REG - Arbuthnot BankingSecure Trust Bank - Half Yearly Report <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin>
06/09/2014 18:41
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Arbuthnot Banking Group PLC
22 July 2014
22 July 2014
For immediate release
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2014
"Continued Momentum"
Arbuthnot Banking Group is pleased to announce a half yearly profit before tax
of £9.5m an increase of 368% compared to the same period in the prior year.
Both banks continue to make good progress and with the completion of the £75m
institutional placing of shares in Secure Trust Bank PLC, Arbuthnot is well
positioned for further growth.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co.,
Limited and Secure Trust Bank PLC.
FINANCIAL HIGHLIGHTS
· Reported profit before tax £9.5m (H1 2013: £2.0m)
· Underlying profit before tax £13.2m (see footnote)
· Customer loans £842m (H1 2013: £673m)
· Customer deposits £1,066m (H1 2013: £840m)
· Interim dividend per share 11p (H1 2013: 11p)
OPERATIONAL HIGHLIGHTS
Retail Banking - Secure Trust Bank
· Profit before tax £11.5m (H1 2013: £6.2m)
· Customer loans £448m (H1 2013: £366m)
· Customer deposits £477m (H1 2013: £387m)
Private Banking - Arbuthnot Latham
· Profit before tax £1.7m (H1 2013: £1.0m)
· Customer loans £394m (H1 2013: £307m)
· Customer deposits £589m (H1 2013: £453m)
Commenting on the results, Henry Angest, Chairman and Chief Executive of
Arbuthnot, said: "The Group has made good progress and following the
successful raising of £75m of new capital is well placed to pursue the
opportunities that exist in the banking industry."
The interim results and presentation are available at
http://www.arbuthnotgroup.com.
Secure Trust Bank PLC is today releasing its interim statement and it should
be read in conjunction with these results.
Footnote - Underlying Profit before tax, adjusted for Secure Trust Bank share
option scheme costs of £0.8m, acquisition accounting adjustments of £2.7m and
acquisition costs of £0.2m.
ENQUIRIES:
Arbuthnot Banking GroupHenry Angest, Chairman and Chief ExecutiveAndrew Salmon, Group Chief Operating OfficerJames Cobb, Group Finance DirectorDavid Marshall, Director of Communications 020 7012 2400
Canaccord Genuity Ltd (Nominated Advisor)Lawrence Guthrie Sunil Duggal 020 7665 4500
Numis Securities Ltd (Broker)Chris WilkinsonMark Lander 020 7260 1000
Bell Pottinger (Financial PR)Ben WoodfordZoë Pocock 020 7861 3917
Chairman's Statement
Arbuthnot Banking Group PLC
I am pleased to report that Arbuthnot Banking Group continued to trade
robustly during the first half of 2014. The Group has reported a profit before
tax of £9.5m (H1 2013: £2.0m) with underlying profits of £13.2m. I also note
that the Group has now exceeded £1bn in customer deposits for the first time.
Both of our banks have continued to deliver attractive products to their
customers and have seen good growth in all of their business lines.
Although not included in these results, I am delighted to note that the
Institutional share placing carried out by Secure Trust Bank, was successfully
completed early in July. As a result, the Group's shareholding in STB now
stands at 53.26%. The effect of this transaction is expected to result in an
£73.15m increase in the net assets of the Group, which represents an increase
of 81% compared to the position at 30 June 2014, all of which is available to
support new business.
The Board is maintaining the interim dividend at 11p (gross) which will be
paid on 3 October 2014 to shareholders on the register at 5 September 2014.
Private banking subsidiary - Arbuthnot Latham & Co., Limited
Arbuthnot Latham reported a profit before tax for the half year of £1.7m (H1
2013: £1.0m), which reflects good momentum in the business. The investment in
senior and experienced Bankers and Wealth Managers continued to have a
positive impact in the development of a broader based business. There has also
been a benefit from fluidity in the market that has seen many private banking
clients seeking to diversify their existing relationships and move their
business to Arbuthnot Latham.
