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Arbuthnot Banking Group PLC
25 May 2022
Arbuthnot Banking Group PLC
Annual General Meeting 2022
Trading Update
The Board of Arbuthnot Banking Group PLC ("Arbuthnot", "the
Company", "the Bank" or the "Group") announces the following
statement regarding the trading performance of the Group for the
four months to 30 April 2022 ahead of the Annual General Meeting
due to be held later today.
Highlights
-- BoE base rate rises expected to contribute to increased revenue
-- Loan Balances including Leased Assets at 30 April 2022 of
GBP2,061m, a 3% increase compared to a 31 December 2021 balance and
a 15% increase year on year
-- Assets Under Management (AUM) of GBP1,353m broadly flat
against 31 December 2021 despite the downturn in the market and an
increase of 12% year on year
Summary
The Group has made a good start to the year. The increase in the
Bank of England base rate has had a positive impact to the Group's
revenues as the assets with variable rate benchmarks have repriced.
Given the very strong surplus liquidity that the Group has
maintained, the decision was taken not to compete on price in the
"non-relationship" or "best buy table" deposit markets and thus the
Group has allowed some deposits to mature. These are being replaced
by more valuable "relationship" balances that are being generated
by both the Private and Commercial banking teams.
Given the increased competition in the real estate lending
markets, the Group has continued to maintain its discipline in
lending only where return on capital hurdles are met. The Group has
managed volume targets to preserve long term capital optimisation
and returns.
As previously mentioned, the Group continues to examine all the
options it has to achieve the planned growth rates as articulated
in the "Future State" vision while being able to absorb the higher
capital requirements as announced by the Bank of England with the
re-introduction of the countercyclical capital buffers. These
options will include continuing to optimise the balance sheet to
focus on core business assets.
Banking
Private and Commercial Banking has continued its trend of strong
client acquisition. The Bank continues to maintain strong levels of
liquidity reserves without competing for higher priced "best buy
table" deposits which have experienced a material uplift in
interest rates following the successive base rate rises so far this
year. Where deposits have matured and not been retained, a
significant portion have been from aggregator and platform channels
where the Bank does not have a direct relationship with the
underlying client. Deposit balances at 30 April 2022 were
GBP2,752m.
Going into 2022, the Bank had a strong lending pipeline that has
resulted in drawdowns being broadly on plan. Net loan growth has
been tempered by repayments ahead of expectations as the result of
a number of watchlist lending cases being resolved. Despite this
headwind, the Banking loan book has grown by 29% in the 12 months
to April 2022.
The Bank of England base rate rises are expected to have a
positive effect on the Group's revenue for the year. However, there
has been a strong preference from clients for fixed rate lending
outside the Bank's targeted returns on our capital. This has
impacted the pipeline, but it is expected that opportunities will
increase in H2 as the imminent prospect of steeper increases in the
base rate appears to have subsided .
During 2021, the Bank announced a three-year strategic
"originate to sell" loan agreement with a third party to partner
with in building a Commercial Real Estate Loan portfolio.
Transactions totalling GBP7.1m have been completed to date with a
strong pipeline in development. Additionally, there is a large
volume of capital intensive Commercial Real Estate loans maturing
in H2 outside of the Bank's current appetite, to which it will be
able to provide support to, via this agreement.
Wealth Management
Total AUM have remained broadly static for the first four months
of 2022 despite the downturn in the markets. Gross inflows year to
date have increased 25% on the prior year, resulting in 12% growth
year on year to April 2022. Following the closure of the Dubai
office in the prior year, client retention has remained in line
with expectations.
Arbuthnot Commercial Asset Based Lending (ACABL)
Despite the challenging markets, the business has been presented
with a number of transactions suiting ACABL's lending approach. The
business completed its largest deal to date in January with
facilities written in excess of GBP20m, comprising both traditional
asset based lending as well as a Recovery Loan Scheme (RLS)
facility.
The ACABL loan book has continued to increase at a good rate
with 20% growth in the 4 months to 30 April 2022 and a 74% increase
year on year to finish the period at GBP218.9m.
RLS products continue to be utilised in deal structuring where
appropriate. At the end of April 2022 RLS exposure totalled
GBP36.5m and is expected to increase to cGBP50m across 30 loans by
the time the scheme closes at the end of Q2.
Renaissance Asset Finance (RAF)
The RAF loan book has grown 11% year on year, and has grown 2%
in the first four months of the year. The business continues to
experience strong demand for its asset finance facilities with the
current pipeline of new business proposals and acceptances above
pre pandemic levels. RAF however continues to experience delays in
deal originations as a result of supply chain challenges.
Loans under forbearance measures following the pandemic continue
to be confined to the London purpose-built taxi market but have
shown significant recovery as London and the economy returns to
normality.
Asset Alliance (AAG)
As previously reported, the global supply chain issues continue
to affect Asset Alliance with a significant reduction in the
delivery of new trucks. This has been further impacted by the war
in Ukraine given the location of manufacturing capacity. This has
resulted in a slowing of the original lending growth plan, with
assets available to lease broadly flat against the year end and the
same period for the prior year. However, used truck sales continue
to be strong, achieving higher than budgeted margins which is
supporting underlying profitability.
The business continues to develop its Bus and Coach lending
business and focus on the stronger urban markets which remain
robust with regular asset replacement cycles in place.
Arbuthnot Specialist Finance (ASFL)
ASFL continues to make progress on implementing its new business
plan. The loan book remains in line with the prior year end with a
steady pipeline.
Operations
The Bank continues to observe increased client banking activity
with a 35% increase of outbound payments against the prior year,
including outward Faster Payments increasing 49%. In addition,
digital wallet transactions (Apple and Google Pay), launched during
the prior year, are trending up with a steady increase in client
usage month on month.
The Directors of the Company accept responsibility for the
contents of this announcement.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Enquiries:
020 7012
Arbuthnot Banking Group 2400
Sir Henry Angest, Chairman and Chief Executive
Andrew Salmon, Group Chief Operating Officer
James Cobb, Group Finance Director
Grant Thornton UK LLP (Nominated Adviser and 020 7383
AQSE Exchange Corporate Adviser) 5100
Colin Aaronson
Samantha Harrison
George Grainger
Ciara Donnelly
020 7260
Numis Securities Ltd (Joint Broker) 1000
Stephen Westgate
020 7408
Shore Capital (Joint Broker) 4090
Hugh Morgan
Daniel Bush
020 7379
Maitland/AMO (Financial PR) 5151
Sam Cartwright
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END
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