REG - Arbuthnot Banking Secure Trust Bank - Interim Results <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin>
25/07/2015 09:40
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Arbuthnot Banking Group PLC
21 July 2015
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2015
"Profitable Growth"
Arbuthnot Banking Group is pleased to announce a half yearly profit before tax
of £15.7m, an increase of 65% compared to the same period last year.
Both banks have continued to grow well and invest for the future.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co.,
Limited and Secure Trust Bank PLC.
FINANCIAL HIGHLIGHTS
· Profit before tax an increase of 65% to £15.7m (H1 2014: £9.5m)
· Underlying profit before tax an increase of 30% to £17.1m (H1 2014:
£13.2m)
· Customer loans £1.4bn (H1 2014: £842m)
· Customer deposits £1.6bn (H1 2014: £1.1bn)
· Interim dividend per share 12p (H1 2014: 11p)
OPERATIONAL HIGHLIGHTS
Private Banking - Arbuthnot Latham
· Profit before tax an increase of 111% to £3.7m (H1 2014: £1.7m)
· Customer loans £584m (H1 2014: £394m)
· Customer deposits £770m (H1 2014: £589m)
· Assets Under Management £701m (H1 2014: £566m)
Retail Banking - Secure Trust Bank
· Profit before tax an increase of 40% to £16.1m (H1 2014: £11.5m)
· Customer loans £852m (H1 2014: £448m)
· Customer deposits £835m (H1 2014: £477m)
Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of
Arbuthnot, said: "The Group has continued its profitable growth and as a
result the Board has decided to increase the interim dividend. Both banks have
detected an improvement in customer sentiment following the decisive result of
the general election."
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 £0.3m and acquisition accounting adjustments of £1m and
Arbuthnot Latham transformation project costs of £0.2m.
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
David Marshall, Director of Communications
Canaccord Genuity Ltd (Nominated Advisor)
020 7665 4500
Sunil Duggal
Philippa Underwood
Numis Securities Ltd (Broker)
020 7260 1000
Chris Wilkinson
Mark Lander
Bell Pottinger (Financial PR)
020 3772 2563
Ben Woodford
Zoe Pocock
Chairman's Statement
Arbuthnot Banking Group PLC
I am pleased to report that Arbuthnot Banking Group has continued its
profitable growth throughout the first half of 2015. The Group has recorded a
profit before tax of £15.7m (H1 2014: £9.5m), which is an increase of 65%
compared to the same period last year. Customer loan balances continue to grow
and now stand at £1.4bn and customer deposits have exceeded £1.5bn for the
first time.
As a result of the growth in profits the Board has decided to increase the
interim dividend by 1p to 12p which will be paid on 2 October 2015 to
shareholders on the register at 4 September 2015.
Private banking subsidiary - Arbuthnot Latham & Co., Limited
Arbuthnot Latham has reported a profit before tax for the half year of £3.7m
(H1 2014: £1.7m), an increase of nearly 111%. This is a result of the bank's
investment by hiring additional private bankers over the past two years, which
has now led to a substantial increase in new clients opening accounts.
In addition to recruitment in London, the bank has also developed in its other
markets. The South West regional office in Exeter has agreed a lease and will
move into its new offices in the second half of 2015. The North West regional
office in Manchester has completed further recruitment of both private bankers
and a wealth planner. The Dubai office will break even in July 2015, as
expected, just two years after opening for business.
The bank has shown good growth, with customer loans increasing to £584m (H1
2014: £394m), deposits up by 31% to £770m (H1 2014: £589m) and assets under
management growing to £701m (H1 2014: £566m).
Included in customer loans is £101m of the residential mortgage portfolio that
was purchased in December 2014. As planned at the time of acquisition, the
bank successfully transferred ownership of the loans into its own name in June
and at the same time entered into a servicing agreement with Exact Mortgages.
As the momentum within the business has grown, the bank has embarked on three
significant investment initiatives to support its future growth. Firstly, the
bank has begun a transformational upgrade of its operations. The programme
includes paperless workflow, standardised customer interaction and the
implementation of a new banking platform. The work is expected to be completed
by the end of 2016. Secondly, Arbuthnot Latham has agreed heads of terms to
secure 10,000 square feet of additional office space in the City on a short
term lease to be occupied in the second half of 2015. Finally, the bank is
embarking on its expansion into Commercial Banking. Initially, the focus will
be on providing business banking services to its entrepreneurial private
banking clients. Recruitment for the new business stream is already underway
with several new bankers expected to join in the remaining months of 2015.
This proposition is not expected to launch until 2016.
Retail banking subsidiary - Secure Trust Bank PLC
The retail bank has reported a record level of first half profits at £16.1m
(H1 2014: £11.5m), which represents an increase of 40% on the prior year.
