REG - Arbuthnot Banking - Unaudited results for the six months to 30/06/2025
Tue 07:00
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RNS Number : 9502R Arbuthnot Banking Group PLC 22 July 2025
22 July 2025
For immediate release
ARBUTHNOT BANKING GROUP PLC ("Arbuthnot", "the Company", "the Group" or "ABG")
Unaudited results for the six months to 30 June 2025
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham &
Co., Limited.
FINANCIAL HIGHLIGHTS
• Profit before tax of £10.9m for the six months to 30 June 2025 following
reductions in base rate since the summer of 2024 (30 June 2024: £20.8m)
• Interim dividend up 10% to 22p per share to be paid on 26 September 2025 (30
June 2024: 20p per share interim dividend and 20p per share special dividend)
• CET1 capital ratio of 12.7% (30 June 2024: 11.6%, 31 December 2024: 13.2%) and
total capital ratio of 14.8% (30 June 2024: 13.6%, 31 December 2024: 15.3%)
• Earnings per share of 42.5p (30 June 2024: 94.6p)
• Further growth in net assets per share to £16.49 (30 June 2024: £15.75, 31
December 2024: £16.36)
OPERATIONAL HIGHLIGHTS
• Continued growth in customer deposits to £4.42bn (30 June 2024: £3.86bn; 31
December 2024: £4.13bn), a 7% increase in the first half of the year and a
14% increase year on year
• Customer loans (including leased assets) of £2.32bn (30 June 2024: £2.40bn;
31 December 2024: £2.38bn) decrease of 4% in the first half of the year, and
an 5% decrease year on year, as lending discipline was maintained
• Specialist Division lending balances of £895.9m (30 June 2024: £861.1 m; 31
December 2024: £840.0m), a 7% increase since the end of 2024 and a 4%
increase year on year
• Funds under Management and Administration (FUMA) of £2.38bn (30 June 2024:
£1.96bn; 31 December 2024: £2.21bn), a 8% increase against 31 December 2024
and an increase of 22% year on year, with net inflows of £127m in the first
half
Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of
Arbuthnot, said: "Arbuthnot has continued to grow the overall business and in
particular its relationship deposit base, funds under management and
specialist commercial lending. The continued strength of the business is
reflected in the decision to increase the interim dividend by 10 per cent even
though, as anticipated, this year's results reflect the effect of a series of
reductions in base rate over the last twelve months."
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 AQSE Corporate Adviser) 020 7383 5100
Colin Aaronson
Samantha Harrison
Ciara Donnelly
Shore Capital 020 7408 4090
(Broker)
Daniel Bush
David Coaten
Tom Knibbs
H/Advisors Maitland (Financial PR) 020 7379 5151
Neil Bennett
Sam Cartwright
Chairman's Statement
The Group has reported a profit before tax for the first six months of the
year of £10.9m compared to £20.8m in the same period last year.
This reduction in reported profit was expected, as the Bank of England's base
rate was lower than the prior period. However, the Group continues to make
good strategic progress. As in prior periods, the Group has maintained its
discipline in allocating capital to the lending proposals that offer the best
returns on capital rather than using lending volumes themselves as an
indicator of success.
During the first half of the year our lending balances fell to £2.3bn
compared to the position at the end of 2024 where they stood at £2.4bn.
Within this we have continued to grow our asset finance and truck leasing
balances but have seen more subdued conditions elsewhere in the Group, in
particular in the real estate finance market along with our invoice finance
business.
The uncertain economic outlook has meant that real estate markets have seen
thin volumes of business and therefore other lenders have been chasing this
business by offering sub optimal rates. We have always considered ourselves to
be counter cyclical lenders, and we refuse to be drawn into competing on price
alone, so we remain content to preserve our capital for the future, when these
markets become firmer, and the prices produce acceptable returns on our
capital deployed.
I was delighted to see that our plan to increase lending in our specialist
divisions was recognised in the recently published Asset Finance UK 50 report,
where Asset Alliance was the number one firm with the highest percentage
growth rate in the last reported year and Renaissance Asset Finance was ranked
sixth with the highest percentage growth rate over the past three years.
The success that the Bank has enjoyed in attracting new deposits has continued
into the first half of the year, with balances growing to in excess of
£4.4bn. This is an increase of £285.5m since the year end and £554.9m since
the same time in the prior year. This is a growth rate of 7% since the year
end, despite seeing approximately net £140m of outflows around the tax
payment season.
As we have previously indicated, our profitability performance is somewhat
linked to the level of the base rate as our surplus liquidity balances are
held at the Bank of England or invested in short term fixed income products.
The continued fall in the base rate during the first half, after the initial
reductions that started in August 2024, is the most significant factor in the
reduction in the reported profit.
However, there is also a lag effect as a result of the time it takes for
deposit balances to reprice. This can be seen in the average cost of deposits,
which fell to 2.80% for the six month period compared to 3.19% for the same
period in the prior year; it stood at 2.68% at the end of June 2025.
I am happy to report that our Wealth Management distribution continues to grow
at a very acceptable rate, with funds under management increasing to £2.4bn
despite the volatile markets. That is a growth rate of 8% since the year end
and 22% in the past year. The business is also making good progress in its
optimisation project which should be up and running in 2026.
Given the continued progress of the Group and the strength of the balance
sheet the Board are proposing to pay an interim dividend of 22p per Ordinary
and Ordinary Non-Voting share, an increase of 2p per share compared to the
regular interim dividend paid in the prior year. This dividend will be paid on
26 September 2025 to shareholders on the register at 29 August 2025.
Finally, at the AGM both Ian Dewar and Sir Alan Yarrow retired from the Board
having reached the notorious nine year guillotine. I would like to thank them
once again for their significant contributions and advice, as they have guided
the Group through a period of exceptional growth. On 16 July we appointed
Charlotte Crosswell to the Board of Directors, and I would like to welcome her
to the Group and look forward to working alongside her in the future.
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 £285.5m to
£4.4bn, equating to 7% growth for the first half of 2025, and 14% compared to
30 June 2024.
Lending declined, as expected, in the first half of 2025 by 8% to £1.4bn. The
Bank continued its strategy to recycle capital into higher margin lending by
the subsidiary companies. With the macro-economic outlook remaining uncertain,
the Bank's loan appetite remains cautious, with a focus on continuing to
support existing clients, whilst maintaining its principle of high quality
credit lending for new business. Consequently, the low growth environment has
suppressed opportunities, resulting in a lower deal flow, with market
participants competing for the quality deals by lowering margins, and hence
returns on capital. Given our long standing principle of maintaining our
returns on capital employed we have not been drawn into this competition.
The Bank's recent Net Promotor Score of 68 reflects the ongoing support from
its clients and its commitment to its vision of being a leading full service,
human-scale relationship bank powered by modern technology.
Wealth Management
Funds Under Management & Administration (FUMA) continued to grow in the
first half of 2025 to finish June at £2.4bn, up 8% from the start of the year
and representing growth of 22% year on year (30 June 2024: £2.0bn).
The threat of a global trade war along with geo-political instability resulted
in high levels of market volatility in the first 6 months of 2025. However
despite the turbulence, year to date gross inflows of £204m over the period
compared to £170m 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 reported a profit of £4.8m compared to £4.4m for the same period the
prior year and finished the period with a loan book of £231.2m, relatively
unchanged from the end of 2024.