Customer deposits have grown 30% to £588.9m and Customer loans have increased
by 28% to £393.8m.
The Bank continued to see good quality lending transactions and supported its
client base in the fulfilment of several high quality projects. Where
appropriate, the opportunity to support clients in their entrepreneurial
ambition and value creation is as much a feature of the Arbuthnot Latham
philosophy as is the management of their wealth.
Investment assets under discretionary management grew by 32% from the prior
year to £565.9m. The Bank continued to receive good inflows of new investment
assets although investment markets generally have traded within a narrow range
during the first half of this year.
The Dubai branch will celebrate its first anniversary at the end of July. The
early signs for business development have been very positive and a number of
new client relationships have been established. Dubai is an important centre
for business in the Middle East region and the forecasts for business growth
and general economic activity for the years ahead provide the background for
an interesting diversification of business opportunities for Arbuthnot
Latham.
Following a return to profitability of Gilliat Financial Solutions, we have
been approached by a third party competitor and have agreed the sale of
certain intellectual assets of the business, which will result in the
cessation of the business in the third quarter of 2014. The outcome of this is
not expected to have a material impact on the full year financial results of
the Group.
Retail banking subsidiary - Secure Trust Bank PLC
The Retail bank has reported a profit before tax of £11.5m (H1 2013: £6.2m)
with record underlying profits of £15.2m, an increase of 48%.
The bank has continued to see strong demand for its loan products with the
overall loan book closing at £447.8m, which is 22% higher than the prior
year.
The Retail Finance business has begun its diversification into new markets. It
has already managed to sign up a dozen top football clubs to provide finance
to their season ticket holders. This has also been enhanced by take up with a
number of rugby clubs and additionally the Welsh Rugby Union. Secure Trust
Bank continues to enjoy excellent commercial relationships with the
Association of Cycle Traders and Creative United (formerly the Arts Council
England). The Association of Cycle Traders have recently renewed their term
contract with Secure Trust Bank.
The SME finance proposition has developed as planned. The Real Estate Finance
team has already grown its loan balances to £12m and has seen strong demand in
the market with a pipeline of over £70m having been established.
The Invoice Finance division continues to build its team having recruited a
number of executives and sales directors. The operating platform is being
tested with a launch scheduled for the third quarter 2014.
Loan impairments have been well controlled and remain below rates that were
anticipated when the loans were originated.
The bank has maintained its cautious funding strategy and has no reliance on
wholesale funding. Its loan to deposit and capital ratios remain strong.
The deposit book increased to £476.8m which is a year on year growth of 23%.
Demand for the deposit product offer remains strong, as does the level of
customer loyalty with a high level of reinvestment taking place on the
maturity of medium term savings bonds.
Outlook
The UK banking sector has continued to see a rebalancing, with the larger
banks deleveraging and the resultant spare capacity being absorbed by those
organisations that have strong balance sheets, access to funding and no
constraints caused by exposure to legacy issues. Given the position that both
of our banks have created in their respective markets, and the completion of
the recent share placing, the Group has confidence in its future prospects and
is looking forward to taking advantage of opportunities as they arise.
