REG - Close Bros Grp PLC - Final Results <Origin Href="QuoteRef">CBRO.L</Origin> - Part 1

Close BrothersAnnouncement

22/09/2015 07:00

RNS Number : 7296Z
Close Brothers Group PLC
22 September 2015
Close Brothers Group plc
Preliminary results for the year ended 31 July 2015
Another Year of Strong Performance 
The group delivered another year of strong performance with adjusted operating profit up 16% to 224.9 million and adjusted basic earnings per share up 19% to 120.5p
Continued good performance in the Banking division with adjusted operating profit 15% higher at 208.7 million, 8.5% loan book growth to 5.7 billion and an improved bad debt ratio of 0.8%
Winterflood delivered adjusted operating profit of 24.6 million as market conditions improved in the second half
Good progress in Asset Management with total client assets up 11% to 10.8 billion and adjusted operating profit of 17.8 million, including 4.4 million from our former private equity business
Full year dividend per share up 9% to 53.5p in line with our progressive dividend policy and commitment to sustainable growth in shareholder returns
Strong return on opening equity of 19.5% and common equity tier 1 capital ratio improved to 13.7%
Financial Highlights (continuing operations)1
 2015
 2014
Adjusted operating profit2
224.9m
193.7m
Adjusted basic earnings per share3
120.5p
101.0p 
Operating profit before tax 
219.9m
188.8m 
Basic earnings per share 
117.8p
98.4p 
Profit attributable to shareholders
185.7m
149.8m 
Ordinary dividend per share4
53.5p
49.0p 
Return on opening equity5
19.5%
17.9% 
1 The disposal of Close Brothers Seydler was completed on 5 January 2015. The profit on disposal of 10.3 million and profit after tax of 0.9 million have been classified as discontinued operations and the 2014 results have been restated. 
2 Adjusted operating profit is before amortisation of intangible assets on acquisition. 
3 Adjusted basic earnings per share is before amortisation of intangible assets on acquisition and the tax effect of such adjustment.
4 Represents final dividend proposed for the respective years together with the interim dividend declared and paid in those years.
5 Return on opening equity ("RoE") calculated as adjusted operating profit after tax and non-controlling interests on opening equity, excluding non-controlling interests.
Preben Prebensen, Chief Executive, commenting on the results said:
"We are pleased to report another year of strong performance for Close Brothers with good results across all of our businesses. After successive years of exceptional growth the group is in better shape than ever, which means we are well positioned to invest in supporting and extending our tried and tested business model and continue to deliver sustainable growth over the long term." 
Enquiries to:
Sophie Gillingham
Close Brothers Group plc
020 7655 3844
Robert Coates
Close Brothers Group plc
020 7655 3350
Lois Hutchings
Close Brothers Group plc
020 7655 3468
Andy Donald
Maitland
020 7379 5151
A presentation to analysts and investors will be held today at 9.30 am GMT at our offices at 10 Crown Place, London EC2A 4FT. A listen-only dial-in facility will be available by dialling +44 203 059 8125. A recording of this call will be available for replay for two weeks by dialling +44 121 260 4861, access code 1525903#.
About Close Brothers: 
Close Brothers is a leading UK merchant banking group providing lending, deposit taking, wealth management services and securities trading.
Our Banking division provides lending to small businesses and individuals, with an emphasis on specialist finance. We also offer deposit taking services to UK businesses and individuals.
In Securities, we provide trading services in the UK through Winterflood, a leading market-maker.
Close Brothers Asset Management provides a range of financial advice, investment management and online investing services to private clients and professional advisers.
Established in 1878, we believe our traditional merchant banking values, based on service and integrity, continue to be relevant today. We define our approach to business as "Modern Merchant Banking" - values that are embedded in our culture and that underpin everything we do.
Today, Close Brothers Group plc employs around 2,900 people, principally in the UK. We are listed on the London Stock Exchange and are a member of the FTSE 250.
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT 
Another Year of Strong Performance
We are pleased to report another year of strong performance across the group, driven by continued good performance from the Banking division and steady growth in Asset Management. This once again demonstrates the robustness of our business model which supports our long-term track record and financial performance.
The Banking division achieved strong profit growth, benefiting from the high quality loan book growth in recent years and lower impairments. Winterflood experienced difficult market conditions in the first half but continued to trade profitably and has delivered a solid result for the full year. Asset Management is continuing to see good demand for its high quality advice and wealth management services, supporting growth in client assets and improving profitability.
We remain fully committed to our strategy of building leading positions in niche markets, through strong customer relationships. As the markets that we operate in continue to evolve, particularly for the Banking division, we will continue to invest in our people, products and systems, to both protect our positioning within existing markets, and extend our reach into new areas to support future growth.
We remain committed to delivering this growth and investment, whilst maintaining a strong and prudent financial position, allowing us to support our customers, grow our businesses and deliver sustainable shareholder returns in all market conditions.
