UBS cuts profits forecast for Schroders by a half

Schroders, the fund manager, saw forecasts for its profits next year cut by more than half yesterday as investment analysts assessed the impact of the stock market downturn following the terrorist attacks on the World Trade Centre.

The revisions, by the investment bank UBS Warburg, overturn existing forecasts for Schroders that were based on the assumption that equity markets would enjoy a strong recovery from their levels before the attacks. UBS has cut its pre-tax profit forecast for the firm from £135m to £58.3m next year, a fall of 57 per cent, generating a comparable fall in earnings per share. The downgrades were made despite the assumption that Schroders will trim its costbase by 8 per cent.

Sarah Ing, the analyst behind the research, said Schroders' assets were 77 per cent comprised of equities, giving it the greatest exposure to equities among its UK-listed asset management peers.

In a worst case scenario in which equity markets continued to fall, Schroders risked seeing pre-tax profits sink as low as £18m in 2002, some 90 per cent below earlier forecasts. Schroders would likely cut costs by as much as 14 per cent in that case, Ms Ing said: "[Among its peers] Schroders suffers the most significant decline in earnings."

UBS said equity markets would deliver growth of 8 per cent annually for the foreseeable future.