Trust Co sees 68% leap in profits

The Trust Company (ASX: TRU) which is at the centre of a three-way acquisition tussle has released a strong set of interim results for the half year ended 31 August 2013.

The financial services firm reported a 12% increase in operating revenue to $47.1 million and a 68% increase in operating profit after tax to $6.7 million. The operating profit excludes corporate activity costs associated with the acquisition approaches which pulled down the reported result.

The revenue growth appears to have been broad-based across the group with all divisions contributing to the double digit growth including a 14% increase in Australian Personal Client Services (PCS), a 15% increase in New Zealand PCS and a 10% increase in Corporate Client Services in both Australia and NZ.

Thanks to a combination of inflows and market gains Trust Co also saw funds under management and advice increase from $5.6 billion to $6.3 billion over the prior corresponding period (pcp) while funds under administration and supervision ballooned from $150.8 billion to $191.1 billion on the pcp.

The growth in earnings has allowed the firm to increase the dividend to shareholders as well. The stock will trade ex-dividend on Tuesday the 15th of October with the board declaring an interim fully franked dividend of 17 cents, up from 12 cents last year.

The strong results highlight why an initial approach by rival Equity Trustees (ASX: EQT) to acquire Trust Co led to both Perpetual (ASX: PPT) and IOOF (ASX: IFL) entering the bidding war as well. As things currently stand Perpetual looks set to acquire Trust Co with IOOF appearing to have turned its attention to Equity Trustees by grabbing a strategic stake in the company.

Foolish takeaway

Financial stocks have rallied strongly, with many outperforming the wider S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) in recognition of the leverage many financial service firms have to higher levels of funds under management. Shareholders are starting to reap the benefits not just thanks to capital gains but now also through higher dividend payments.

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Motley Fool contributor Tim McArthur owns shares in Perpetual.

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