The economic uncertainty and low growth environment, which suppressed activity
in 2024, continued in the first half of 2025. Client facilities reaching the
end of their terms continued to offset growth in the loan book, although
originations in Q2 including the provision of additional facilities for
existing clients, together with ACABL's pipeline, are showing more positive
signs.
The business carries on closely monitoring watch cases, but the proven
business model of high quality collateral continues to mitigate against credit
losses.
Renaissance Asset Finance (RAF)
RAF reported a profit of £3.3m (30 June 2024: £2.2m), an increase of 48%
compared to the same period in the prior year, and finished the first half
with a loan book of £279.6m, equating to annual growth of 19% when compared
to £234.3m for the same period in the prior year and 12% up from the year end
(31 December 2024: £248.8m).
The Block Discounting business now makes up 21% of the RAF book with balances
of £58m, equating to annual growth of 88% when compared to £30.9m for the
same period in the prior year.
Despite the challenging economic climate for the SME sector, problem debt
provisions remain low and favourable net margins were maintained.
Asset Alliance (AAG)
AAG reported a loss before tax of £0.5m (30 June 2024: £0.03m profit).
Whilst the commercial vehicle market remains subdued, there are definite signs
of improvement in both new business lending and end of lease asset sales. As
at 30 June 2025 the business had assets available for lease and finance leases
totalling £385.0m (30 June 2024: £363.1m), growth of 6% since the year end
and over the previous 12 months (31 December 2024: £363.0m).
Own book origination of £75m in the first six months has been achieved by a
continuation of the strong origination within the bus and coach market from
2024 as well as the improvements on truck and trailer leasing. 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, which saw a slump in 2024,
has seen improvement towards the second half of the period. The strategy to
diversify the portfolio has resulted in strong performance from the bus and
coach division offsetting the more challenging truck sector.
The Bus Rental Division which launched in 2024 continues to deliver growth
amidst the ongoing drive for Extra Low Emission Zones within the UK Cities
with all assets fully utilised and delivering strong yields, coupled with a
healthy forward pipeline.
The lending book remains robust with minimal impairments.
Operations
The Bank has continued to pursue its client growth strategy in target markets
whilst investing in infrastructure to improve client service and operational
resilience. New account growth was 5% higher than for the same period in the
prior year.
Inbound and outbound payments increased by 8% to 630,162 for the period
compared to 585,520 for the prior year. The Total Number of Active cards grew
to 7,834 with a 32% increase in Digital Wallet spending.
The digital transformation programme launched in the prior year continued to
progress, enhancing the client experience and how they interact with the Bank
whilst improving operational efficiency with greater integration across the
Bank's suite of applications in a modern, cloud-based architecture.
Outlook
The UK economic environment appears to be weaker than expected with two months
of falling GDP. This suggests that further rate cuts may be required. However,
inflation remains stubbornly higher than the target rate so any rate cuts will
have to balance this, and that is before the effect of global tariffs or the
increase in employers' national insurance have fed their way into the economy.
Added to this, the geopolitical situation is far from stable. Regardless, the
Group remains focused on pursuing its long term 'Future State 2' strategy and
will continue to seek and pursue opportunities with caution and discipline.
Consolidated Statement of Comprehensive Income
Six months ended 30 June Six months ended 30 June
2025 2024
Note £000 £000
Income from banking activities
Interest income 125,213 129,565
Interest expense (66,493) (67,509)
Net interest income 58,720 62,056
Fee and commission income 15,161 12,769
Fee and commission expense (582) (403)
Net fee and commission income 14,579 12,366
Operating income from banking activities 73,299 74,422
Income from leasing activities
Revenue 57,146 53,178
Cost of goods sold (45,556) (40,457)
Gross profit from leasing activities 11,590 12,721
Total group operating income 84,889 87,143
Net impairment loss on financial assets (1,440) (1,053)
Other income 6 724 704
Operating expenses (73,319) (65,958)
Profit before income tax 10,854 20,836
Income tax expense (3,916) (5,399)
Profit for the period 6,938 15,437
Other comprehensive income
Items that will not be reclassified to profit or loss
Changes in fair value of equity investments at fair value through other 22 72
comprehensive income
Tax on other comprehensive income (6) (18)
Other comprehensive income for the period, net of tax 16 54
Total comprehensive income for the period 6,954 15,491
Earnings per share for profit attributable to the equity holders of the
Company during the period (expressed in pence per share):
Basic earnings per share 7 42.5 94.6
Diluted earnings per share 7 42.5 94.6
Consolidated Statement of Financial Position
At 30 June At 30 June At 31 December
2025 2024 2024
£000 £000 £000
ASSETS
Cash and balances at central banks 768,724 553,095 911,887
Loans and advances to banks 83,573 121,977 66,971
Debt securities at amortised cost 1,690,403 1,196,110 1,199,847
Assets classified as held for sale - 3,203 -
Derivative financial instruments 2,030 4,356 2,970
Loans and advances to customers 2,019,258 2,116,043 2,094,212
Other assets 51,690 48,482 51,701
Financial investments 4,975 4,156 4,947
Intangible assets 30,887 29,188 30,565
Property, plant and equipment 324,135 313,336 313,366
Right-of-use assets 45,688 49,918 47,511
Investment properties 5,250 5,950 5,250
Total assets 5,026,613 4,445,814 4,729,227
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital and share premium 167 167 167
Share premium account 11,606 11,606 11,606
Retained earnings 256,779 245,158 254,575
Other reserves 624 69 608
Total equity 269,176 257,000 266,956
LIABILITIES
Deposits from banks 196,965 193,758 192,911
Derivative financial instruments - 535 -
Deposits from customers 4,418,019 3,863,155 4,132,493
Current tax liability 1,641 1,194 3,001
Other liabilities 40,755 33,245 35,384
Deferred tax liability 5,501 4,881 5,671
Lease liabilities 56,164 53,790 54,829
Debt securities in issue 38,392 38,256 37,982
Total liabilities 4,757,437 4,188,814 4,462,271
Total equity and liabilities 5,026,613 4,445,814 4,729,227
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Group
Share capital Share capital premium Capital redemption reserve Fair value reserve Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2025 167 11,606 19 1,888 (1,299) 254,575 266,956
Total comprehensive income for the period
Profit for the six months ended 30 June 2025 - - - - - 6,938 6,938
Other comprehensive income, net of tax
Changes in the fair value of financial assets at FVOCI - - - 22 - - 22
Tax on other comprehensive income - - - (6) - - (6)
Total other comprehensive income - - - 16 - - 16
Total comprehensive income for the period - - - 16 - 6,938 6,954
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2024 - - - - - (4,734) (4,734)
Total contributions by and distributions to owners - - - - - (4,734) (4,734)
Balance at 30 June 2025 167 11,606 19 1,904 (1,299) 256,779 269,176
Attributable to equity holders of the Group
Share capital Share premium Capital redemption reserve Fair value reserve Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2024 167 11,606 19 1,341 (1,299) 240,606 252,440
Total comprehensive income for the period
Profit for the six months ended 30 June 2024 - - - - - 15,437 15,437
Other comprehensive income, net of income tax
Changes in the fair value of financial assets at FVOCI - - - 72 - - 72
Sale of financial assets carried at FVOCI - - - (46) - 46 -
Tax on other comprehensive income - - - (18) - - (18)
Total other comprehensive income - - - 8 - 46 54
Total comprehensive income for the period - - - 8 - 15,483 15,491
