned by IW&I on client liquidity under the client money rules prior to migration. The increase in interest also reflects the initial benefit of the revenue synergies driven by RIM's banking model.

As a result of this change, other income declined by £4.7 million to £11.0 million in the period. The migration has generated synergy benefits in the second quarter of £1.6 million from the transition to the banking model.

Total underlying operating expenses for the period were £341.4 million (30 June 2024: £335.3 million). The 1.8% increase relative to the prior half year reflects the effect of increases in certain costs which have offset the benefit of increased synergies in the period. The increase in costs includes £5.2 million which is the short-term impact of non-recurring costs and includes the temporary costs of the transition to the outsourcing agreement with Investec Bank for specific technology services relating to networks, infrastructure, end user computing and cyber operations. Salary and general inflation have also affected the cost base, along with the impact of the NIC increase which took effect in April. FSCS levies of £6.8 million were expensed in full in the first half of 2025, having increased by £2.3 million (2024: £4.5 million). Other cost headwinds include an increase in the cost of VAT that cannot be recovered, which increased by £2.2 million per annum, and the depreciation of office fit out costs which were partly funded by Investec Bank under the terms of the IW&I transaction but which are treated as part of the Group's underlying cost base.

Underlying profit before tax was £107.7 million for the six months ended 30 June 2025 (30 June 2024: £112.1 million), with an underlying operating margin of 24.0% (30 June 2024: 25.1%).

Statutory profit before tax was £62.3 million (30 June 2024: £65.3 million), after recognising amortisation of client relationship intangible assets of £22.2 million (30 June 2024: £22.0 million) and integration-related costs of £23.2 million (30 June 2024: £24.8 million). We continue to expect that acquisition and integration costs will decline substantially in 2026, supporting margin expansion and growth in basic earnings per share.

Despite a slight year-on-year decline in underlying operating profit and margin driven by market volatility at the end of the first quarter, we continue to expect full-year 2025 results to be in line with market forecasts, supported by a stronger starting FUMA position in the second half of 2025 and increasing synergy benefits. Most organisational design changes were completed by the end of H1, with further margin improvement expected in H2 as integration progresses and the IW&I platform is decommissioned. We now anticipate that the underlying operating margin for 2025 will remain broadly consistent with 2024 as a result of the first quarter billing taking place at a time of asset values being relatively depressed. We continue to expect greater margin progression in 2026, with our 30% margin target being underpinned by both the delivery of the remaining synergies and the delivery of scalable growth in income through our strategic initiatives.

MIGRATION OF IW&I CLIENTS

The migration of all planned IW&I client data and assets at the end of the second quarter marked a significant milestone in the integration of IW&I into the Rathbones business, concluding a complex programme of planning, execution, and risk management. A small number of client accounts remain on the IW&I platform, including those accounts that were in the process of probate or otherwise leaving the IW&I service. The expected value of client exits from the completion of this process in the second half is nominal.

Many of the key risks identified early in the process have been mitigated effectively, and the period of heightened migration risk has now passed. We are now operating as a single, unified business, with focus shifting to decommissioning legacy systems and unlocking the associated cost and efficiency benefits.

The integration also highlighted opportunities to further enhance the MyRathbones app, particularly in supporting seamless client access, and we continue to build on its capabilities as part of our commitment to delivering a high-quality digital experience.

We are now well positioned to deliver on our long-term goals, with fully aligned investment systems and processes providing a strong foundation to further build and enhance our capabilities.

POSITIONED FOR THE NEXT CHAPTER

We continue to see a meaningful opportunity in helping clients navigate through growing financial complexities. Despite the clear value of personalised advice, access remains limited. Only around 9 percent of UK adults received regulated advice in the past two years, although 91 percent of those who did found it beneficial. This persistent advice gap presents both a societal challenge and a long-term growth opportunity. Our team of expert financial and wealth planners enables us to provide integrated, holistic solutions for both new and existing wealth clients. This is a key market differentiator and a clear expression of our long-term commitment to delivering high-quality client outcomes.

For Direct Private Clients, we are aligning our services to key financial life stages, including with a revitalised retirement proposition launching early next year. This will address rising demands for more personalised, flexible income strategies through retirement. We are broadening our decumulation offer to better support clients and advisors, particularly through bespoke investment capabilities that can adapt as needs evolve.

We are also strengthening our discretionary and risk-rated portfolio management through two complementary approaches. Launching this autumn, our core Model Portfolio Service offers a cost-effective, scalable, and risk-rated solution for independent financial advisors (IFAs). It is built around our proprietary Liquidity, Equity, Diversifier (LED) investment framework. This approach balances growth, stability, and flexibility while supporting personalised lifestyle analysis. Demand for our bespoke services remains strong, with over three-quarters of UK advisors reporting increased appetite for tailored solutions. This reinforces the value of our continued investment in this space.

For Charities, we are developing scalable investment solutions. Following FCA authorisation, our first Charity Authorised Investment Fund (CAIF) is set to launch in October, alongside our new Managed Service for Charities. Both build on Greenbank's sustainable investing expertise. In July, we also partnered with the National Philanthropic Trust to launch two new Donor Advised Fund propositions.

With client-facing teams now operating on a single integrated platform, our focus in the second half is on equipping them to drive growth while continuing to invest in marketing and distribution to expand our share of voice in the market.

RAM announced the addition of senior fund managers in Asia ex-Japan and Emerging Market Equities this year, marking our first move into these geographies. Subject to regulatory approval, new strategies are expected to launch by the end of this year, complementing our existing range and positioning us for further international growth.

We are continuing to strengthen our strategic partnership with Investec to drive referral growth and support our long-term growth objectives. As referral volumes increase, we plan to invest in additional resources to meet rising demand.

