REG - Arbuthnot Banking - Annual General Meeting 2022 and Trading Update

Arbuthnot BankingAnnouncement

25/05/2022 13:15

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RNS Number : 8008M  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
£2,061m, a 3% increase compared to a 31 December 2021 balance and a 15%
increase year on year

·        Assets Under Management (AUM) of £1,353m 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 £2,752m.

 

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 £7.1m 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 £20m,
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 £218.9m.

 

RLS products continue to be utilised in deal structuring where appropriate. At
the end of April 2022 RLS exposure totalled £36.5m and is expected to
increase to c£50m 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:

 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
 George Grainger

 Ciara Donnelly

 Numis Securities Ltd (Joint Broker)             020 7260 1000
 Stephen Westgate

 Shore Capital (Joint Broker)                    020 7408 4090
 Hugh Morgan
 Daniel Bush

 Maitland/AMO (Financial PR)                     020 7379 5151
 Sam Cartwright

 

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