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2023 - - - - - (4,406) (4,406)
Interim dividend relating to 2024 - - - - - (3,264) (3,264)
Special dividend relating to 2024 - - - - - (3,264) (3,264)
Total contributions by and distributions to owners - - - - - (10,934) (10,934)
Balance at 30 June 2024 167 11,606 19 1,349 (1,299) 245,158 257,000
Consolidated Statement of Cash Flows
Six months ended 30 June Six months ended 30 June*
2025 2024
£000 £000
Cash flows from operating activities
Profit before tax 10,854 20,836
Adjustments for:
- Depreciation and amortisation 5,384 5,353
- Impairment loss on loans and advances 770 594
- Net interest income (32) 233
- Elimination of exchange differences on debt securities (388) 39
- Other non-cash or non-operating items included in profit before tax (105) 35
- Tax paid (5,452) (7,892)
Cash flows from operating profits before changes in operating assets and 11,031 19,198
liabilities
Changes in operating assets and liabilities:
- net decrease/(increase) in derivative financial instruments 940 (639)
- net decrease/(increase) in loans and advances to customers 74,184 (52,420)
- net increase in assets held for leasing (11,377) (19,634)
- net decrease in other operating assets 11 8,564
- net increase in amounts due to customers 285,526 103,588
- net increase / (decrease) in other operating liabilities 6,908 (2,650)
Net cash inflow from operating activities 367,223 56,007
Cash flows from investing activities
Acquisition of financial investments (7) (222)
Purchase of computer software (1,642) (1,173)
Purchase of property, plant and equipment (1,528) (20,097)
Purchases of debt securities (1,411,513) (850,812)
Proceeds from redemption of debt securities 920,957 596,496
Net cash outflow from investing activities (493,733) (275,808)
Cash flows from financing activities
Decrease in borrowings 4,884 1,288
Repayment of principal portions of lease liabilities (201) (1,419)
Dividends paid (4,734) (10,936)
Net cash used in financing activities (51) (11,067)
Net (decrease)/increase in cash and cash equivalents (126,561) (230,868)
Cash and cash equivalents at 1 January 978,858 905,940
Cash and cash equivalents at 30 June 852,297 675,072
*2024 comparative figures have been adjusted by £1.4m to reflect the
repayment of principal portions of lease liabilities within financing
cashflows and the interest portion within operating cashflows to align
presentation of interest within the statement of cashflows. 2024 comparative
tax paid figures have been adjusted by £2.5m to reflect amounts paid instead
of tax expense. This has resulted in adjustments to changes in other
liabilities of £3.9m.
Notes to the Consolidated Financial Statements
1. Basis of preparation
The interim financial statements have been prepared on the basis of accounting
policies set out in the Group's 2024 statutory accounts as amended by
UK-adopted standards and interpretations effective during 2025 as set out
below and in accordance with IAS 34 "Interim Financial Reporting" as adopted
for use in the UK. 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 2025 and are
unaudited. The interim financial statements will be available on the Group
website (www.arbuthnotgroup.com) from 23 July 2025.
2. Risks and Uncertainties
The Group regards the monitoring and controlling of risks and uncertainties as
a fundamental part of the management process. Consequently, senior
management are involved in the development of risk management policies and in
monitoring their application. A detailed description of the risk management
framework and associated policies is set out in Note 4.
The principal risks inherent in the Group's business are reputational,
macroeconomic and competitive environment, strategic, credit, market,
liquidity, operational, cyber, residual value, conduct and, regulatory and
capital.
Reputational risk
Reputational risk is the risk to the Group from a failure to meet reasonable
stakeholder expectations as a result of any event, behaviour, action or
inaction by ABG itself, its employees or those with whom it is associated.
This includes the associated risk to earnings, capital or liquidity.
ABG seeks to ensure that all of its businesses act consistently with the seven
corporate principles as laid out on page 1 of the Annual Report and Accounts.
This is achieved through a central Risk Management framework and supporting
policies, the application of a three-lines of defence model across the Group
and oversight by various committees. Employees are supported in training,
studies and other ways and encouraged to live out the cultural values within
the Group of integrity, energy and drive, respect, collaboration and
empowerment. In applying the seven corporate principles, the risk of
reputational damage is minimised as the Group serves its shareholders,
customers and employees with integrity and high ethical standards.
Macroeconomic and competitive environment
The Group is exposed to indirect risk that may arise for the macroeconomic and
competitive environment.
In recent years there have been a number of global and domestic events which
have had significant implications for the Group's operating environment,
namely: Russia's war in the Ukraine, the Israel-Hamas war in Gaza and
Coronavirus. The culmination of these events has led to significant turmoil in
both global and domestic markets. Geo-political volatility and uncertainty
remains high with the potential to adversely affect the UK economy, as well as
the Group's customers and assets.
Strategic risk
Strategic risk is the risk that the Group's ability to achieve its corporate
and strategic objectives may be compromised. This risk is particularly
important to the Group as it continues its growth strategy. However, the Group
seeks to mitigate strategic risk by focusing on a sustainable business model
which is aligned to the Group's business strategy. Also, the Directors
normally meet once a year to ensure that the Group's strategy is appropriate
for the market and economy.
Credit risk
Credit risk is the risk that a counterparty (borrower) will be unable to pay
amounts in full when due. This risk exists in Arbuthnot Latham, which
currently has a loan book of £2.0bn (30 June 2024: £2.1bn). The lending
portfolio in Arbuthnot Latham is extended to clients, the majority of which is
secured against cash, property or other high quality assets. Credit risk is
managed through the Credit Committee of Arbuthnot Latham.
Market risk
Market risk arises in relation to movements in interest rates, currencies,
property and equity markets.
Interest rate and currency risk
The Group's treasury function operates mainly to provide a service to clients
and does not take significant unmatched positions in any market for its own
account. As a result, the Group's exposure to adverse movements in interest
rates and currencies is limited to interest earnings on its free cash and
interest rate re-pricing mismatches. The Group actively monitors its exposure
to future changes in interest rates. However, at the current time the Group
does not hedge the earnings from the free cash which currently totals £769m.
The cost of hedging is prohibitive. Cash is held at the Bank of England and
with the general consensus in the market that rates are expected to fall, the
Group has shifted its focus to longer term fixed rate lending products and
also investing some of the excess liquidity into high quality short dated
fixed income assets, such as gilts.
Property and equity market risk
The Group is exposed to changes in the market value of its properties. The
current carrying value of Investment Property is £5.3m (31 December 2024:
£5.3m) and properties classified as inventory are carried at £16.5m (31
December 2024: £17.4m). Any changes in the market value of the property will
be accounted for in the Income Statement for the Investment Property and could
also impact the carrying value of inventory, which is at the lower of cost and
net realisable value. As a result, it could have a significant impact on the
profit or loss of the Group. The Group is also exposed to changes in the value
of equity investments. The current carrying value of financial investments is
£5.0m (31 December 2024: £4.9m). Any changes in the value of financial
investments will be accounted for in Other Comprehensive Income.
