Shares in Rathbones Group, the FTSE 250 wealth manager, tumbled more than 12% in early trading on Wednesday after the company issued a surprise profit warning. The stock fell to 1,678p, its lowest level since November 2023, wiping roughly £250m from its market capitalisation. The sharp decline made Rathbones the worst performer on the FTSE 250 index, which itself slipped 0.3% to 20,450 points.
In a trading update released after the market close on Tuesday, Rathbones said it now expects full-year underlying profit before tax to be 'materially below' current market consensus. The firm blamed lower-than-expected client activity in its investment management division, alongside persistent cost inflation from regulatory compliance and technology investment. The warning came just weeks after the company completed its integration of Investec's wealth and investment business, a deal that had been expected to deliver significant cost synergies.
Analysts at Numis swiftly cut their price target on Rathbones from 2,100p to 1,700p, describing the update as 'disappointing and unexpected'. 'The profit warning suggests the integration benefits are taking longer to materialise than hoped, and the macro environment remains challenging for discretionary fund managers,' they wrote in a note. Peel Hunt also downgraded the stock from 'buy' to 'hold', citing uncertainty over the timing of a recovery.
The warning reflects broader headwinds facing the UK wealth management sector. Prolonged market uncertainty, driven by sticky inflation and delayed interest rate cuts, has dampened investor appetite and reduced trading volumes. For UK investors and pension holders with exposure to Rathbones through funds or direct holdings, the profit warning raises questions about near-term returns. The company's shares have now lost nearly a quarter of their value over the past twelve months.
Rathbones is scheduled to report its full-year results in March. Management has indicated it will provide a more detailed outlook at that time. In the meantime, the market will be watching for any signs of stabilisation in client activity or further cost-saving measures. Source: Rathbones Group trading update, Numis research note, Peel Hunt research note.