REG - Arbuthnot BankingSecure Trust Bank - Final Results for the year to 31 December 2015 <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 5
17/03/2016 07:05
- Part 5: For the preceding part double click ID:nRSQ3559Sd
5,522 - - - 5,522
Financial investments 158 - 1,119 - 1,277
1,330,223 29,441 47,352 938 1,407,954
LIABILITIES
Deposits from banks 27,489 168 - - 27,657
Derivative financial instruments 1,067 - - - 1,067
Deposits from customers 1,147,299 28,081 18,146 759 1,194,285
Other liabilities 12,024 - - - 12,024
Debt securities in issue - - 11,448 - 11,448
1,187,879 28,249 29,594 759 1,246,481
Net on-balance sheet position 142,344 1,192 17,758 179 161,473
Credit commitments 140,137 - - - 140,137
A 10% strengthening of the pound against the US dollar would lead to a £3,000 decrease (2014: £1,000 decrease) in Group
profits and equity, while a 10% weakening of the pound against the US dollar would lead to the same decrease in Group
profits and equity. Similarly a 10% strengthening of the pound against the Euro would lead to a £52,000 (2014: £6,000
increase) in Group profits and equity, while a 10% weakening of the pound against the Euro would lead to the same increase
in Group profits and equity. The above results are after taking into account the effect of derivative financial instruments
(see note 19), which covers most of the net exposure in each currency.
The table below summarises the Company's exposure to foreign currency exchange rate risk at 31 December 2015:
GBP (£) Euro (E) Total
At 31 December 2015 £000 £000 £000
ASSETS
Due from subsidiary undertakings - bank balances 1,087 11,357 12,444
Financial investments 125 - 125
Other assets 789 - 789
2,001 11,357 13,358
LIABILITIES
Other liabilities 3,068 - 3,068
Debt securities in issue - 10,834 10,834
3,068 10,834 13,902
Net on-balance sheet position (1,067) 523 (544)
The table below summarises the Company's exposure to foreign currency exchange rate risk at 31 December 2014:
GBP (£) Euro (E) Total
At 31 December 2014 £000 £000 £000
ASSETS
Due from subsidiary undertakings - bank balances 7,276 11,968 19,244
Financial investments 158 - 158
Other assets 5,365 - 5,365
12,799 11,968 24,767
LIABILITIES
Other liabilities 3,028 - 3,028
Debt securities in issue - 11,448 11,448
3,028 11,448 14,476
Net on-balance sheet position 9,771 520 10,291
A 10% strengthening of the pound against the Euro would lead to £52,000 (2014: £28,000) decrease in the Company profits and
equity, conversely a 10% weakening of the pound against the Euro would lead to the same increase in the Company profits and
equity.
Interest rate risk
Interest rate risk is the potential adverse impact on the Company and Group's future cash flows from changes in interest
rates; and arises from the differing interest rate risk characteristics of the Company and Group's assets and liabilities.
In particular, fixed rate savings and borrowing products expose the Group to the risk that a change in interest rates could
cause either a reduction in interest income or an increase in interest expense relative to variable rate interest flows.
The Group seeks to "match" interest rate risk on either side of the Statement of Financial Position. However, this is not a
perfect match and interest rate risk is present on: Money market transactions of a fixed rate nature, fixed rate loans and
fixed rate savings accounts. There is interest rate mismatch in Arbuthnot Latham and Secure Trust Bank. This is monitored
on a daily basis in conjunction with liquidity and capital. The interest rate mismatch is daily monitored, throughout the
maturity bandings of the book on a parallel shift scenario for 50, 100 and 200 basis points movement. The Group consider
the 50, 100 and 200 basis points movement to be appropriate for scenario testing given the current economic outlook and
industry expectations. This typically results in a pre-tax mismatch of £0.4m to £1.8m (2014: £0.3m to £1.1m) for the Group,
with the same impact to equity pre-tax. The Company has no fixed rate exposures, but a upward change of 50 basis points on
variable rates would increase pre-tax profits and equity by £7,000 (2014: increase pre-tax profits and equity by £60,000).
The following tables summarise the re-pricing periods for the assets and liabilities in the Company and Group, including
derivative financial instruments which are principally used to reduce exposure to interest rate risk. Items are allocated
to time bands by reference to the earlier of the next contractual interest rate re-price and the maturity date.
