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Highlights:
- Recovery Begins: SJP’s July interim results showed significant cost savings and a share buyback, initiating a recovery in its share price.
- Pension Reform Concerns: Potential changes in pension tax relief could pose long-term challenges, although immediate impacts are not expected.
- Upgraded FUM Forecast: Jefferies raised its FUM expectations for SJP, projecting £183.4 billion in Q3 and optimism for future growth.
FTSE 100-listed wealth manager St. James’s Place (LSE:STJ) has faced a turbulent year in 2024, marked by claims of overcharging that contributed to a significant drop in its share price, reaching its lowest point in over a decade. However, better-than-expected interim results in July, which revealed significant cost savings and a share buyback program, sparked the beginnings of a recovery. As the company prepares to release its third-quarter results on 17 October, investors are hopeful for further positive momentum, although potential changes in the pensions system could pose challenges ahead.
Interim Recovery and Market Response
SJP entered 2024 under pressure due to mounting overcharging claims, which heavily impacted its share price. However, its interim results in July highlighted half a billion pounds in cost savings and a £33 million share buyback. These measures were well-received by analysts, marking the start of a recovery in market sentiment. With the third-quarter results on the horizon, shareholders are eager to see if the company can maintain this positive trajectory.
Potential Impact of Pension Reforms
As Labour Chancellor Rachel Reeves prepares to unveil the October Budget, potential changes to the pensions system are being closely monitored. Analysts at UBS noted that reforms such as a flat tax relief percentage of 30% and the possible abolition of Inheritance Tax exemptions on pensions could benefit lower-income individuals but adversely affect higher-rate taxpayers. While these changes may not immediately impact SJP's pension-related business, which accounts for around 60% of new inflows, a longer-term headwind could arise if individuals reduce pension contributions in response.
Positive Outlook on Funds Under Management
Despite these potential challenges, investment bank Jefferies has upgraded its predictions for SJP’s funds under management (FUM). The bank now anticipates £183.4 billion in FUM for the third quarter and £186.2 billion for the full year. Analysts noted that although SJP may still be out of favor, they expect gradual improvement in inflows and sentiment. Jefferies emphasized the company's strong market position, driven by its scale and brand, which positions it to remain a leader in the wealth management sector.
St. James’s Place appears poised for a steady recovery, but regulatory changes and evolving market conditions will continue to influence its long-term outlook.
