HUB24 upbeat on fees as rates rise

HUB24 will look to reverse some of the fee losses of recent years once the RBA lifts rates, its CEO says.

HUB24 chief executive Andrew Alcock.

HUB24 will look to take advantage of rising interest rates by reversing some of the fee discounting it has been wearing since rates hit zero, according to managing director and chief executive Andrew Alcock.

Speaking to The Australian after handing down HUB24’s half-year result, which showed a more than doubling of funds under administration, Mr Alcock said HUB24 would benefit from higher rates not only in terms of fees, but also through higher transaction activity.

“When interest rates came down we didn’t collect all of our fees from customers. If we had, we would have taken them into negative interest rate territory,” Mr Alcock said.

“So we’ve been forgoing some of our fees. As interest rates go up, that will be an opportunity to collect the fees that were due, to pass that back on to consumers. So as rates go up, it’s a benefit to us.

“And as rates go up there could be a flight to cash. But we benefit either way, because of the transaction volume, so movement is good either direction for us.”

Mr Alcock was speaking after HUB24’s result for the six months to December 31 showed the wealth manager lifted net profit 37 per cent to $8.4m, up from $6.1m in the prior corresponding period, as income surged to $81.6m.

Underlying profit, which strips out the costs associated with the Xplore and Ord Minnett PARS acquisitions completed in the year, rose 103 per cent to $14.2m.

While funds under administration doubled over the period, platform funds under administration jumped 128 per cent to $50bn, as net inflows reached $6.7bn.

HUB24 now expects to nearly double platform funds under administration to between $83bn and $92bn by 2024, with Mr Alcock saying the guidance was based on expectations of between $10m and $14m a year and 5 per cent market movement.

The new target range is up from the previous target range of $63bn-$70bn expected for 2023.

After a spate of acquisitions, including the most recent Class bolt-on, completed this month, Mr Alcock said HUB24 was still on the lookout for more opportunities. “We absolutely know that we’ve got more room in the tank if we found something interesting,” he said. “And we know with Class that we’re largely having it operate as a separate entity so there’s not a lot of integration to do, meaning we’ve got the bandwidth to look at opportunities that make sense. We have such good strong organic growth, we don’t need to buy market share. If it makes sense for us strategically then we’ll look at it.”

Mr Alcock said the recent acquisition of Class, a self-managed super fund software and portfolio management company, would enhance value for our customers and shareholders.

Barrenjoey analyst Nick McGarrigle said the result was strong, with pre-tax earnings ahead of expectations: “With group EBITDA margin expanding slightly on the previous corresponding period, HUB24’s result stands out versus specialist platform peers that saw margins contract in the first half.”

HUB24 shares rose 4.8 per cent to $24.68 on Tuesday.