Strong Financial Position
Overall, the group delivered adjusted operating profit growth of 16% to 224.9 million (2014: 193.7 million), and adjusted earnings per share growth of 19% to 120.5p (2014: 101.0p). As a result, we have delivered a further improvement in return on opening equity to 19.5% (2014: 17.9%).
Our strong and prudent financial position has again been strengthened in the period, by further diversifying our sources of funding to include the government's Funding for Lending Scheme and continued improvement in our capital position, with a common equity tier 1 ratio of 13.7% (31 July 2014: 13.1%), and a leverage ratio of 10.2% (31 July 2014: 9.2%).
Our prudent approach, strong financial position and consistent track record have resulted in Moody's upgrading our credit rating to A3/P2 for Close Brothers Group and Aa3/P1 for Close Brothers Limited, both with stable outlooks, making us one of the highest rated banks in the UK.
In line with our commitment to delivering sustainable, progressive dividend growth for our shareholders, and to reflect our continued strong financial performance, the board has recommended a 9% increase in the final dividend to 35.5p (2014: 32.5p). This gives a total dividend per share for the full year of 53.5p (2014: 49.0p) making 2015 our fifth successive year of growing our dividend. 
Consistent Profitability and Returns over the Long Term 
The Banking division continued its good performance, delivering its sixth consecutive year of double-digit profit growth. Adjusted operating profit increased 15% to 208.7 million (2014: 181.6 million), reflecting good loan book growth over the last year, a strong net interest margin of 8.8%, and a further decline in impairments. This consistent performance illustrates the strength of our business model, focusing on our local presence in specialist markets, building strong client relationships, underpinned by prudent underwriting criteria. 
As we continue to see a gradual increase in the supply of credit a with a return of competition in some of our key markets, we will maintain the same approach that has served us well through previous cycles, maintaining our margins and continuing to price risk appropriately rather than chasing growth. We will remain focused on our core attributes which differentiate us and underpin our long track record of profitable growth through the cycle, namely the expertise of our people within their specific fields, our high levels of repeat business and local underwriting responsibility. We will also ensure that the profile of our lending, which is predominantly short-term, secured and diversified across industry sectors, remains consistent.
We continue to see opportunities for growth in the Banking division, both through our well established distribution network of over 500 direct sales people as well as specialist intermediaries including motor dealers and insurance brokers, and through initiatives looking at entry into adjacent markets which suit our specialist model and underwriting criteria.
Winterflood experienced mixed market conditions during the year but continues to benefit from its unique business model which allows us to provide continuous liquidity for our clients and trade profitably even in challenging market conditions, thereby maintaining our market leading position. Lower activity and periods of increased volatility in the first half resulted in an increase in the number of loss days, but conditions improved in the second half and good performance in our investment trusts business ensured that adjusted operating profit reduced by just 8% to 24.6 million (2014: 26.6 million).
In the first half we completed the sale of Close Brothers Seydler, our German securities business which has been treated as a discontinued operation.
Our Asset Management business continues to make good progress, with its high quality integrated financial planning advice and investment management proposition proving popular with clients. We achieved good growth in the period with gross inflows into our managed assets up 31% year-on-year to 1.5 billion (31 July 2014: 1.1 billion). We continue to see good demand for our discretionary Close Portfolio Funds which now total close to 3 billion under management, the majority of which delivered top quartile performance over the last year. This growth is driving further improvement in profitability with adjusted operating profit increasing to 17.8 million (2014: 9.9 million), including a 4.4 million benefit from our former private equity business.
Our business remains well positioned to benefit from ongoing changes in the market and regulatory environment, such as the recently announced pension freedoms legislation which we expect to increase the overall demand for retail advice and wealth management over the longer term.
Investing for the Long Term
Our strong financial position and good levels of profitability also mean that we have the financial resources to continuously invest in our people, products and systems to adapt as markets evolve, and to enhance and diversify our client offering and improve the delivery of services to our clients.
Our high touch business model and client led approach is dependent upon the knowledge and experience of our people and our shared values of integrity, prudence and commitment to service. Therefore, attracting, retaining and developing talent in each of our specialist fields is key to our longer term success. To further develop our employees, we have introduced a sales training programme for new recruits in our asset finance business, and to maximise productivity and enhance the client experience in Asset Management, we are investing in the training and development of our professional adviser force and creating regional practices which are supported by expanded client service teams.
We have a long history of supporting SMEs across the UK and currently provide 3.5 billion of lending to these growing businesses. To further demonstrate our ongoing commitment to supporting SMEs we have created an apprenticeship scheme. The Close Brothers SME Apprentice Programme will provide funding for up to 20 apprentices per annum for the next three years with the aim of enabling SMEs that would otherwise be unable to afford to take on and train additional staff to grow and expand their businesses.
