The launch of "zero-fee" trading broker Robinhood's in the UK last month is seen as "another headwind" for Hargreaves Lansdown PLC's (LSE:HL.) market share, leading UBS to reiterate a 'sell' rating on the shares.
Fees at the Bristol-headquartered investment platform are high, UBS analysts noted, with platform fees at 0.45% versus peers 0.15-0.25%, stockbroking fees at just under £12 compared to peers at £5-7.
"We see HL's loss of market share as a result of maintaining premium pricing, although HL has attributed it also to client cash needs and customer service issues," they wrote.
HL's overseas stock trading, mostly in US shares, accounted for 8% half-year revenue, with the company charging 1% forex fees and £11.95 standard online stockbroking charge, "we see high likelihood this shrinks and HL loses market share in US trading", analysts added.
Based on market share losses continuing, UBS predicts earnings per share next year will fall 24% from a peak in 2023.
If HL takes price-cutting action to stem market share losses, falling closer into line with rivals, this would see 50% EPS downside risk for 2027 forecasts, the UBS team said.
"This extreme but plausible scenario, in our view, could then position HL for a longer term return to market share growth."
Another point is the Financial Conduct Authority's industry focus on what interest is paid on client cash held in investment accounts, which has led to higher rates being paid and an end to "double dipping", with easier movement of cash into savings accounts.
UBS said cash assets under administration (53% of PBT) are expected to be around £11.5 billion at its June year-end, with UBS forecasting that the peak interest income seen last year will fall 31% to £185 million in the year to June 2026.
UBS set a new share price target of 680p, up from 650p before, but below the last close price of 724.2p.