Group Within 3 months More than 3 months but less than 6 months More than 6 months but less than 1 year More than 1 year but less than 5 years More than 5 years Non interest bearing Total
As at 31 December 2015 £000 £000 £000 £000 £000 £000 £000
ASSETS
Cash and balances at central banks 368,611 - - - - - 368,611
Loans and advances to banks 28,578 - - - - - 28,578
Assets classified as held for sale - - - - - 118,456 118,456
Debt securities held-to-maturity 54,472 14,481 18,775 - - - 87,728
Derivative financial instruments - - - - 1,490 - 1,490
Loans and advances to customers 637,301 267,464 176,227 534,201 15 (35,696) 1,579,512
Other assets - - - - - 44,499 44,499
Financial investments - - - - - 2,685 2,685
Total assets 1,088,962 281,945 195,002 534,201 1,505 129,944 2,231,559
LIABILITIES
Deposits from banks 387 35,000 19,918 - - - 55,305
Derivative financial instruments 135 - - - - - 135
Deposits from customers 675,327 534,562 184,758 497,416 37,775 - 1,929,838
Liabilities classified as held for sale - - - - - 8,700 8,700
Other liabilities - - - - - 35,343 35,343
Debt securities in issue 10,834 - - - - - 10,834
Equity - - - - - 191,404 191,404
Total liabilities 686,683 569,562 204,676 497,416 37,775 235,447 2,231,559
Impact of derivative instruments 3,800 - - (3,800) - -
Interest rate sensitivity gap 406,079 (287,617) (9,674) 32,985 (36,270) (105,503)
Cumulative gap 406,079 118,462 108,788 141,773 105,503 -
Group Within 3 months More than 3 months but less than 6 months More than 6 months but less than 1 year More than 1 year but less than 5 years More than 5 years Non interest bearing Total
As at 31 December 2014 £000 £000 £000 £000 £000 £000 £000
ASSETS
Cash and balances at central banks 115,938 - - - - - 115,938
Loans and advances to banks 31,844 - - - - - 31,844
Debt securities held-to-maturity 86,462 - - 5,221 - - 91,683
Derivative financial instruments 1,209 - - - 1,498 - 2,707
Loans and advances to customers 615,599 74,042 116,012 383,698 200 (30,568) 1,158,983
Other assets - - - - - 44,190 44,190
Financial investments - - - - - 1,277 1,277
Total assets 851,052 74,042 116,012 388,919 1,698 14,899 1,446,622
LIABILITIES
Deposits from banks 27,657 - - - - - 27,657
Derivative financial instruments 1,067 - - - - - 1,067
Deposits from customers 615,005 119,973 138,515 253,360 29,670 37,762 1,194,285
Other liabilities - - - - - 38,596 38,596
Debt securities in issue 11,448 - - - - - 11,448
Equity - - - - - 173,569 173,569
Total liabilities 655,177 119,973 138,515 253,360 29,670 249,927 1,446,622
Impact of derivative instruments (16,200) 20,000 - (3,800) - -
Interest rate sensitivity gap 179,675 (25,931) (22,503) 131,759 (27,972) (235,028)
Cumulative gap 179,675 153,744 131,241 263,000 235,028 -
Company Within 3 months More than 3 months but less than 6 months More than 6 months but less than 1 year More than 1 year but less than 5 years More than 5 years Non interest bearing Total
As at 31 December 2015 £000 £000 £000 £000 £000 £000 £000
ASSETS
Due from subsidiary undertakings - bank balances 12,444 - - - - 159 12,603
Other assets - - - - - 47,920 47,920
Financial investments - - - - - 125 125
Total assets 12,444 - - - - 48,204 60,648
LIABILITIES
Other liabilities - - - - - 4,235 4,235
Debt securities in issue 10,834 - - - - - 10,834
Equity - - - - - 45,579 45,579
Total liabilities 10,834 - - - - 49,814 60,648
Interest rate sensitivity gap 1,610 - - - - (1,610)
Cumulative gap 1,610 1,610 1,610 1,610 1,610 -
Company Within 3 months More than 3 months but less than 6 months More than 6 months but less than 1 year More than 1 year but less than 5 years More than 5 years Non interest bearing Total
As at 31 December 2014 £000 £000 £000 £000 £000 £000 £000
ASSETS
Due from subsidiary undertakings - bank balances 19,244 - - - - - 19,244
Other assets - - - - - 45,975 45,975
Financial investments - - - - - 158 158
Total assets 19,244 - - - - 46,133 65,377
LIABILITIES
Other liabilities - - - - - 4,132 4,132
Debt securities in issue 11,448 - - - - - 11,448
Equity - - - - - 49,797 49,797
Total liabilities 11,448 - - - - 53,929 65,377
Interest rate sensitivity gap 7,796 - - - - (7,796)
Cumulative gap 7,796 7,796 7,796 7,796 7,796 -
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset.
