UK Financial Services Sector – Artificial Intelligence is Reshaping the Industry

 This report is an updated version of the report published on 26 February 2025, at 07:59 AM GMT. 

Section 1.0. UK Financial Services Sector Landscape, Trends & SWOT Analysis

Section 1.1. Financial Services Sector Landscape

The financial services sector includes the financial and professional services related to banking, asset management, infrastructure financing, management consultancy, fintech, wealth management, venture capital, insurance, and accounting. The sector shall provide resilience to the economy to withstand an expected recessionary scenario as it would provide support through debt repayment deferrals, insurance premium wavers, and availability of affordable credit. It would also drive investment and help the economy bounce back once the inflationary condition and macroeconomic uncertainties subside. Kalkine’s Sector Report covers the Sector Landscape, Trends & SWOT Analysis, Risks, Recent Business Updates along with the Valuation, Target Price, and Recommendation on the stock.

Section 1.2. Trends in the Financial Services Sector

Section 1.3. SWOT Analysis

Section 2.0. Sector Risks & Opportunities

Section 2.1. Risk Exposures to Financial Services Sector

Section 2.2. UK Financial Services Sector Outlook

The UK Treasury Committee has launched an investigation into the growing impact of AI on financial services, including banking and pensions. It seeks input from industry professionals and consumers to assess AI’s benefits, risks, and implications for financial stability and consumer protection. Key topics include AI’s effect on productivity, employment, cybersecurity, and the UK’s global competitiveness. The inquiry aims to balance innovation with adequate safeguards, ensuring AI enhances financial services without jeopardizing stability.

After gaining insights into the Financial Services sector, we will look at the business model of two relevant players listed on the London Stock Exchange.

Section 3.0. CMC Markets Plc (LSE: CMCX) (Speculative Buy at GBX 198.40, closing market price of 25 February 2025)

3.1 Company Details

3.2. Key Metrics in Pictures

3.3 Valuation and Technical Guidance

Section 4.0: Liontrust Asset Management PLC (LSE: LIO) (Speculative Buy at GBX 421.00, closing price as on 25 February 2025)

4.1 Company Details

4.2. Key Metrics in Pictures

4.3 Valuation and Technical Guidance

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 25 February 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.