Consolidated Statement of Comprehensive Income
Six months ended 30 June Six months ended 30 June
2014 2013
Note £000 £000
Interest income 50,909 40,931
Interest expense (9,844) (10,868)
Net interest income 41,065 30,063
Fee and commission income 18,240 14,062
Fee and commission expense (2,123) (927)
Net fee and commission income 16,117 13,135
Operating income 57,182 43,198
Net impairment loss on financial assets (7,502) (8,150)
Other income 2 - 842
Operating expenses (40,155) (33,853)
Profit before income tax 9,525 2,037
Income tax expense (2,862) (633)
Profit for the period 6,663 1,404
Revaluation reserve
- Amount transferred to profit and loss (2) 48
Cash flow hedging reserve
- Effective portion of changes in fair value 378 7
Other comprehensive income for the period, net of income tax 376 55
Total comprehensive income for the period 7,039 1,459
Profit attributable to:
Equity holders of the Company 3,873 5
Non-controlling interests 2,790 1,399
6,663 1,404
Total comprehensive income attributable to:
Equity holders of the Company 4,249 60
Non-controlling interests 2,790 1,399
7,039 1,459
Earnings per share for profit attributable to the equity holders of the Company during the period
(expressed in pence per share):
- basic and fully diluted 4 25.3 -
Consolidated Statement of Financial Position
At 30 June
2014 2013
£000 £000
ASSETS
Cash 172,402 117,724
Loans and advances to banks 98,474 82,168
Debt securities held-to-maturity 49,980 16,477
Derivative financial instruments 101 -
Loans and advances to customers 841,602 673,204
Other assets 18,573 17,110
Financial investments 1,622 3,358
Deferred tax asset 3,080 4,724
Investment in associate 943 -
Intangible assets 12,235 14,014
Property, plant and equipment 5,617 22,352
Total assets 1,204,629 951,131
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 153 153
Retained earnings 69,739 51,245
Other reserves (1,091) (1,198)
Non-controlling interests 20,777 15,805
Total equity 89,578 66,005
LIABILITIES
Deposits from banks 1,619 1,163
Derivative financial instruments - 6
Deposits from customers 1,065,678 840,358
Current tax liability 1,145 290
Other liabilities 33,123 29,755
Deferred tax liability 1,720 974
Debt securities in issue 11,766 12,580
Total liabilities 1,115,051 885,126
Total equity and liabilities 1,204,629 951,131
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Group
Share capital Revaluation reserve Capital redemption reserve Available-for-sale reserve Cash flow hedging reserve Treasury shares Retained earnings Non-controlling interests Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2014 153 191 20 (169) (378) (1,131) 67,901 20,327 86,914
Total comprehensive income for the period
Profit for the six months ended 30 June 2014 - - - - - - 3,873 2,790 6,663
Other comprehensive income, net of income tax
Revaluation reserve
- Amount transferred to profit and loss - (2) - - - - 2 - -
Cash flow hedging reserve
- Effective portion of changes in fair value - - - - 378 - - - 378
Total other comprehensive income - (2) - - 378 - 2 - 378
Total comprehensive income for the period - (2) - - 378 - 3,875 2,790 7,041
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment transactions - - - - - - 196 86 282
Final dividend relating to 2013 - - - - - - (2,233) (2,426) (4,659)
Total contributions by and distributions to owners - - - - - - (2,037) (2,340) (4,377)
Balance at 30 June 2014 153 189 20 (169) - (1,131) 69,739 20,777 89,578
Attributable to equity holders of the Group
Share capital Revaluation reserve Capital redemption reserve Available-for-sale reserve Cash flow hedging reserve Treasury shares Retained earnings Non-controlling interests Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2013 153 140 20 81 (363) (1,131) 53,372 16,376 68,648
Total comprehensive income for the period
Profit for the six months ended 30 June 2013 - - - - - - 5 1,399 1,404
Other comprehensive income, net of income tax
Cash flow hedging reserve reserve
- Adjustment - 48 - - - - (48) - -
- Effective portion of changes in fair value - - - - 7 - - - 7
Total other comprehensive income - 48 - - 7 - (48) - 7
Total comprehensive income for the period - 48 - - 7 - (43) 1,399 1,411