TECHNOLOGY AND OPERATIONAL EFFICIENCY

Following the combination of IW&I with Rathbones, we are focused on evolving our technology infrastructure by identifying and adopting the best solutions from both legacy organisations to better support our people and clients. Our focus remains on delivering best-in-class client service, underpinned by continued investment in digital platforms such as MyRathbones, which continues to see increased usage from clients and advisors. Feature enhancements are ongoing to further improve user experience and engagement.

Rathbones' custody, settlement, and investment systems - now hosted in the cloud - continue to support reliable service delivery, alongside technology services provided by Investec. To further enhance performance and insight, we have established a dedicated data and analytics function to strengthen decision-making across the Group and unlock future data opportunities.

We have rolled out Microsoft AI tools to support colleagues in their day-to-day work and are piloting a large language model to enhance client service delivery. These initiatives complement our use of AI to generate client insights and improve targeting. Our strategy remains focused on embracing emerging technologies alongside our core infrastructure and application suite to support scale, agility, and service excellence.

INSPIRING OUR PEOPLE

This year, we refreshed our purpose to better reflect who we are as a larger, combined business and what we aim to deliver. This is a key step in realigning our culture post-integration, helping colleagues return to business as usual after a period of significant operational change.

Shaped through extensive consultation with clients and colleagues, our new purpose is, "To help more people invest their money well, so they can live well."

It reflects our commitment to planning and investing for our clients long-term success by upholding three brand promises, consistently over time:

•    Good results - by upholding consistently high professional standards, thanks to our greater scale and capability.

•    Deep and meaningful relationships - by going the extra mile for clients, thanks to our distinctive people-first culture.

•    Responsible behaviours - by acting in the best interest of all stakeholders, thanks to a strong foundation of independence and ethics.

Our investment in leadership development and broader people initiatives continues, with a focus on building capability, strengthening culture, and fostering high performance. We remain committed to cultivating a diverse and inclusive environment, supported by active employee networks and executive-led initiatives designed to drive lasting, meaningful change.

EXECUTIVE CHANGES

We announced in March that I will be retiring later this year after what will be 17 years with Rathbones. With a strong platform for growth in place, I feel strongly that now is the right time for new energy and Group leadership. Jonathan Sorrell joined Rathbones as Group Chief Executive designate on 1 July, bringing extensive experience in financial services, a track record of delivering growth and a strong alignment with our strategy and values. Jonathan will join the board immediately following regulatory approval. I will remain in the business until the end of September to ensure a smooth transition.

Following the retirement of Rupert Baron, we also announced the creation of a new executive role earlier this year: Chief Executive Officer of Wealth, appointing Camilla Stowell who joined Rathbones in June 2025. Camilla brings extensive experience in wealth management and financial planning and will lead all areas of client servicing, investment management, and financial planning across the UK and the Channel Islands.

The executive changes will result in a temporary increase in costs in the second half of the year of approximately £3.5 million, which relates to the timing of recognition of existing awards, awards made in lieu of amounts forfeited, and transitional periods of handover.

Both Jonathan and Camilla will play a key role in setting our future strategy, capturing future efficiencies and driving future growth and I am excited about what they will bring to the Group.

REGULATION

As the regulatory landscape continues to evolve, we remain proactive in our response, adapting our practices and policies to ensure we remain aligned with regulatory expectations. Our priority has been to maintain strong and effective relationships with our regulators, and this has been enhanced by our active contributions to practitioner panels and trade body forums this year.

We remain fully committed to upholding Consumer Duty principles as practices develop, which is integral to how we shape our strategy, culture, and long-term objectives.

PRINCIPAL RISKS AND UNCERTAINTIES

The changing economic and political landscape within the UK and abroad has proved to be the most significant external uncertainty in the first half of 2025, however, with a disciplined investment process we have not seen the need for this to be translated into a change in our risk profile.  Our principal risks and uncertainties, detailed in the strategic report and group risk committee report in pages 63 to 67 and pages 111 to 113 of the 2024 annual report and accounts, remain current and continue to receive management attention.

We expect people risk to remain high into the second half as organisational designs and day-to-day processes bed down, so this will continue to receive careful focus and management attention.

GOING CONCERN

As set out in the statement of directors' responsibilities of the condensed consolidated interim financial statements, the directors believe that the Group is well positioned to manage its business risks successfully. The Group's financial projections reflect the proposed share buyback referenced in note 24 to these accounts. The capital adequacy and liquidity assessment, which is required to apply severe but plausible stress scenarios to the Group's projections, provide comfort that the Group has adequate financial and regulatory resources to continue in operational existence for the foreseeable future.

In forming their view, the directors have considered the Group's prospects for a period exceeding 12 months from the date the condensed consolidated interim financial statements are approved.

THANK YOU

As I prepare to hand over to Jonathan, I've reflected on what makes Rathbones unique. I often return to three things: the depth of our client relationships, the strength of our values and culture, and our ability to adapt while staying true to who we are. Investing well, to live well, indeed. The combination with IW&I has enhanced our capability significantly and whilst the business has changed as a result of the combination, these pillars remain strong and will continue to serve us well in the future.

It has been a professional and personal privilege to lead this organisation through such a transformative period. Rathbones is managing nearly £100 billion more assets than when I joined in August 2008, which is a testament to a great deal of work by many highly valued colleagues and the continuing confidence our clients continue to have in us. I offer them my heartfelt thanks for their collaboration, support, and above all, their trust.

From the beginning, our focus has been on building for the long-term and the Rathbones I leave today is not only fit for the challenges of today, but also positioned for sustainable success in the years to come.

PAUL STOCKTON

GROUP CHIEF EXECUTIVE OFFICER

29 July 2025