Financial Grime 28 September 2018

Sep 28, 2018 / Financial Grime

Last night the SEC filed legal action accusing Elon Musk of securities fraud. Unusual.

 

FCA Market Study for insurance

  • Market study In response to a supercomplaint to the CMA from the Citizens advice bureau about ongoing loyal customers paying for discounts for new customers in the home and motor insurance market the FCA has launched a market study.  The FCA comments in its statement that it expects customers to be treated fairly.  While the FCA market study covers general insurance the super- complaint covers insurance, cash savings and mortgages.

 

  • View  It could be the end of teaser rates, student incentives for bank account opening, first time buyer discounts etc.  This may in fact help the profitability of insurers, mortgage providers and banks but make growth harder to come by. In 2016 the mortgage market study from the FCA led to the rise of the switching market in order to increase customer choices.  There may be an opportunity for a fintech solution to provide an insurance switching market to increase customer choice. Something that Randall & Quilter could provide the fronting for.

Numis – Pre Close Update 

Share Price 374p

Mkt Cap £396m

  • Statement – Revenue weaker in H2 than H1 but up 3% for the full year. Pipeline encouraging. Headcount has grown 16% over the year so with staff costs significantly up profits are expected to be down.
  • Estimates  The market estimate which was previously provided by Edison was for £144m revenue. A 3% increase on last year would imply £134m revenue so the pipeline they mention could be £10m of fees slipped to after the period end.  The profit forecast was £37.8m against last year’s £38.3m. Given a shortfall at the revenue level and a 16% headcount increase this looks too high.
  • Valuation PER pre downgrade is 14X and yield 3.2%.
  • Conclusion Share will come back but the power of momentum which Numis has will continue. Could be an opportunity. It wont help the sale of Peel Hunt who reported a profit of £26m in the year to March 2017 to Santander.