Liquidity risk
Liquidity risk is the risk that the Group, although solvent, either does not
have sufficient financial resources to enable it to meet its obligations as
they fall due, or can only secure such resources at an excessive cost. The
Group takes a conservative approach to managing its liquidity profile. Retail
client deposits, together with drawings from the Bank of England Term Funding
Scheme and capital fund the Bank. The loan to deposit ratio is maintained at a
prudent level, and consequently the Group maintains a high level of liquidity.
The Arbuthnot Latham Board annually approves the Internal Liquidity Adequacy
Assessment Process ("ILAAP"). The Directors model various stress scenarios and
assess the resultant cash flows in order to evaluate the Group's potential
liquidity requirements. The Directors firmly believe that sufficient liquid
assets are held to enable the Group to meet its liabilities in a stressed
environment.
Operational risk
Operational risk is the risk that the Group may be exposed to financial losses
from conducting its business. The Group's exposure to operational risk include
its Information Technology ("IT") and Operating platforms. There are
additional internal controls in these processes that are designed to protect
the Group from these risks. The Group's overall approach to managing internal
control and financial reporting is described in the Corporate Governance
section of the Annual Report.
In line with guidance issued by the Regulator, the Bank has continued to focus
on ensuring that the design of systems and operational plans are robust to
maintain operational resilience in the face of unexpected incidents.
Cyber risk
Cyber risk is an increasing risk for the Group within its operational
processes. It is the risk that the Group is subject to some form of disruption
arising from an interruption to its IT and data infrastructure. The Group
regularly tests the infrastructure to ensure that it remains robust to a range
of threats and has continuity of business plans in place including a disaster
recovery plan.
Residual value risk
Residual value risk equals the difference in the residual value of a leased
asset set at lease inception and the lower salvage value realised upon its
disposal or re-lease at the end of the lease term. The Group is exposed to
residual value risk in its AAG business. Normal residual value risk is managed
through the process set out below, and it should be noted that the transition
to greener technology may further impact residual values in two ways. Firstly,
residual values could decrease due to assets becoming obsolete; climate
related regulations might change, which could result in legal restrictions on
the use of assets or technological advances could lead to preferred
environmental technologies. Secondly, the lack of historical information on
green vehicles could lead to inaccurate measurement of residual values at
inception of leases.
The AAG business manages Residual Value setting through its Residual Value
Committee that comprises representatives from its Asset Management,
Procurement, Sales and Leasing divisions and is chaired by the Residual Value
Manager. Assets are valued using either an approved Residual Value matrix or
individually, dependent upon the nature of the asset and current market
conditions. The strategy for Residual Value setting and oversight of the
Residual Value Committee is conducted by the AAG Residual Risk Committee,
which in turn reports into the Asset Alliance Group Holdings Limited board.
The Residual Risk Committee, chaired by the AAG Group Risk Director, includes
AAG CEO, AL Group Risk Director, AAG Managing Director, AAG Finance Director
and heads of Asset Management, Sales and Leasing divisions in AAG.
Conduct risk
As a financial services provider the Group faces conduct risk, including
selling products to customers which do not meet their needs, failing to deal
with clients' complaints effectively, not meeting clients' expectations, and
exhibiting behaviours which do not meet market or regulatory standards.
The Group adopts a low risk appetite for any unfair customer outcomes. It
maintains clear compliance guidelines and provides ongoing training to all
employees. Periodic spot checks, compliance monitoring and internal audits are
performed to ensure these guidelines are followed. The Group also has
insurance policies in place to provide some cover for any claims that may
arise.
Financial Crime
The Group is exposed to risk due to financial crime including money
laundering, sanctions evasion, bribery and corruption, market abuse, tax
evasion and fraud. The Group operates policies and controls which are
designed to ensure that financial crime risks are identified, appropriately
mitigated and managed.
Regulatory and capital risk
Regulatory and capital risk includes the risk that the Group will have
insufficient capital resources to support the business and/or does not comply
with regulatory requirements. The Group adopts a conservative approach to
managing its capital. The Board of Arbuthnot Latham approves an ICAAP
annually, which includes the performance of stringent stress tests to ensure
that capital resources are adequate over a three year horizon. Capital and
liquidity ratios are regularly monitored against the Board's approved risk
appetite as part of the risk management framework.
Regulatory change also exists as a risk to the Group's business.
Notwithstanding the assessments carried out by the Group to manage regulatory
risk, it is not possible to predict how regulatory and legislative changes may
alter and impact the business. Significant and unforeseen regulatory changes
may reduce the Group's competitive situation and lower its profitability.
3. Critical accounting estimates and judgements in applying accounting
policies
The Group makes estimates and assumptions that affect the reported amounts of
assets and liabilities within the next financial year. Estimates and
judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. For a full list of critical
accounting estimates and judgements, please refer back to the Annual Report
and Accounts for 2024. Assumptions surrounding credit losses are discussed in
more detail below, while other critical accounting estimates and judgements
have remained unchanged from what was previously reported.
Estimation uncertainty - Expected credit losses ("ECL") on financial assets
The Group reviews its loan portfolios and debt security investments to assess
impairment at least on a quarterly basis. The measurement of ECL required by
IFRS 9, necessitates a number of significant judgements. Specifically,
judgements and estimation uncertainties relate to assessment of whether credit
risk on the financial asset has increased significantly since initial
recognition, incorporation of forward-looking information ("FLI") in the
measurement of ECLs and key assumptions used in estimating recoverable cash
flows. These estimates are driven by a number of factors that are subject to
change which may result in different levels of ECL allowances.
The Group incorporates FLI into the assessment of whether there has been a
significant increase in credit risk. Forecasts for key macroeconomic variables
that most closely correlate with the Bank's portfolio are used to produce five
economic scenarios, comprising of a Baseline, which is the central scenario,
developed internally based on public consensus forecasts, and four less likely
scenarios, one upside and three downside scenarios (Downside 1, Downside 2 and
Extreme Downside), and the impacts of these scenarios are then probability
weighted. The estimation and application of this FLI will require significant
judgement supported by the use of external information.
12-month ECLs on loans and advances (loans within Stage 1) are calculated
using a statistical model on a collective basis, grouped together by product
and geographical location. The key assumptions are the probability of default,
the economic scenarios and loss given default ("LGD") having consideration for
collateral. Lifetime ECLs on loans and advances (loans within Stage 2 and 3)
are calculated based on an individual valuation of the underlying asset and
other expected cash flows.
For financial assets in Stage 2 and 3, ECL is calculated on an individual
basis and all relevant factors that have a bearing on the expected future cash
flows are taken into account. These factors can be subjective and can include
the individual circumstances of the borrower, the realisable value of
collateral, the Group's position relative to other claimants, and the likely
cost to sell and duration of the time to collect. The level of ECL is the
difference between the value of the recoverable amount (which is equal to the
expected future cash flows discounted at the loan's original effective
interest rate), and its carrying amount.
The Group considered the impact of various assumptions on the calculation of
ECL (changes in GDP, unemployment rates, inflation, exchange rates, equity
prices, wages and collateral values/property prices) and concluded that
collateral values/property prices, UK GDP and UK unemployment rate are key
drivers of credit risk and credit losses for each portfolio of financial
instruments.