The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group's reputation. The liquidity requirements of the Group are met through withdrawing funds from
its Bank of England Reserve Account to cover any short-term fluctuations and, longer term funding to address any structural
liquidity requirements.
The Group has formal governance structures in place to manage and mitigate liquidity risk on a day to day basis. The Board
of each bank sets and approves the liquidity risk management strategy for each subsidiary. The Assets and Liabilities
Committees ("ALCO"), comprising senior executives of each Company, monitors liquidity risk. Key liquidity risk management
information is reported by the finance teams and monitored by the Chief Executive Officer and Chief Financial Officer on a
daily basis. The ALCO meets monthly to review liquidity risk against set thresholds and risk indicators including early
warning indicators, liquidity risk tolerance levels and Individual Liquidity Adequacy Assessment Process ("ILAAP")
metrics.
The PRA requires a firm to maintain at all times liquidity resources which are adequate, both as to amount and quality, to
ensure that there is no significant risk that its liabilities cannot be met as they fall due. There is also a requirement
that a firm ensures its liquidity resources contain an adequate buffer of high quality, unencumbered assets (i.e.
Government Securities in the liquidity asset buffer); and it maintains a prudent funding profile. The liquidity assets
buffer is a pool of highly liquid assets that can be called upon to create sufficient liquidity to meet liabilities on
demand, particularly in a period of liquidity stress. The liquidity resources outside the buffer must either be marketable
assets with a demonstrable secondary market that the firm can access, or a credit facility that can be activated in times
of stress.
Arbuthnot Latham & Co., Limited ("AL") and Secure Trust Bank PLC ("STB") have Board approved ILAAPs. The liquidity buffer
required by the ILAAP has been put in place and maintained since that time. Liquidity resources outside of the buffer are
made up of deposits placed at the Bank of England. The ILAAP is updated annually.
The Liquidity Coverage Ratio ("LCR") regime has applied to the Group from 1 October 2015, requiring management of net 30
day cash outflows as a proportion of high quality liquid assets. The actual LCR has significantly exceeded the regulatory
minimum throughout the year.
The Group is exposed to daily calls on its available cash resources from current accounts, maturing deposits and loan
draw-downs. The Group maintains significant cash resources to meet all of these needs as they fall due. The matching and
controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of
the Group. It is unusual for banks to be completely matched, as transacted business is often of uncertain term and of
different types.
The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as
they mature are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates.