While we are predominantly a people driven business, we also continuously invest in our systems to both improve our client proposition and the accessibility of our products and services as well as protect our client data. During the year we have further strengthened our IT function within the Banking division to deliver improvements to our client proposition and increase our efficiency and speed to market. We have rolled out a number of new initiatives in recent years including system upgrades in Property and Treasury to improve efficiency and we are now enhancing our processes in premium finance. Winterflood invests continuously to support its market leading, proprietary technology and Asset Management is benefiting from the investment made in our technology platform in recent years.
Ongoing regulatory reform remains a significant challenge in the banking sector, but with our strong client focus, straightforward products and prudent approach we are well positioned. Monitoring and implementing this regulatory change is resource intensive and we continue to invest in our people and systems to ensure we continue to meet increasing regulatory reporting requirements and operate in the best interests of our clients. Specifically, in response to the increased focus on risk and compliance across our industry and a greater level of oversight, we have reorganised and strengthened our group wide risk and compliance functions.
Management and Board Changes 
As previously announced, after 27 years with the business, Julian Palfreyman retired from his position as chief executive of Winterflood at the end of the financial year. Philip Yarrow has taken over as chief executive, having previously been the head of electronic trading at Winterflood since 2000. We would like to thank Julian for his significant contribution to the business over many years and wish him well for the future.
Additionally, Robert Sack joined Close Brothers in April 2015 as group risk officer and is a member of the Executive Committee. Robert has held a number of senior roles at other financial institutions and brings a wealth of risk management experience to his new role within the group.
As planned, Bruce Carnegie-Brown stood down from the board in November 2014. Following Bruce's departure, Bridget Macaskill was appointed chairman of the remuneration committee and Geoffrey Howe was appointed senior independent director.
Outlook
We remain confident that our strategy and proven business model will continue to deliver both attractive propositions for our clients, and long-term value for our shareholders.
We see continued opportunities for growth in the Banking division, whilst maintaining our prudent risk profile and focus on returns.
Winterflood is well positioned but remains sensitive to market conditions.
In Asset Management we expect to see continued net inflows and increasing profitability.
Overall, the group remains well positioned to continue to deliver good results.
FINANCIAL REVIEW
Continued Strong Performance
Close Brothers has delivered another year of strong performance, with adjusted operating profit growth of 16% to 224.9 million (2014: 193.7 million), adjusted earnings per share ("EPS") growth of 19% to 120.5p (2014: 101.0p) and a further improvement in return on opening equity to 19.5% (2014: 17.9%).
All three of our divisions delivered a good performance in 2015. The Banking division remains the key driver of the group's growth, delivering a 15% uplift in adjusted operating profit to 208.7 million (2014: 181.6 million), with 8.5% loan book growth to 5.7 billion, helped by a strong net interest margin and further improvement in the bad debt ratio. Winterflood experienced difficult trading conditions in the first half but remained consistently profitable, delivering 24.6 million adjusted operating profit (2014: 26.6 million) in the period as strong performance in the investment trust business and a one-off investment gain helped to offset weaker trading revenues. Asset Management continues to make progress in growing client assets and underlying profitability, as well as benefitting from non-recurring income related to our former private equity business, to deliver 80% adjusted operating profit growth to 17.8 million (2014: 9.9 million).
Group Income Statement
 2015
 2014
 Change
 million
 million
 %
Adjusted operating income
689.5
627.9
10
Adjusted operating expenses
(422.7)
(390.1)
8
Impairment losses on loans and advances
(41.9)
(44.1)
(5)
Adjusted operating profit
224.9
193.7
16
 Banking
208.7
181.6
15
 Securities
24.6
26.6
(8)
 Asset Management
17.8
9.9
80
 Group
(26.2)
(24.4)
7
Amortisation of intangible assets on acquisition
(5.0)
(4.9)
2
Operating profit before tax
219.9
188.8
16
Tax
(45.4)
(43.2)
5
Non-controlling interests
-
(0.4)
Profit attributable to shareholders from continuing operations
174.5
145.2
20
Profit from discontinued operations, net of tax
11.2
4.6
Profit attributable to shareholders from continuing and discontinued operations
185.7
149.8
24
Adjusted basic earnings per share (continuing operations)
120.5p
101.0p
19
Basic earnings per share (continuing operations)
117.8p
98.4p
20
Basic earnings per share (continuing and discontinued operations)
125.4p
101.5p
24
Ordinary dividend per share
53.5p
49.0p
9
Return on opening equity
19.5%
17.9%
Total revenues increased 10% year-on-year to 689.5 million (2014: 627.9 million) driven primarily by strong growth in net interest and fee income in the Banking division and further growth in Asset Management, although income in Securities declined marginally.
