Hargreaves Lansdown has disappointed market expectations to pay a special dividend for the year ending in June 2017 after being told by the Financial Conduct Authority that it has to set aside more regulatory capital.
The FTSE 100 company has said it needs to set aside an extra £50m of capital, meaning it will not announce a special dividend in its final results later this month.
This morning (4 August) Hargreaves Lansdown’s shares opened nearly 6 per cent lower than yesterday’s closing price on the news, but have since begun recovering.
Hargreaves has said it still expects to propose a final ordinary dividend which will generate a total ordinary dividend payout ratio of 65 per cent for that year.
In a statement this morning, the company said the FCA would be reassessing its regulatory capital requirements because of its “strong recent growth in scale and complexity”
The statement read: “The revised assessment would mean the group's regulatory capital surplus during 2018 is insufficient to meet our risk appetite levels if we paid a special dividend for the year ended 30 June 2017 in line with market expectations.”
The company added: “The group maintains a strong net cash position and the board believes it already had a robust balance sheet with sufficient capital to fund ongoing trading and future growth.
“The action announced today maintains capital above our regulatory risk appetite levels, in line with our strategy of offering a safe and secure home for our clients' lifelong investments.”
In addition, Hargreaves has pre-released some elements of its results to allow the market to “assess its strong financial and trading performance alongside this announcement”.
For the financial year ending in June Hargreaves expects to announce assets under administration up by 28 per cent to £79.2bn.
It also expects to announce unaudited profit before tax up by 21 per cent to a range between £265m and £266m.
damian.fantato@ft.com