The business has continued to implement its strategic plan following the
significant capital raising it carried out in 2014. As a result it has seen
continued positive trends in its customer lending balances, which overall have
grown by 90% compared to the prior year period to stand at £852m (H1 2014:
£448m).
Of the more established Consumer Finance businesses, Motor Finance and Retail
Finance have performed well. The Motor Finance book has increased to £152m
from £128m a year ago, an increase of 19%. The Retail Finance lending has
grown to £163m from £91m driven by good lending volumes generated from the
sport and leisure and cycle businesses.
The SME Lending growth has exceeded expectations, largely due to the Real
Estate and Asset Finance products. The Real Estate Finance loan balances have
increased to £266m from £13m at 30 June 2014, which was shortly after we had
started this line of business. The Asset Finance portfolio has risen to £30m
and invoice finance now stands at £16m, both of which commenced business
within the last year and are now fully established.
The growth in the portfolios continues to be controlled according to our
strict lending criteria, with impairments at levels well below our
expectations at the time the loans were originated.
Secure Trust Bank remains funded from the retail deposit markets. During the
first six months of 2015 the bank continued to see a good flow of deposits and
has grown the customer deposit balances to £835m (H1 2014: £ 477m), an
increase of 75%.
Outlook
The economic environment remains favourable, which should allow both banks to
continue their growth. With a business friendly government in office for the
next five years, we expect the banks will maintain their momentum and continue
their long term investment plans. As ever, we remain vigilant as to the
political and economic events that are developing in Europe, and elsewhere.
Consolidated Statement of Comprehensive Income
Six months ended 30 June Six months ended 30 June
2015 2014
Note £000 £000
Interest income 77,374 50,909
Interest expense (12,925) (9,844)
Net interest income 64,449 41,065
Fee and commission income 16,373 18,240
Fee and commission expense (1,815) (2,123)
Net fee and commission income 14,558 16,117
Operating income 79,007 57,182
Net impairment loss on financial assets (11,926) (7,502)
Operating expenses (51,345) (40,155)
Profit before income tax 15,736 9,525
Income tax expense (3,038) (2,862)
Profit for the period 12,698 6,663
Revaluation reserve
- Amount transferred to profit and loss - (2)
Cash flow hedging reserve
- Effective portion of changes in fair value - 378
Other comprehensive income for the period, net of income tax - 376
Total comprehensive income for the period 12,698 7,039
Profit attributable to:
Equity holders of the Company 6,507 3,873
Non-controlling interests 6,191 2,790
12,698 6,663
Total comprehensive income attributable to:
Equity holders of the Company 6,507 4,249
Non-controlling interests 6,191 2,790
12,698 7,039
Earnings per share for profit attributable to the equity holders of the Company during the period
(expressed in pence per share):
- basic 3 42.6 25.3
- diluted 3 42.4 25.3
Consolidated Statement of Financial Position
At 30 June
2015 2014
£000 £000
ASSETS
Cash 224,678 172,402
Loans and advances to banks 35,865 98,474
Debt securities held-to-maturity 98,143 49,980
Derivative financial instruments 1,634 101
Loans and advances to customers 1,436,381 841,602
Other assets 17,269 18,573
Financial investments 1,108 1,622
Deferred tax asset 1,770 3,080
Investment in associate 943 943
Intangible assets 11,100 12,235
Property, plant and equipment 13,475 5,617
Total assets 1,842,366 1,204,629
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 153 153
Retained earnings 118,822 69,739
Other reserves (1,263) (1,091)
Non-controlling interests 61,716 20,777
Total equity 179,428 89,578
LIABILITIES
Deposits from banks 10,871 1,619
Deposits from customers 1,604,929 1,065,678
Current tax liability 5,487 1,145
Other liabilities 31,256 33,123
Deferred tax liability - 1,720
Debt securities in issue 10,395 11,766
Total liabilities 1,662,938 1,115,051
Total equity and liabilities 1,842,366 1,204,629
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 2015 153 98 20 (250) - (1,131) 114,641 60,038 173,569
Total comprehensive income for the period
Profit for the six months ended 30 June 2015 - - - - - - 6,507 6,191 12,698
Other comprehensive income, net of income tax
Revaluation reserve
Cash flow hedging reserve
Total comprehensive income for the period - - - - - - 6,507 6,191 12,698
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment transactions - - - - - - 56 36 92
Final dividend relating to 2014 - - - - - - (2,382) (4,549) (6,931)
Total contributions by and distributions to owners - - - - - - (2,326) (4,513) (6,839)
Balance at 30 June 2015 153 98 20 (250) - (1,131) 118,822 61,716 179,428
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
Cash flow hedging reserve
- Adjustment - (2) - - - - 2 - -
- 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
Consolidated Statement of Cash Flows
