Thumbs-up for coalition's fiscal priorities

The group, which has offices in Leeds, York and Bradford, reported a 12 per cent surge in funds under management, which grew to 23bn.

Brewin's underlying profit, which excludes redundancy costs and contract renewal payments, rose 21 per cent to 20.3m in the 26 weeks to March 28. Income grew 15 per cent to 120.9m.

Executive chairman Jamie Matheson said the new Conservative/Liberal Democrat coalition's action on fiscal stability bodes well for the group.

"It would appear that economic stability is a major priority which should be good news for our clients and the company," he said. "They have got off to a courageous and principled start and the two men, Mr Cameron and Mr Clegg, have laid out their stall without pulling their punches."

Mr Matheson said he is "cautiously optimistic" about the British economic outlook. Despite market volatility caused by fears over debt contagion from struggling European economies, he said he is confident of Brewin's resilience.

"I'm very much of the view that, in the medium term, equities are going to regain their place as the investment medium," he said.

"We may have some squalls ahead of us and clearly there are some material economic problems that the world, Europe and Britain are facing but I'm certainly not losing sleep at night.

"Our client base is not one prone to wild fluctuations, they are very much long-term investors with an eye to income and returns."

Brewin said its profits surge was delivered despite higher salary costs, which included increased profits sharing

and a 2.2m contract renewal payment.

The group's investment banking arm showed strong recovery, generating operating profit of 962,000 during the period, compared with an 825,000 loss a year earlier.

Mr Matheson also called for restraint over plans to increase the rate of capital gains tax and warned it could deter savers from investing directly in quoted companies.

He called for the Chancellor, George Osborne, to impose a "swallowable" increase that does not deter private investors.

Brewin also invested in expansion during the period, opening an office in Shrewsbury this week to give it about 40 sites. It also added new teams and personnel across its network.

Michael Craven, head of Brewin's Leeds office, said "While the markets have been choppy recently and do not look like settling down anytime soon, it is a good to be reporting some positive figures for our first half of this year. I am particularly pleased that we have increased our total funds under management by 12 per cent to 23bn and I am very proud of the hard work by all my colleagues here in Leeds looking after our clients and of the part we have played in these results."

Brewin maintained its interim dividend at 3.55p per share.

Analysts at Shore Capital said Brewin has traded at an undeserved discount to peers Rensburg Sheppards and Rathbones.

Leeds-based rival Rensburg last week said full-year adjusted pre-tax profit fell, although a recovery in global markets meant profitability improved in the second half.

The company, which in March recommended a takeover offer from South African investment bank Investec, posted adjusted pre-tax profit of 30.2m for the year to the end of March, down from 36.3m in 2009.

Rensburg said it grew its funds under management to 12.9bn from 10.01bn in the period.

Business potential

Analysts said Brewin Dolphin's share price has the potential to push on significantly given its rate of growth.

"We strongly believe there will be a significant re-rating of the stock as the market begins to recognise the quality and potential of this business," said analysts at Shore Capital.

Analysts at Canaccord said: "On a longer-term view, we think the shares could recover by 65 per cent, to 213p."

House brokers Arden partners said: "Brewin has the fastest-growing funds under management and the highest-yielding funds in its sector.

"With a recent bid for Rensburg, we see the current value as unjustified.

"We believe the shares will re-rate as the company continues to grow its funds under management and generate cash."