TIDMCBG
RNS Number : 7211G
Close Brothers Group PLC
21 July 2023
Press Release
Scheduled Trading Update
-------------------------
21 July 2023
Embargoed for release until 7.00 am on 21 July 2023.
Close Brothers Group plc ("the group" or "Close Brothers") today
issues its scheduled pre-close trading update ahead of its 2023
financial year end. Close Brothers will release its results for the
full year ended 31 July 2023 on 26 September 2023.
All statements in this release relate to the 11 months to 30
June 2023 unless otherwise indicated.
Adrian Sainsbury, Chief Executive Officer, said:
"We have performed well in the second half of the financial
year, maintaining the loan book growth momentum, strong net
interest margin and stable credit performance in Banking reported
at Q3. Close Brothers Asset Management continued to attract client
assets and delivered a strong net inflow rate, although
Winterflood's performance remains impacted by subdued trading
activity.
We are seeing good demand in our Banking business and are making
the most of the opportunities, notwithstanding the uncertain
external environment. We continue to support our customers and
clients, maintaining our consistent approach to lending throughout
the cycle. Our financial strength and proven business model leave
us well placed and I am pleased with our progress towards resuming
the group's track record of earnings growth and returns since the
first half."
Divisional performance
In Banking , the loan book increased 3.7% year-to-date to GBP9.4
billion(1) (6.8% excluding Novitas and the Irish Motor Finance
business). This reflected continued demand in the Commercial
businesses and strong growth in Property Finance driven by
increased drawdowns and a slowdown in repayments. Marginal growth
in the UK Motor Finance and Premium Finance loan books has been
more than offset by the run-off of the Irish Motor Finance
business.
The annualised year-to-date net interest margin remained strong
at 7.7% (7.5% excluding Novitas) (FY 2022: 7.8%, 7.5% excluding
Novitas), reflecting our pricing discipline.
We remain focused on cost control, although we experienced
increased pressure from the inflationary environment, particularly
in the second half of the financial year and we continued to invest
in strategic programmes.
The annualised year-to-date bad debt ratio was 2.3% (Q3 2023:
2.6%). This incorporates the significant provisions taken against
Novitas in the first half of the 2023 financial year, which we
believe adequately reflect the remaining risk of credit losses for
the Novitas loan book.
Our credit performance has remained stable since the first half,
with an annualised year-to-date bad debt ratio of 0.9% excluding
Novitas (Q3 2023: 0.9%) (2) . We continue to monitor closely the
evolving impacts of higher inflation and remain confident in the
quality of our loan book, which is predominantly secured, prudently
underwritten, diverse, and supported by the deep expertise of our
people.
Close Brothers Asset Management delivered year-to-date
annualised net inflows of 9% (FY 2022: 5%, Q3 2023: 9%),
notwithstanding market uncertainty throughout the period. Our
hiring strategy is proving successful, with the new portfolio
managers contributing significantly to the overall inflow rate, and
we continue to invest to support the long-term growth potential of
the business. Since the Q3 trading update, both managed assets and
total client assets have remained stable at GBP16.1 billion and
GBP17.0 billion respectively, as negative market movements largely
offset net inflows.
Winterflood's performance continued to be impacted by the
cyclical trends and weak retail investor activity previously
highlighted, generating operating profit of c.GBP3 million in the
financial year-to-date. Nevertheless, the team's experience and
focus on managing risk resulted in only one loss day year-to-date.
Winterflood has a long track record of trading profitably in a
range of market conditions and remains well positioned to benefit
when investor confidence recovers.
Strong capital, funding and liquidity positions
We maintained our strong balance sheet and the prudent
management of our financial resources. Our Common Equity Tier 1
("CET1") ratio was 13.7% at 30 June 2023 (30 April 2023: 14.0%),
significantly above the applicable minimum regulatory
requirement(3) . Our funding base was strengthened by the
successful issuance of a GBP250 million senior unsecured bond in
June 2023 and we maintained our prudent liquidity position, with
the liquidity coverage ratio substantially above regulatory
requirements.