Six months ended 30 June Six months ended 30 June
2015 2014
£000 £000
Cash flows from operating activities
Interest received 73,555 53,775
Interest paid (12,512) (11,240)
Fees and commissions received 11,482 16,117
Cash payments to employees and suppliers (49,020) (54,804)
Taxation paid (1,163) (3,144)
Cash flows from operating profits before changes in operating assets and liabilities 22,342 704
Changes in operating assets and liabilities:
- net decrease in derivative financial instruments 6 36
- net increase in loans and advances to customers (283,097) (100,072)
- net increase in other assets (403) (1,306)
- net decrease in deposits from banks (16,786) (384)
- net increase in amounts due to customers 410,644 107,887
- net (decrease)/increase in other liabilities (3,728) 2,106
Net cash inflow from operating activities 128,978 8,971
Cash flows from investing activities
Purchase of financial investments (1,580) -
Disposal of financial investments 1,602 -
Purchase of computer software (1,200) (765)
Purchase of property, plant and equipment (1,648) (306)
Proceeds from sale of property, plant and equipment - 42
Purchases of debt securities (152,243) (37,766)
Proceeds from redemption of debt securities 145,783 7,252
Net cash outflow from investing activities (9,286) (31,543)
Cash flows from financing activities
Dividends paid (6,931) (4,659)
Net cash used in financing activities (6,931) (4,659)
Net increase/(decrease) in cash and cash equivalents 112,761 (27,231)
Cash and cash equivalents at 1 January 147,782 298,107
Cash and cash equivalents at 30 June 260,543 270,876
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 2015 £000 £000 £000 £000
Interest revenue 64,162 13,460 60 77,682
Inter-segment revenue (159) (89) (60) (308)
Interest revenue from external customers 64,003 13,371 - 77,374
Fee and commission income 9,482 6,891 - 16,373
Revenue from external customers 73,485 20,262 - 93,747
Interest expense (9,769) (3,162) 172 (12,759)
Subordinated loan note interest - - (166) (166)
Fee and commission expense (1,635) (180) - (1,815)
Add back inter-segment revenue 159 89 (248) -
Segment operating income 62,240 17,009 (242) 79,007
Impairment losses (11,218) (708) - (11,926)
Operating expenses (34,873) (12,640) (3,832) (51,345)
Segment profit / (loss) before tax 16,149 3,661 (4,074) 15,736
Income tax (expense) / income (3,132) - 94 (3,038)
Segment profit / (loss) after tax 13,017 3,661 (3,980) 12,698
Loans and advances to customers 852,291 584,090 - 1,436,381
Other assets 149,701 281,135 (24,851) 405,985
Segment total assets 1,001,992 865,225 (24,851) 1,842,366
Customer deposits 835,083 769,846 - 1,604,929
Other liabilities 38,555 52,495 (33,041) 58,009
Segment total liabilities 873,638 822,341 (33,041) 1,662,938
Other segment items:
Capital expenditure (1,435) (1,313) - (2,748)
Depreciation and amortisation (799) (587) (5) (1,391)
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, which
generated £807k (2014: £225k) fee income and had operating costs of £873k
(2014: £745k). Other than the Dubai branch, 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 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)
2. 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 2015 £000 £000 £000
Profit before tax 3,661 16,149 15,736
ELL & V12 fair value amortisation - 950 950
STB acquisition costs - 4 4
STB share options - 271 271
AL transformation project 170 - 170
Underlying profit 3,831 17,374 17,131
Basic earnings per share (pence) 46.8
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
3. Earnings per ordinary share
Basic
Earnings per ordinary share are calculated on the net basis by dividing the
profit attributable to equity holders of the Company of £6,607,000 (H1 2014:
£3,873,000) by the weighted average number of ordinary shares 15,279,322 (H1
2014: 15,279,322) in issue during the year.
Diluted
Diluted earnings per ordinary share are calculated on the net basis by
dividing the profit attributable to equity holders of the Company of
£6,607,000 (H1 2014: £3,873,000) by the weighted average number of ordinary
shares 15,279,322 (H1 2014: 15,279,322) in issue during the year, as noted
above, as well as the number of dilutive share options in issue during the
year. The number of dilutive shares in issue at the half year was 53,699 (H1
2014: 42,533), being based on the number of options granted of 200,000 (H1
2014: 200,000), the weighted exercise price of 994 pence (H1 2014: 994 pence)
per option and the average share price during the year of 1359 pence (H1 2014:
1300 pence).
4. Basis of reporting
The interim financial statements have been prepared on the basis of accounting
policies set out in the Group's 2014 statutory accounts as amended by
standards and interpretations effective during 2015 and in accordance with IAS
34 "Interim Financial Reporting" (except for the comparatives in the statement
of financial position). 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 20 July 2015 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, 7 Wilson Street, London EC2M 2SN.
This information is provided by RNS
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