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2012 - - - - - - (2,084) (1,970) (4,054)
Total contributions by and distributions to owners - - - - - - (2,084) (1,970) (4,054)
Balance at 30 June 2013 153 188 20 81 (356) (1,131) 51,245 15,805 66,005
Consolidated Statement of Cash Flows
Six months ended 30 June Six months ended 30 June
2014 2013
£000 £000
Cash flows from operating activities
Interest received 53,775 40,471
Interest paid (11,240) (11,185)
Fees and commissions received 16,117 13,135
Net trading and other income - 842
Cash payments to employees and suppliers (54,805) (38,252)
Taxation paid (3,144) (689)
Cash flows from operating profits before changes in operating assets and liabilities 703 4,322
Changes in operating assets and liabilities:
- net decrease in derivative financial instruments 36 192
- net increase in loans and advances to customers (100,071) (91,678)
- net increase in other assets (1,306) (5,444)
- net (decrease)/increase in deposits from banks (384) 790
- net increase/(decrease) in amounts due to customers 107,887 (54,187)
- net increase in other liabilities 2,106 6,734
Net cash inflow/(outflow) from operating activities 8,971 (139,271)
Cash flows from investing activities
Purchase of computer software (765) (3,631)
Purchase of property, plant and equipment (306) (286)
Disposal of property, plant and equipment - 2,000
Proceeds from sale of property, plant and equipment 42 11
Purchases of debt securities (37,766) (6,957)
Proceeds from redemption of debt securities 7,252 4,006
Net cash outflow from investing activities (31,543) (4,857)
Cash flows from financing activities
Dividends paid (4,659) (4,054)
Net cash used in financing activities (4,659) (4,054)
Net decrease in cash and cash equivalents (27,231) (148,182)
Cash and cash equivalents at 1 January 298,107 348,074
Cash and cash equivalents at 30 June 270,876 199,892
1. Operating segments
The Group is organised into three main operating segments as disclosed below:
1) Retail banking - incorporating household cash management, personal lending
and banking and insurance services.
2) UK Private banking - incorporating private banking and wealth management.
3) Group Centre - ABG Group Centre management.
Transactions between the operating segments are on normal commercial terms.
Centrally incurred expenses are charged to operating segments on an
appropriate pro-rata basis. Segment assets and liabilities comprise operating
assets and liabilities, being the majority of the balance sheet.
Retail banking UK Private banking Group Centre Total
Six months ended 30 June 2014 £000 £000 £000 £000
Interest revenue 41,576 9,454 58 51,088
Inter-segment revenue (31) (87) (61) (179)
Interest revenue from external customers 41,545 9,367 (3) 50,909
Fee and commission income 11,227 7,013 - 18,240
Revenue from external customers 52,772 16,380 (3) 69,149
Interest expense (7,213) (2,460) 29 (9,644)
Subordinated loan note interest - - (200) (200)
Fee and commission expense (1,825) (298) - (2,123)
Add back inter-segment revenue 31 87 (118) -
Segment operating income 43,765 13,709 (292) 57,182
Impairment losses (6,352) (1,150) - (7,502)
Operating expenses (25,899) (10,822) (3,434) (40,155)
Segment profit / (loss) before tax 11,514 1,737 (3,726) 9,525
Income tax (expense) / income (3,057) (88) 283 (2,862)
Segment profit / (loss) after tax 8,457 1,649 (3,443) 6,663
Loans and advances to customers 447,848 393,754 - 841,602
Other assets 122,576 290,903 (50,452) 363,027
Segment total assets 570,424 684,657 (50,452) 1,204,629
Customer deposits 476,783 588,895 - 1,065,678
Other liabilities 30,209 65,752 (46,588) 49,373
Segment total liabilities 506,992 654,647 (46,588) 1,115,051
Other segment items:
Capital expenditure (625) (445) (1) (1,071)
Depreciation and amortisation (1,488) (308) (6) (1,802)
The "Group Centre" segment above includes the parent entity and all
intercompany eliminations. Segment profit is shown prior to any intra-group
eliminations. The UK private bank opened a branch in Dubai in 2013, the
results of which are currently immaterial. All other operations of the Group
are conducted wholly within the United Kingdom and therefore geographical
information is not presented.