Outlook
Following a challenging first half, we have performed well in
the second part of the financial year so far. Although the external
environment remains uncertain, we are making the most of
opportunities and our business is performing as we would expect at
this stage in the cycle. Our proven model and financial strength
leave us well placed to resume our track record of earnings growth
and returns by focusing on disciplined growth, cost efficiency and
capital optimisation.
Footnotes
1 The loan book is presented including operating lease
assets.
2 At 30 June 2023, there was a 32.5% weighting to the baseline
scenario, 30.0% to the upside and 37.5% to the downside scenarios
(unchanged from 31 July 2022). Moody's June unemployment forecast
for Q4 2023 under the baseline scenario is 4.3%, 3.9% under the
upside scenario and ranges between 4.7% and 5.4% in the downside
scenarios. Moody's June inflation forecast for Q4 2023 under the
baseline scenario is 5.2%, 4.8% for the upside scenario and ranges
between 3.8% and 1.5% in the downside scenarios. Moody's June
forecast for the Bank of England base rate for Q4 2023 is 5.0% in
the baseline scenario, 5.2% in the upside scenario and ranges from
4.7% to 3.8% in the downside scenarios.
3 The group's capital ratios are presented on a transitional
basis after the application of IFRS 9 transitional arrangements
which allows banks to add back to their capital base a proportion
of the IFRS 9 impairment charges during the transitional period.
Without their application, the CET1 capital ratio would be 13.4%.
The applicable minimum regulatory requirement, excluding any
applicable PRA buffer, was 8.5% at 30 June 2023. The CET1 ratio at
30 June 2023 has been calculated in accordance with UK CRR Article
26 regarding the deduction of foreseeable dividends from CET1
capital. The CET1 ratio for 31 July 2023 may be impacted by any
dividend declared by the Board.
Enquiries
Camila Sugimura Close Brothers Group plc 020 3857 6577
Kimberley Taylor Close Brothers Group plc 020 3857 6233
Sam Cartwright Maitland 07827 254561
About Close Brothers
Close Brothers is a leading UK merchant banking group providing
lending, deposit taking, wealth management services and securities
trading. We employ approximately 4,000 people, principally in the
United Kingdom and Ireland. Close Brothers Group plc is listed on
the London Stock Exchange and is a member of the FTSE 250.
Cautionary Statement
Certain statements included or incorporated by reference within
this announcement may constitute "forward-looking statements" in
respect of the group's operations, performance, prospects and/or
financial condition. All statements other than statements of
historical fact are, or may be deemed to be, forward-looking
statements. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as "anticipates", "aims", "due", "could", "may", "will",
"should", "expects", "believes", "intends", "plans", "potential",
"targets", "goal" or "estimates". By their nature, forward-looking
statements involve a number of risks, uncertainties and assumptions
and actual results or events may differ materially from those
expressed or implied by those statements. There are also a number
of factors that could cause actual future operations, performance,
financial conditions, results or developments to differ materially
from the plans, goals and expectations expressed or implied by
these forward-looking statements and forecasts. These factors
include, but are not limited to, those contained in the Group's
annual report (available at:
https://www.closebrothers.com/investor-relations ). Accordingly, no
assurance can be given that any particular expectation will be met
and reliance should not be placed on any forward-looking statement.
Additionally, forward-looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future.
Except as may be required by law or regulation, no
responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future
events or otherwise. Nothing in this announcement should be
construed as a profit forecast. Past performance cannot be relied
upon as a guide to future performance and persons needing advice
should consult an independent financial adviser.
This announcement does not constitute or form part of any offer
or invitation to sell, or any solicitation of any offer to
subscribe for or purchase any shares or other securities in the
company or any of its group members, nor shall it or any part of it
or the fact of its distribution form the basis of, or be relied on
in connection with, any contract or commitment or investment
decisions relating thereto, nor does it constitute a recommendation
regarding the shares or other securities of the company or any of
its group members. Statements in this announcement reflect the
knowledge and information available at the time of its preparation.
Liability arising from anything in this announcement shall be
governed by English law. Nothing in this announcement shall exclude
any liability under applicable laws that cannot be excluded in
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