The five macroeconomic scenarios modelled on future property prices were as
follows:
• Baseline
• Upside
• Downside 1
• Downside 2
• Extreme downside
The tables below therefore reflect the expected probability weightings applied
for each macroeconomic scenario:
Probability weighting
Jun-25 Dec-24
Economic Scenarios
Baseline 43.0% 46.0%
Upside 23.0% 21.0%
Downside 1 12.0% 15.0%
Downside 2 11.0% 9.0%
Extreme downside 11.0% 9.0%
The tables below show the five-year forecasted average for property prices
growth, UK unemployment rate and UK real GDP growth:
30 June 2025
Base Upside Downside 1 Downside 2 Extreme downside
Five-year summary
UK House price index - average growth 2.6% 4.5% 0.5% (1.6%) (3.6%)
UK Commercial real estate price - average growth 1.3% 3.0% (0.5%) (2.3%) (4.2%)
UK Unemployment rate - average 4.7% 4.1% 5.5% 6.3% 7.1%
UK GDP - average growth 1.3% 1.8% 0.9% 0.5% 0.1%
31 December 2024
Base Upside Downside 1 Downside 2 Extreme downside
Five-year summary
UK House price index - average growth 3.0% 4.2% 0.8% (1.4%) (3.6%)
UK Commercial real estate price - average growth 1.4% 3.4% (0.4%) (2.3%) (4.2%)
UK Unemployment rate - average 4.4% 3.9% 5.3% 6.2% 7.1%
UK GDP - average growth 1.4% 2.0% 0.9% 0.5% 0.1%
The tables below list the macroeconomic assumptions at 30 June 2025 used in
the base, upside and downside scenarios over the five-year forecast period.
The assumptions represent the absolute percentage unemployment rates and
year-on-year percentage change for GDP and property prices.
UK House price index - four quarter growth
Year Baseline Upside Downside 1 Downside 2 Extreme downside
2025 2.3% 3.5% 0.2% (2.0%) (4.1%)
2026 1.6% 4.6% (3.6%) (8.9%) (14.1%)
2027 2.5% 4.0% (2.5%) (7.6%) (12.6%)
2028 2.9% 4.1% 4.0% 5.0% 6.1%
2029 3.6% 6.2% 4.6% 5.6% 6.5%
5 year average 2.6% 4.5% 0.5% (1.6%) (3.6%)
UK Commercial real estate price - four quarter growth
Year Baseline Upside Downside 1 Downside 2 Extreme downside
2025 1.9% 6.1% (4.9%) (11.7%) (18.4%)
2026 1.3% 4.4% (5.9%) (13.1%) (20.3%)
2027 1.3% 2.6% 3.1% 4.9% 6.7%
2028 1.1% 1.1% 2.6% 4.2% 5.8%
2029 0.9% 0.9% 2.4% 3.9% 5.5%
5 year average 1.3% 3.0% (0.5%) (2.3%) (4.2%)
UK Unemployment rate - annual average
Year Baseline Upside Downside 1 Downside 2 Extreme downside
2025 4.8% 4.5% 4.9% 4.9% 5.0%
2026 4.8% 3.9% 5.7% 6.6% 7.5%
2027 4.7% 3.9% 5.9% 7.2% 8.4%
2028 4.7% 4.2% 5.7% 6.7% 7.8%
2029 4.6% 4.1% 5.4% 6.3% 7.1%
5 year average 4.7% 4.1% 5.5% 6.3% 7.1%
UK GDP - annual growth
Year Baseline Upside Downside 1 Downside 2 Extreme downside
2025 1.1% 1.3% (0.9%) (2.9%) (4.8%)
2026 1.0% 2.0% 1.0% 1.0% 0.9%
2027 1.4% 1.9% 1.4% 1.4% 1.4%
2028 1.5% 1.8% 1.5% 1.4% 1.4%
2029 1.5% 1.8% 1.5% 1.4% 1.4%
5 year average 1.3% 1.8% 0.9% 0.5% 0.1%
The graphs below plot the historical data for HPI, Commercial real estate
price, unemployment rate and GDP growth rate in the UK as well as the
forecasted data under each of the five scenarios.
Management have assessed the impact of assigning a 100% probability to each of
the economic scenarios, which would have the following impact on the Profit or
Loss of the Group:
Arbuthnot Latham
Jun 2025 Dec 2024
Impact of 100% scenario probability £m £m
Baseline 0.8 0.5
Upside 2.3 1.8
Downside 1 (1.0) (1.9)
Downside 2 (6.7) (5.2)
Extreme downside (22.8) (21.4)
4. Financial risk management
Strategy
By their nature, the Group's activities are principally related to the use of
financial instruments. The Directors and senior management of the Group have
formally adopted a Group Risk and Controls Policy which sets out the Board's
attitude to risk and internal controls. Key risks identified by the
Directors are formally reviewed and assessed at least once a year by the
Board, in addition to which key business risks are identified, evaluated and
managed by operating management on an ongoing basis by means of procedures
such as physical controls, credit and other authorisation limits and
segregation of duties. The Board also receives regular reports on any risk
matters that need to be brought to its attention. Significant risks identified
in connection with the development of new activities are subject to
consideration by the Board. There are budgeting procedures in place and
reports are presented regularly to the Board detailing the results of each
principal business unit, variances against budget and prior year, and other
performance data.
The principal non-operational risks inherent in the Group's business are
credit, macroeconomic, market, liquidity and capital.
Credit risk
The Company and Group take on exposure to credit risk, which is the risk that
a counterparty will be unable to pay amounts in full when due. Significant
changes in the economy, or in the health of a particular industry segment that
represents a concentration in the Company and Group's portfolio, could result
in losses that are different from those provided for at the balance sheet
date. Credit risk is managed through the Credit Committee of the banking
subsidiary.
The Committee regularly reviews the credit risk profile of the Group, with a
clear focus on performance against risk appetite statements and risk metrics.
The Committee considered credit conditions during the period.
The Company and Group structure the levels of credit risk it undertakes by
placing limits on the amount of risk accepted in relation to products, and one
borrower or groups of borrowers. Such risks are monitored on a revolving basis
and subject to an annual or more frequent review. The limits are approved
periodically by the Board of Directors and actual exposures against limits are
monitored daily.
Exposure to credit risk is managed through regular analysis of the ability of
borrowers and potential borrowers to meet interest and capital repayment
obligations and by changing these lending limits where appropriate. Exposure
to credit risk is also managed in part by obtaining collateral, and corporate
and personal guarantees.
The Group has attempted to leverage stress test modelling insights to inform
ECL model refinements to enable reasonable estimates. Management review of
modelling approaches and outcomes continues to inform any necessary
adjustments to the ECL estimates through the form of in-model adjustments,
based on expert judgement including the use of available information.
Management considerations included the potential severity and duration of the
economic shock, including the mitigating effects of government support
actions, as well the potential trajectory of the subsequent recovery.
The Group employs a range of policies and practices to mitigate credit risk.
The most traditional of these is the taking of collateral to secure advances,
which is common practice. The principal collateral types for loans and
advances include, but are not limited to:
• Charges over residential and commercial
properties;
• Charges over business assets such as premises,
inventory and accounts receivable;
• Charges over financial instruments such as debt
securities and equities;
• Charges over other chattels; and
• Personal guarantees
Upon initial recognition of loans and advances, the fair value of collateral
is based on valuation techniques commonly used for the corresponding assets.
