Berenberg raises target price for Hargreaves Lansdown

Berenberg acknowledged that earnings expectations for Hargreaves Lansdown had declined steeply in 2020, reflecting the decline in financial markets and the reduction in UK interest rates.

However, although Hargreaves' operational backdrop had been challenging, the German bank pointed out how the group's trading statement revealed that it had added 94,000 net new customers in the first four months of the year.

"We view this as testament to the power of the group's brand, the quality of its user experience and (not least) the operational capacity to onboard that many customers amid Covid-19 restrictions," said Berenberg.

Less positively though, Berenberg said the quality of HL's customers appeared to be declining.

"Assuming little change to customer retention rates and flow composition, we estimate the average customer won by Hargreaves in the period had roughly £10,000 in assets, significantly below the current £71,000 average portfolio size."

Berenberg, which reiterated its 'hold' rating on HL, said a higher-than-expected asset base was the primary driver behind the increase in its revenue expectations and stated it should "more than offset" the additional Financial Services Compensation Scheme costs coming the company's way in 2020.