St James's shares fall on Budget fears

Chancellor Alistair Darling holds Gladstone's old Budget box for the cameras outside 11 Downing Street, before delivering the annual Budget to the House of Commons in central London April 22, 2009.

LONDON (Reuters) - Shares in St James's Place fell sharply on Tuesday as the wealth manager failed to reassure over the impact of the Budget on its high-earning clients alongside in-line first-quarter figures.

The firm (SJP.L) -- which is 60 percent owned by Lloyds Banking Group -- posted a 4.9 percent fall in first-quarter new business to 93.8 million pounds from 98.7 million pounds last year.

That was above the 91.6 million pounds analysts consensus provided by the company, but by 10 a.m., St James's Place shares were down 10.67 percent, or 17.5 pence, at 147.25 pence. The FTSE 250 was down 2.52 percent.

St James's Place CEO David Bellamy told Reuters that he expected the impact of the budget would be "overall neutral" but struggled to persuade the market.

"We remain unconvinced at this stage," said broker Numis Securities. "We would still expect it to have a modest net negative impact from Q211."

"The shares have been weak on a combination of uncertainty over the rate of new business growth for the sector as a whole and fears that the budget would take the gloss off high roller pension contributions," said FinnCap analyst Duncan Hall.

The company said in a statement: "We anticipate some high earners will redirect pension contributions towards our other investment products such as unit trusts.

"We also expect clients to take advantage of the new ISA limits. Importantly, more people than ever are looking for advice about managing their wealth."

Chancellor Alistair Darling's budget, announced last week, included provisions to increase the tax burden on those earning more than 150,000 pounds per year.

Bellamy said that between five percent and 10 percent of its clients earned more than 150,000 pounds.

HIRING

Bellamy also told Reuters that his firm is aiming to recruit more staff this year.

"Retention is as good as it gets, but we are also growing," he said. "We will be growing our distribution by 100 people if everything goes to plan."

He also said St James's Place will implement changes to some of its funds by mid-year.

"There are two or three things we would like to see different, in terms of managers and funds... I would not go as far as saying 'dismissals', just 'changes'," he said.

The CEO said pension savers are slowly returning to equity investments. "If the horizons are five years plus, people are beginning to invest back into equities and take that long-term view, the challenge is for those slightly more novice who are taking it a more gently," he said.

Pension net sales rose 6.7 percent to 46.4 million pounds in the first quarter from 43.5 million pounds a year ago.

Funds under management at the firm fell 6 percent over the quarter to 15.3 billion pounds as tumbling markets countered gross inflows of 711 million pounds of which 470 million pounds were in pension products. This compares with 759 million pounds a year earlier.

Bellamy said 10 percent of total net inflows in the quarter were invested in corporate bond funds, above the usual allocation to the asset class.

On the firm's relationship with Lloyds, he said: "It is all fairly quiet, not a lot has changed. Lloyds continue to focus on their business, we continue to focus on our business."

(Reporting by Cecilia Valente; editing by Simon Jessop)