In order to minimise any potential credit loss the Group will seek additional
collateral from the counterparty as soon as impairment indicators are noticed
for the relevant individual loans and advances. Repossessed collateral, not
readily convertible into cash, is made available for sale in an orderly
fashion, with the proceeds used to reduce or repay the outstanding
indebtedness, or held as inventory where the Group intends to develop and sell
in the future. Where excess funds are available after the debt has been
repaid, they are available either for other secured lenders with lower
priority or are returned to the customer.
Commitments to extend credit represent unused portions of authorisations to
extend credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Group is
potentially exposed to loss in an amount equal to the total unused
commitments. However, the likely amount of loss is less than the total unused
commitments, as most commitments to extend credit are contingent upon
customers maintaining specific credit standards.
The Group incorporates forward-looking information into both its assessment of
whether the credit risk of an instrument has increased significantly since its
initial recognition and its measurement of ECL. The key inputs into the
measurement of the ECL are:
• assessment of significant increase in credit
risk
• future economic scenarios
• probability of default
• loss given default
• exposure at default
The IFRS 9 impairment model adopts a three stage approach based on the extent
of credit deterioration since origination.
The Group's maximum exposure to credit risk before collateral held or other
credit enhancements is as follows:
30 June 2025
Group Banking RAF ACABL AAG All Other Divisions Total
Credit risk exposures (all stage 1, unless otherwise stated) £000 £000 £000 £000 £000 £000
On-balance sheet:
Cash and balances at central banks - - - - 768,640 768,640
Loans and advances to banks - - - - 83,573 83,573
Debt securities at amortised cost - - - - 1,690,403 1,690,403
Derivative financial instruments - - - - 2,030 2,030
Loans and advances to customers (Gross of ECL) 1,430,741 280,553 231,211 87,955 1,156 2,031,616
Stage 1 - Gross amount outstanding 1,325,043 273,520 206,284 87,751 - 1,892,598
Stage 2 - Gross amount outstanding 35,746 3,375 24,927 168 - 64,216
Stage 3 - Gross amount outstanding 69,952 3,658 - 36 1,156 74,802
Other assets - - - - 5,800 5,800
Financial investments - - - - 4,975 4,975
Off-balance sheet:
Guarantees 2,425 - - - - 2,425
Loan commitments 77,937 - 275,475 - - 353,412
At 30 June 2025 1,511,103 280,553 506,686 87,955 2,556,577 4,942,874
30 June 2024
Group Banking RAF ACABL AAG All Other Divisions Total
Credit risk exposures (all stage 1, unless otherwise stated) £000 £000 £000 £000 £000 £000
On-balance sheet:
Cash and balances at central banks - - - - 552,876 552,876
Loans and advances to banks - - - - 121,977 121,977
Debt securities at amortised cost - - - - 1,196,110 1,196,110
Derivative financial instruments - - - - 4,356 4,356
Loans and advances to customers (Gross of ECL) 1,546,013 236,078 264,055 76,165 1,135 2,123,446
Stage 1 - Gross amount outstanding 1,382,850 229,618 253,603 76,165 - 1,942,236
Stage 2 - Gross amount outstanding 79,114 2,559 9,816 - - 91,489
Stage 3 - Gross amount outstanding 84,049 3,901 636 - 1,135 89,721
Other assets - - - - 6,910 6,910
Financial investments - - - - 4,156 4,156
Off-balance sheet:
Guarantees 2,251 - - - - 2,251
Loan commitments 174,459 - 280,579 - - 455,038
At 30 June 2024 1,722,723 236,078 544,634 76,165 1,887,520 4,467,120
31 December 2024
Group Banking RAF ACABL AAG All Other Divisions Total
Credit risk exposures (all stage 1, unless otherwise stated) £000 £000 £000 £000 £000 £000
On-balance sheet:
Cash and balances at central banks - - - - 911,699 911,699
Loans and advances to banks - - - - 66,971 66,971
Debt securities at amortised cost - - - - 1,199,847 1,199,847
Derivative financial instruments - - - - 2,970 2,970
Loans and advances to customers (Gross of ECL) 1,549,071 249,789 228,507 77,305 1,129 2,105,801
Stage 1 - Gross amount outstanding 1,420,547 242,482 189,097 77,065 (14) 1,929,177
Stage 2 - Gross amount outstanding 60,379 4,407 38,249 240 - 103,275
Stage 3 - Gross amount outstanding 68,145 2,900 1,161 - 1,143 73,349
Other assets - - - - 7,758 7,758
Financial investments - - - - 4,947 4,947
Off-balance sheet:
Guarantees 2,500 - - - - 2,500
Loan commitments 101,412 - 324,119 - - 425,531
At 31 December 2024 1,652,983 249,789 552,626 77,305 2,195,321 4,728,024
The table below shows the Group's expected credit loss (ECL), by segment and
stage:
30 June 2025
Group Banking RAF ACABL AAG All Other Divisions Total
ECL provisions £000 £000 £000 £000 £000 £000
Stage 1 (384) (67) (43) (305) - (799)
Stage 2 (7) (51) (10) - - (68)
Stage 3 (10,513) (719) - (1) (258) (11,491)
At 30 June 2025 (10,904) (837) (53) (306) (258) (12,358)
30 June 2024
Group Banking RAF ACABL AAG All Other Divisions Total
ECL provisions £000 £000 £000 £000 £000 £000
Stage 1 (237) (109) (50) (277) - (673)
Stage 2 (216) (60) (71) - - (347)
Stage 3 (4,510) (1,617) (156) - (100) (6,383)
At 30 June 2024 (4,963) (1,786) (277) (277) (100) (7,403)
31 December 2024
Group Banking RAF ACABL AAG All Other Divisions Total
ECL provisions £000 £000 £000 £000 £000 £000
Stage 1 (260) (65) (86) (254) - (665)
Stage 2 (1,345) (52) (226) - - (1,622)
Stage 3 (8,311) (882) - - (108) (9,300)
At 31 December 2024 (9,916) (999) (312) (254) (108) (11,587)
Capital management
During the period all regulated entities have complied with all of the
externally imposed capital requirements to which they are subject. The capital
position of the Group remains strong. The Total Capital Requirement Ratio
("TCR") is 8.32% (30 June 2024: 8.32%; 31 December 2024: 8.32%), while the
CET1 capital ratio is 12.7% (30 June 2024: 11.6%; 31 December 2024: 13.2%) and
the total capital ratio is 14.8% (30 June 2024: 13.6%; 31 December 2024:
15.3%).
Valuation of financial instruments
The Group measures the fair value of an instrument using quoted prices in an
active market for that instrument. A market is regarded as active if quoted
prices are readily and regularly available and represent actual and regularly
occurring market transactions. If a market for a financial instrument is not
active, the Group establishes fair value using a valuation technique. These
include the use of recent arm's length transactions, reference to other
instruments that are substantially the same for which market observable prices
exist, net present value and discounted cash flow analysis. The objective of
valuation techniques is to determine the fair value of the financial
instrument at the reporting date as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants. In the event that fair values of assets and liabilities
cannot be reliably measured, they are carried at cost.
