REG - Arbuthnot Banking - 2025 AGM Trading Update

Arbuthnot BankingAnnouncement

21/05/2025 14:30

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RNS Number : 6185J  Arbuthnot Banking Group PLC  21 May 2025

21 May 2025

Arbuthnot Banking Group PLC

Annual General Meeting 2025

 

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 2025 ahead of the
Annual General Meeting due to be held later today.

 

Highlights

 

 ●    Loan Balances including Leased Assets at 30 April 2025 of £2,361m (30 April
      2024: £2,370m, 31 December 2024: £2,380m) as a cautious credit appetite was
      maintained.
 ●    Deposits of £4,257m (30 April 2024: £3,646m, 31 December 2024: £4,132m),
      representing a 3% increase since the year end and a 17% increase year on year.
 ●    Funds Under Management and Administration ("FUMA") of £2,250m, (30 April
      2024: £1,873m, 31 December 2024: £2,214m), a 2% increase against 31 December
      2024 and an increase of 20% year on year.

Summary

Despite the global economic outlook becoming increasingly uncertain during the
start of 2025, in particular due to the threat of trade wars and tariffs, the
Group has continued to focus on progressing its on-going long-term strategic
initiatives to attract profitable relationship driven deposits whist growing
and diversifying its lending proposition.

 

In response to the uncertain backdrop, the Bank of England ("BoE") has reduced
interest rates twice so far in 2025, with two cuts of 0.25%.  This follows
the prior reductions in August and November 2024. As previously signposted,
downward movements in the base rate will impact the Group's net interest
income, both whilst the cost of deposits catches up and as the Group's
significant surplus liquidity balances earn less. However, given the on-going
inflationary pressures that exist in the economy and the anticipated effect
that the recently introduced increase in employers' National Insurance
contributions may have, it might be that the BoE policy makers have less room
to cut interest rates and in the long term the resting rate could be higher
than some expect.

 

Group loan balances at 30 April 2025 were £2,361m, a small reduction from
loan balances at 31 December 2024 and 12 months ago. This reflected the
Group's on-going cautious credit appetite in response to recent economic
uncertainty. However, the Group has continued to execute its strategy to
allocate capital to its specialist lending divisions which continue to see
growth opportunities.  Despite the economic environment, the Bank has also
begun to see more activity in its lending pipeline.

 

Our deposit gathering capabilities continue to prove successful with balances
increasing to £4,257m an increase of 3% since the year end and 17% growth
over the last 12 months. The focus on raising profitable deposits has become
an important strategy as the Bank develops its client growth programmes.

 

Despite the volatile equity markets, within the Wealth Management division,
Funds Under Management and Administration have increased by 2% since the start
of 2025, with net inflows of £127m being partially offset by the downward
revaluations in investment assets caused by the threat of an all out tariff
war. FUMA balances are 20% higher than the same period in 2024.

 

As previously noted the Prudential Regulation Authority (PRA) announced its
intention to delay the implementation of Basel 3.1 in the UK, to allow more
time for greater clarity to emerge on the plans for implementation of the new
rules in the United States.  The Group has adjusted its lending appetite to
have sufficient capital regardless of the introduction of the new rules but we
await clarity as we continue to evaluate the relative benefits of this regime
compared to the alternative being the Small Domestic Deposit Takers (SDDT)
regime, the new evolution of Strong and Simple.

 

Banking

Banking's relationship-led approach continued to support the acquisition and
retention of criteria clients across Private and Commercial Banking.

 

Despite the annual expected outflows to HMRC in the early part of 2025, these
were more than offset with an increase in deposit flows from new and existing
clients.  As a result, core deposits for Banking increased by £124m to
£4,257m in the first four months of 2025, in contrast to a decline for the
same period in the prior year.

 

Lending reduced in the first four months of 2025 by 2% to £1,515m as
expected, as capital is recycled into higher margin lending by the subsidiary
companies. The Bank continues to hold to its principles of maintaining high
quality credit lending, with the volume and value of lending cases identified
as higher risk reducing.  With the macro-economic outlook remaining uncertain
the Bank's loan appetite remains cautious, with the focus on supporting
existing clients, whilst pursuing quality new business opportunities.
Consequently, the Bank's cautious underwriting approach continues to result in
limited losses from any new defaults.

 

Wealth Management

The threat of a global trade war resulted in high levels of market volatility.
However, FUMA at the end of April closed at £2.25bn equating to 20% year on
year growth. Despite adverse market-wide performance being reported, year to
date Group gross inflows of £204m over the period compared to £171m over the
same period last year, which has resulted in net flows for the current period
of £127m.

 

Arbuthnot Commercial Asset Based Lending ("ACABL")

ACABL finished the period with a loan book of £216m a reduction of 6% from
the end of 2024.

 

The economic uncertainty and low growth environment, which suppressed activity
in 2024, continued in the first four months of 2025. Client facilities
reaching the end of their terms continued to offset growth in the loan book,
although originations and ACABL's pipeline are showing positive signs.

 

The business continues to closely monitor watch cases. The proven business
model of high quality collateral continues to mitigate against credit losses.

 

Renaissance Asset Finance ("RAF")

RAF finished the period with a loan book of £264m up 6% from the end of 2024,
with 21% year on year growth and new business up 16% against the same period
in the prior year.

 

The Block Discounting business which launched in late 2021 continued to grow
its loan book reporting a 16% increase over the period.

 

Asset Alliance ("AAG")

Whilst the commercial vehicle market continues to remain subdued, the first
four months have seen strong origination within the bus and coach market.
Total origination of £41m in the first four months has seen the assets
available for lease rise 3%, to £373m. Yields on new business remain stable,
in line with the prior year and resilient amidst recent rate reductions and a
highly competitive market.

 

Trading in used, end of lease commercial vehicles has seen an upturn however
an excess supply of older assets is resulting in margin pressure. The strategy
to diversify the portfolio is working well, with strong performance from the
bus and coach division and a positive overall lending pipeline.

 

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:
 Arbuthnot Banking Group                          020 7012 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 5100

 AQSE Exchange Corporate Adviser)

 Colin Aaronson

 Samantha Harrison

 Ciara Donnelly

 Shore Capital (Broker)                           020 7408 4090

 Daniel Bush

 David Coaten

 Tom Knibbs

 H/Advisors Maitland (Financial PR)               020 7379 5151

 Sam Cartwright

 Neil Bennett

 

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