Retail banking UK Private banking Group Centre Total
Six months ended 30 June 2013 £000 £000 £000 £000
Interest revenue 33,171 7,876 50 41,097
Inter-segment revenue - (116) (50) (166)
Interest revenue from external customers 33,171 7,760 - 40,931
Fee and commission income 8,163 5,899 - 14,062
Revenue from external customers 41,334 13,659 - 54,993
Interest expense (6,602) (4,108) 50 (10,660)
Subordinated loan note interest - - (208) (208)
Fee and commission expense (743) (184) - (927)
Add back inter-segment revenue - 116 (116) -
Segment operating income 33,989 9,483 (274) 43,198
Impairment losses (7,541) (609) - (8,150)
Other income 17 825 - 842
Operating expenses (20,258) (8,729) (4,866) (33,853)
Segment profit / (loss) before tax 6,207 970 (5,140) 2,037
Income tax (expense) / income (1,375) 424 318 (633)
Segment profit / (loss) after tax 4,832 1,394 (4,822) 1,404
Loans and advances to customers 365,786 307,418 - 673,204
Other assets 98,042 205,536 (25,651) 277,927
Segment total assets 463,828 512,954 (25,651) 951,131
Customer deposits 387,291 453,067 - 840,358
Other liabilities 27,317 34,012 (16,561) 44,768
Segment total liabilities 414,608 487,079 (16,561) 885,126
Other segment items:
Capital expenditure (347) (453) - (800)
Depreciation and amortisation (1,524) (326) (6) (1,856)
2. Other income
Other income for 2013 mainly consist out of rental income received from the
letting of the premises at Wilson Street.
3. Underlying profit reconciliation
The profit before tax as reported in the operating segments can be reconciled
to the underlying profit for the year as disclosed in the tables below.
Underlying profit reconciliation Arbuthnot Latham & Co. Secure Trust Bank Arbuthnot Banking Group
Six months ended 30 June 2014 £000 £000 £000
Profit before tax 1,737 11,514 9,525
ELL & V12 fair value amortisation - 2,767 2,767
STB acquisition costs - 183 183
STB share options - 754 754
Underlying profit 1,737 15,218 13,229
Basic earnings per share (pence) 38.1
38.1
Underlying profit reconciliation Arbuthnot Latham & Co. Secure Trust Bank Arbuthnot Banking Group
Six months ended 30 June 2013 £000 £000 £000
Profit before tax 970 6,207 2,037
ELL & V12 fair value amortisation - 2,766 2,766
STB acquisition costs - 384 384
STB share options - 1,021 1,021
ABG share options - - 1,021
Underlying profit 970 10,378 7,229
Basic earnings per share (pence) 20.7
20.7
4. Earnings per ordinary share
Basic and fully diluted
Earnings per ordinary share are calculated on the net basis by dividing the
profit attributable to equity holders of the Company of £3,873,000 (2013:
£5,000) by the weighted average number of ordinary shares 15,279,322 (2013:
15,279,322) in issue during the year. There is no difference between basic and
fully diluted earnings per ordinary share.
5. Basis of reporting
The interim financial statements have been prepared on the basis of accounting
policies set out in the Group's 2013 statutory accounts as amended by
standards and interpretations effective during 2014 and in accordance with IAS
34 "Interim Financial Reporting". The directors do not consider the fair value
of the assets and liabilities presented in these financial statements to be
materially different from their carrying value.
The statements were approved by the Board of Directors on 21 July 2014 and are
unaudited. The interim financial statements will be posted to shareholders and
copies may be obtained from The Company Secretary, Arbuthnot Banking Group
PLC, Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR.
6. Events after the balance sheet date
On 19 June 2014 Secure Trust Bank PLC announced a proposed placing to
institutional investors of 3,125,000 Ordinary Shares in aggregate, comprising
2,083,333 new Ordinary Shares to be issued by Secure Trust Bank PLC and
1,041,667 existing Ordinary Shares to be sold by Arbuthnot Banking Group PLC.
On 9 July 2014 the new and existing shares were placed at a price of £24.00
per share following approval of the Resolutions for the issue and allotment of
the new Ordinary Shares at a General Meeting. The placing of the shares raised
£73.15 million, net of estimated expenses, whilst the shareholding of Ordinary
Shares by Arbuthnot Banking Group PLC post-placing reduced from 67.0% to 53.3%
of the new enlarged issued share capital of Secure Trust Bank PLC.
This information is provided by RNS
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