The Group measures fair value using the following fair value hierarchy that
reflects the significance of the inputs used in making measurements:
• Level 1: Quoted prices in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes instruments
valued using: quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are
considered less than active; or other valuation techniques in which all
significant inputs are directly or indirectly observable from market data.
• Level 3: Inputs that are unobservable. This category includes all instruments
for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based on
quoted prices for similar instruments for which significant unobservable
adjustments or assumptions are required to reflect differences between the
instruments
The consideration of factors such as the magnitude and frequency of trading
activity, the availability of prices and the size of bid/offer spreads assists
in the judgement as to whether a market is active. If in the opinion of
management, a significant proportion of the instrument's carrying amount is
driven by unobservable inputs, the instrument in its entirety is classified as
valued using significant unobservable inputs. 'Unobservable' in this context
means that there is little or no current market data available from which to
determine the level at which an arm's length transaction would be likely to
occur. It generally does not mean that there is no market data available at
all upon which to base a determination of fair value (consensus pricing data
may, for example, be used).
The tables below analyse financial instruments measured at fair value by the
level in the fair value hierarchy into which the measurement is categorised:
Level 1 Level 2 Level 3 Total
At 30 June 2025 £000 £000 £000 £000
ASSETS
Derivative financial instruments - 2,030 - 2,030
Financial investments - - 4,975 4,975
- 2,030 4,975 7,005
Level 1 Level 2 Level 3 Total
At 30 June 2024 £000 £000 £000 £000
ASSETS
Derivative financial instruments - 4,356 - 4,356
Financial investments - - 4,156 4,156
- 4,356 4,156 8,512
LIABILITIES
Derivative financial instruments - 535 - 535
- 535 - 535
Level 1 Level 2 Level 3 Total
At 31 December 2024 £000 £000 £000 £000
ASSETS
Derivative financial instruments - 2,970 - 2,970
Financial investments - - 4,947 4,947
- 2,970 4,947 7,917
There were no transfers between level 1 and level 2 during the year.
The following table reconciles the movement in level 3 financial instruments
measured at fair value (financial investments) during the year:
At 30 June At 30 June At 31 December
2025 2024 2024
Movement in level 3 £000 £000 £000
At 1 January 4,947 3,942 3,942
Acquisitions 6 223 294
Disposals - (84) (84)
Movements recognised in Other Comprehensive Income 22 75 795
At 30 June / 31 December 4,975 4,156 4,947
The tables below show the fair value of financial instruments carried at
amortised cost by the level in the fair value hierarchy:
Level 1 Level 2 Level 3 Total
At 30 June 2025 £000 £000 £000 £000
ASSETS
Cash and balances at central banks - 768,724 - 768,724
Loans and advances to banks - 83,573 - 83,573
Debt securities at amortised cost - 1,691,397 - 1,691,397
Loans and advances to customers - - 2,014,780 2,014,780
Other assets - - 5,800 5,800
- 2,543,694 2,020,580 4,564,274
LIABILITIES
Deposits from banks - 196,965 - 196,965
Deposits from customers - 4,418,019 - 4,418,019
Other liabilities - - 40,755 40,755
Debt securities in issue - - 38,392 38,392
- 4,614,984 79,147 4,694,131
Level 1 Level 2 Level 3 Total
At 30 June 2024 £000 £000 £000 £000
ASSETS
Cash and balances at central banks - 553,095 - 553,095
Loans and advances to banks - 121,977 - 121,977
Debt securities at amortised cost - 1,195,965 - 1,195,965
Loans and advances to customers - - 2,110,029 2,110,029
Other assets - - 6,910 6,910
- 1,871,037 2,116,939 3,987,976
LIABILITIES
Deposits from banks - 193,758 - 193,758
Deposits from customers - 3,863,155 - 3,863,155
Other liabilities - - 33,245 33,245
Debt securities in issue - - 38,256 38,256
- 4,056,913 71,501 4,128,414
Level 1 Level 2 Level 3 Total
At 31 December 2024 £000 £000 £000 £000
ASSETS
Cash and balances at central banks - 911,887 - 911,887
Loans and advances to banks - 66,971 - 66,971
Debt securities at amortised cost - 1,199,963 - 1,199,963
Loans and advances to customers - - 2,088,933 2,088,933
Other assets - - 7,758 7,758
- 2,178,821 2,096,691 4,275,512
LIABILITIES
Deposits from banks - 192,911 - 192,911
Deposits from customers - 4,132,493 - 4,132,493
Other liabilities - - 6,229 6,229
Debt securities in issue - - 37,982 37,982
- 4,325,404 44,211 4,369,615
All above assets and liabilities are carried at amortised cost. Therefore for
these assets, the fair value hierarchy noted above relates to the disclosure
in this note only.
Cash and balances at central banks
The fair value of cash and balances at central banks was calculated based upon
the present value of the expected future principal and interest cash flows.
The rate used to discount the cash flows was the market rate of interest at
the balance sheet date.
At the end of each year, the fair value of cash and balances at central banks
was calculated to be equivalent to their carrying value.
Loans and advances to banks
The fair value of loans and advances to banks was calculated based upon the
present value of the expected future principal and interest cash flows. The
rate used to discount the cash flows was the market rate of interest at the
balance sheet date.
Loans and advances to customers
The fair value of loans and advances to customers was calculated based upon
the present value of the expected future principal and interest cash flows.
The rate used to discount the cash flows was the market rate of interest at
the balance sheet date, and the same assumptions regarding the risk of default
were applied as those used to derive the carrying value.
The Group provides loans and advances to commercial, corporate and personal
customers at both fixed and variable rates. To determine the fair value of
loans and advances to customers, loans are segregated into portfolios of
similar characteristics. A number of techniques are used to estimate the fair
value of fixed rate lending; these take account of expected credit losses
based on historic trends and expected future cash flows.
For the acquired loan book, the discount on acquisition is used to determine
the fair value in addition to the expected credit losses and expected future
cash flows.
Debt securities
The fair value of debt securities is based on the quoted mid-market share
price.
Derivatives
Where derivatives are traded on an exchange, the fair value is based on prices
from the exchange.
Deposits from banks
The fair value of amounts due to banks was calculated based upon the present
value of the expected future principal and interest cash flows. The rate used
to discount the cash flows was the market rate of interest at the balance
sheet date.
At the end of each year, the fair value of amounts due to banks was calculated
to be equivalent to their carrying value due to the short maturity term of the
amounts due.
Deposits from customers
The fair value of deposits from customers was calculated based upon the
present value of the expected future principal and interest cash flows. The
rate used to discount the cash flows was the market rate of interest at the
balance sheet date for the notice deposits and deposit bonds. The fair value
of instant access deposits is equal to book value as they are repayable on
demand.
Financial liabilities
The fair value of other financial liabilities was calculated based upon the
present value of the expected future principal cash flows.
At the end of each year, the fair value of other financial liabilities was
calculated to be equivalent to their carrying value due to their short
maturity. The other financial liabilities include all other liabilities other
than non-interest accruals.
Subordinated liabilities
The fair value of subordinated liabilities was calculated based upon the
present value of the expected future principal cash flows.
5. Operating segments
The Group is organised into seven operating segments as disclosed below:
1) Banking - Includes Private and Commercial Banking. Private Banking - Provides
traditional private banking services.