The tables below show the undiscounted contractual maturity analysis of the Group's financial liabilities and assets as at 31 December 2015:
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2015 £000 £000 £000 £000 £000 £000
Financial liability by type
Non-derivative liabilities
Deposits from banks 55,305 (55,305) (35,387) (19,918) - -
Deposits from customers 1,929,838 (2,059,721) (1,099,222) (376,705) (540,890) (42,904)
Other liabilities 14,581 (14,581) (12,992) (125) - (1,464)
Debt securities in issue 10,834 (12,442) (80) (241) (1,287) (10,834)
Liabilities relating to assets classified as held for sale 8,700 (8,700) (8,700) - - -
Issued financial guarantee contracts - (56) (56) - - -
Unrecognised loan commitments - (178,863) (178,863) - - -
2,019,258 (2,329,668) (1,335,300) (396,989) (542,177) (55,202)
Derivative liabilities
Risk management: 135 - - - - -
- Outflows - (135) (135) - - -
135 (135) (135) - - -
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2015 £000 £000 £000 £000 £000 £000
Financial asset by type
Non-derivative assets
Cash and balances at central banks 368,611 368,611 368,611 - - -
Loans and advances to banks 28,578 28,578 28,578 - - -
Debt securities held-to-maturity 87,728 88,887 29,333 27,302 32,252 -
Assets classified as held for sale 118,456 (118,456) (118,456) - - -
Loans and advances to customers 1,579,512 1,913,124 245,450 506,808 1,093,755 67,111
Other assets 2,625 2,625 2,625 - - -
Financial investments 2,685 2,685 2,561 - 124 -
2,188,195 2,286,054 558,702 534,110 1,126,131 67,111
Derivative assets
- Inflows 1,490 1,490 59 - - 1,431
1,490 1,490 59 - - 1,431
The tables below show the undiscounted contractual maturity analysis of the Group's financial liabilities and assets as at 31 December 2014:
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2014 £000 £000 £000 £000 £000 £000
Financial liability by type
Non-derivative liabilities
Deposits from banks 27,657 (27,657) (12,627) (15,030) - -
Deposits from customers 1,194,285 (1,227,753) (510,423) (382,230) (299,841) (35,259)
Other liabilities 12,024 (18,674) (17,084) (125) - (1,465)
Debt securities in issue 11,448 (13,248) (90) (270) (1,440) (11,448)
Issued financial guarantee contracts - (714) (714) - - -
Unrecognised loan commitments - (139,423) (139,423) - - -
1,245,414 (1,427,469) (680,361) (397,655) (301,281) (48,172)
Derivative liabilities
Risk management: 1,067 - - - - -
- Outflows - (1,067) (1,067) - - -
1,067 (1,067) (1,067) - - -
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2014 £000 £000 £000 £000 £000 £000
Financial asset by type
Non-derivative assets
Cash and balances at central banks 115,938 115,938 115,938 - - -
Loans and advances to banks 31,844 31,843 31,843 - - -
Debt securities held-to-maturity 91,683 92,511 50,832 12,359 29,320 -
Loans and advances to customers 1,158,983 1,353,592 205,066 319,221 800,860 28,445
Other assets 5,522 5,522 5,522 - - -
Financial investments 1,277 1,277 - 1,119 158 -
1,405,247 1,600,683 409,201 332,699 830,338 28,445
Derivative assets
Risk management: 2,707 - - - - -
- Inflows - 2,707 1,209 - - 1,498
2,707 2,707 1,209 - - 1,498
The table below sets out the components of the Group's liquidity reserves:
31 December 2015 31 December 2014
Amount Fair value Amount Fair value
Liquidity reserves £000 £000 £000 £000
Cash and balances at central banks 368,611 368,611 115,938 115,938
Loans and advances to banks 28,578 28,578 31,844 31,844
Debt securities held-to-maturity 87,728 87,594 91,683 91,683
Undrawn credit lines 38,500 38,500 38,500 38,500
523,417 523,283 277,965 277,965
Assets pledged as collateral or encumbered
The total financial assets recognised in the statement of financial position that had been pledged as collateral for
liabilities at 31 December 2015 was £226.2m (2014: £159.3m).
Financial assets are pledged as collateral as part of sales and repurchases, securities borrowing and securitisation
transactions under terms that are usual and customary for such activities. In addition, as part of these transactions, the
Group has received collateral that is permitted to sell or repledge in the absence of default.
The table below analyses the contractual maturity analysis of the Company's financial liabilities and assets as at 31 December 2015:
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2015 £000 £000 £000 £000 £000 £000
Financial liability by type
Non-derivative liabilities
Other liabilities 3,068 (3,068) (1,479) (125) - (1,464)
Debt securities in issue 10,834 (12,442) (80) (241) (1,287) (10,834)
13,902 (15,510) (1,559) (366) (1,287) (12,298)
Carrying amount Gross nominal inflow/ (outflow) Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years
At 31 December 2015 £000 £000 £000 £000 £000 £000
Financial asset by type
Non-derivative assets
Due from subsidiary undertakings - bank balances 12,444 12,444 11,965 - - 479
Financial investments 125 125 - - 125 -
Other assets 891 891 891
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