Commercial Banking - Provides bespoke commercial banking services and tailored
secured lending against property
investments and other assets. The acquired mortgage portfolio is also included
in Banking.
2) Wealth Management - Offering financial planning and investment management
services.
3) RAF - Specialist asset finance lender mainly in high value cars but also
business assets.
4) ACABL - Provides finance secured on either invoices, assets or stock of the
borrower.
5) AAG - Provides vehicle finance and related services, predominantly in the
truck & trailer and bus & coach markets.
6) All Other Divisions - All other smaller divisions and central costs in
Arbuthnot Latham & Co., Ltd (Investment property and Central costs).
7) Group Centre - ABG Group 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 loans and
advances to customers and customer deposits, being the majority of the balance
sheet.
Banking Wealth Management RAF ACABL AAG All Other Divisions Group Centre Total
Six months ended 30 June 2025 £000 £000 £000 £000 £000 £000 £000 £000
Interest revenue 50,251 - 11,241 9,821 2,803 51,097 - 125,213
Interest revenue from external customers 50,251 - 11,241 9,821 2,803 51,097 - 125,213
Fee and commission income 2,541 7,844 43 3,790 - 943 - 15,161
Revenue - - - - 57,146 - - 57,146
Revenue from external customers 52,792 7,844 11,284 13,611 59,949 52,040 - 197,520
Interest expense (248) 324 (3,692) (5,430) (6,812) (50,635) - (66,493)
Cost of goods sold - - - - (45,556) - - (45,556)
Fee and commission expense (173) (59) (10) - (9) (331) - (582)
Segment operating income 52,371 8,109 7,582 8,181 7,572 1,074 - 84,889
Impairment losses (962) - (504) 259 (83) (150) - (1,440)
Other income - - - - 16 708 - 724
Operating expenses (36,949) (10,045) (3,798) (3,673) (8,022) (5,441) (5,391) (73,319)
Segment profit / (loss) before tax 14,460 (1,936) 3,280 4,767 (517) (3,809) (5,391) 10,854
Income tax (expense) / income - - (827) (1,199) 82 174 (2,146) (3,916)
Segment profit / (loss) after tax 14,460 (1,936) 2,453 3,568 (435) (3,635) (7,537) 6,938
Loans and advances to customers 1,419,837 - 279,716 231,158 87,649 898 - 2,019,258
Assets available for lease - - - - 297,330 - - 297,330
Other assets - - - - - 2,718,605 (8,580) 2,710,025
Segment total assets 1,419,837 - 279,716 231,158 384,979 2,719,503 (8,580) 5,026,613
Customer deposits 4,418,019 - - - - - - 4,418,019
Other liabilities - - - - - 341,913 (2,495) 339,418
Segment total liabilities 4,418,019 - - - - 341,913 (2,495) 4,757,437
Other segment items:
Capital expenditure - - (3) - (50,892) (2,051) - (52,946)
Depreciation and amortisation - - (68) - (28,608) (3,479) (15) (32,170)
The "Group Centre" segment above includes the parent entity and all
intercompany eliminations.
Banking Wealth Management RAF ACABL AAG All Other Divisions Group Centre Total
Six months ended 30 June 2024 £000 £000 £000 £000 £000 £000 £000 £000
Interest revenue 59,610 - 8,815 11,979 2,357 46,804 - 129,565
Interest revenue from external customers 59,610 - 8,815 11,979 2,357 46,804 - 129,565
Fee and commission income 1,721 6,599 104 3,564 - 781 - 12,769
Revenue - - - - 53,178 - - 53,178
Revenue from external customers 61,331 6,599 8,919 15,543 55,535 47,585 - 195,512
Interest expense (13,431) - (3,017) (7,478) (7,584) (33,861) (2,138) (67,509)
Cost of goods sold - - - - (40,457) - - (40,457)
Fee and commission expense (367) (32) (7) - (9) 12 - (403)
Segment operating income 47,533 6,567 5,895 8,065 7,485 13,736 (2,138) 87,143
Impairment losses (582) - (351) 3 (62) (61) - (1,053)
Other income - - - - 53 612 39 704
Operating expenses (33,380) (9,060) (3,321) (3,682) (7,451) (4,061) (5,003) (65,958)
Segment profit / (loss) before tax 13,571 (2,493) 2,223 4,386 25 10,226 (7,102) 20,836
Income tax (expense) / income - - (269) (576) (605) (2,630) (1,319) (5,399)
Segment profit / (loss) after tax 13,571 (2,493) 1,954 3,810 (580) 7,596 (8,421) 15,437
Loans and advances to customers 1,541,087 - 234,292 263,778 75,888 998 - 2,116,043
Assets available for lease - - - - 287,184 - - 287,184
Other assets - - - - - 2,050,765 (8,178) 2,042,587
Segment total assets 1,541,087 - 234,292 263,778 363,072 2,051,763 (8,178) 4,445,814
Customer deposits 3,863,155 - - - - - - 3,863,155
Other liabilities - - - - - 324,573 1,086 325,659
Segment total liabilities 3,863,155 - - - - 324,573 1,086 4,188,814
Other segment items:
Capital expenditure - - - - (56,606) (19,979) (118) (76,703)
Depreciation and amortisation - - - - (27,966) (689) (12) (28,667)
Segment profit is shown prior to any intra-group eliminations.
6. Other income
Other income includes rental income from the investment property of £0.2m (H1
2024: £0.2m).
7. Earnings per ordinary share
Basic
Basic earnings per ordinary share are calculated by dividing the profit after
tax attributable to equity holders of the Company by the weighted average
number of ordinary shares 16,319,926 (2024: 16,319,926) in issue during the
period.
Diluted
Diluted earnings per ordinary share are calculated by dividing the dilutive
profit after tax attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period, as well as the
number of dilutive share options in issue during the period. There were no
dilutive share options in issue at the end of June (2024: nil).
Six months ended 30 June Six months ended 30 June
2025 2024
Profit attributable £000 £000
Total profit after tax attributable to equity holders of the Company 6,938 15,437
Six months ended 30 June Six months ended 30 June
2025 2024
Basic Earnings per share p p
Total Basic Earnings per share 42.5 94.6
8. Share capital and share premium
30 Jun 2025 30 Jun 2024
£000 £000
Share capital 167 167
Share premium 11,606 11,606
Share capital and share premium 11,773 11,773
Ordinary share capital
Number of Share
shares Capital
£000
At 1 January 2025 16,576,619 166
At 30 June 2025 16,576,619 166
Ordinary non-voting share capital
Number of Share
shares Capital
£000
At 1 January 2025 152,621 1
At 30 June 2025 152,621 1
Total share capital
Number of Share
shares Capital
£000
At 1 January 2025 16,729,240 167
At 30 June 2025 16,729,240 167
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares or options
by the Company are shown in equity as a deduction, net of tax, from the
proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which
they are approved.
(c) Share buybacks
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted from equity attributable
to the Company's equity holders until the shares are cancelled or reissued.
The Ordinary shares have a par value of 1p per share (2024: 1p per share). At
30 June 2025 the Company held 409,314 shares (2024: 409,314) in treasury. This
includes 390,274 (2024: 390,274) Ordinary shares and 19,040 (2024: 19,040)
Ordinary Non-Voting shares.
9. Events after the balance sheet date
There were no material post balance sheet events to report.
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