We continue to invest in people, products and systems to sustain and further develop our business model. As a result adjusted operating expenses increased 8% to 422.7 million (2014: 390.1 million) primarily driven by higher volume related costs and continued investment to support growth in the Banking division. Securities costs have remained broadly stable, while costs in Asset Management increased only modestly reflecting the operating leverage in the division.
Overall, the expense/income and compensation ratios (total staff costs on adjusted operating income) both improved to 61% (2014: 62%) and 36% (2014: 37%) respectively.
The group continues to benefit from its disciplined approach to underwriting and primarily secured lending model as well as the benign credit environment. As a result, impairment losses declined and the bad debt ratio fell for the sixth consecutive year to 0.8% (2014: 0.9%), despite the strong loan book growth over the same period.
Overall, this resulted in strong adjusted operating profit growth of 16% to 224.9 million (2014: 193.7 million) which includes the group expenses of 26.2 million (2014: 24.4 million). The operating margin increased slightly to 33% (2014: 31%).
After amortisation of intangible assets of 5.0 million (2014: 4.9 million), profit attributable to shareholders increased 20% to 174.5 million (2014: 145.2 million). The effective tax rate declined to 21% (2014: 23%), in line with the UK corporation tax rate.
In July 2015, draft legislation was published in relation to a corporation tax surcharge of 8% on banking sector profits from 1 January 2016, together with a reduction in the underlying corporation tax rate from 20% to 18% by 2020. We will continue to monitor this legislation and its impact on our tax rate.
Our adjusted EPS from continuing operations increased 19% or 19.5p to 120.5p (2014: 101.0p), ahead of the 16% increase in adjusted operating profit due to the reduction in effective tax rate. 
Our reported basic EPS, which includes amortisation of intangible assets, increased 20% to 117.8p (2014: 98.4p) on a continuing basis. Basic EPS including continuing and discontinued operations increased 24% to 125.4p (2014: 101.5p), which includes the trading result and profit on disposal of Close Brothers Seydler.
Simple and Transparent Balance Sheet
During the year, the overall structure of the group's high quality and transparent balance sheet has remained unchanged, and we have maintained our prudent capital, funding and liquidity positions. Our balance sheet remains simple and is predominantly made up of loans and advances to customers, which are short-term in nature and over 90% secured, cash and loans and advances to banks and settlement balances held within our Securities division.
Total assets increased by 256.9 million to 8.0 billion, due to an 8.5% increase in loans and advances to customers to 5,737.8 million (31 July 2014: 5,289.7 million) which account for the significant majority of the balance sheet at 72% (31 July 2014: 69%) of assets. Borrowings increased 351.6 million to 1,792.6 million (31 July 2014: 1,441.0 million) to fund the loan book growth.
Net settlement balances declined 34.8 million to 77.6 million due to the disposal of Close Brothers Seydler and lower trading activity at Winterflood.
Total equity increased to 1,009.9 million (31 July 2014: 917.6 million) reflecting strong profitability in the year, partially offset by dividend payments of 74.3 million. The return on group assets improved to 2.3% from 1.9% in 2014.
Group Balance Sheet
31 July
2015
 million
31 July
2014
 million
Assets
Cash and loans and advances to banks
1,122.6
1,259.2
Settlement balances, long trading positions and loans to money brokers
481.9
634.8
Loans and advances to customers
5,737.8
5,289.7
Non-trading debt securities
135.4
45.6
Intangible assets
144.2
146.3
Other assets
335.4
324.8
Total assets
7,957.3
7,700.4
Liabilities
Settlementbalances,shorttrading positions and loans from money brokers
404.3
522.4
Deposits by banks
35.1
49.6
Deposits by customers
4,481.4
4,513.7
Borrowings
1,792.6
1,441.0
Other liabilities
234.0
256.1
Total liabilities
6,947.4
6,782.8
Equity
1,009.9
917.6
Total liabilities and equity
7,957.3
7,700.4
Diverse and conservative funding position
Our conservative approach to funding and liquidity is a core part of our business model. Our Treasury function provides funding for our lending businesses from a diverse range of sources, including retail and corporate customer deposits, secured and unsecured loan facilities and bonds, and maintains a prudent maturity profile at all times. As a result, we expect to meet the requirements for the new funding and liquidity ratios proposed under the Capital Requirements Directive ("CRD IV") when they come into force.
In 2015 we have taken advantage of favourable market conditions to strengthen our funding position whilst at the same time reducing the overall funding costs for our business. We have further diversified our funding sources by drawing down 375 million from the government's Funding for Lending Scheme secured against a portion of the asset finance loan book. We have also renewed 945 million of facilities and since the year end we have completed a private placement of a 25 million bond.
Total funding increased 392.4 million or 6% in the year to 7,520.3 million (31 July 2014: 7,127.9 million) and accounted for 131% (31 July 2014: 135%) of the loan book. This reflects a 321.0 million increase in drawn and undrawn facilities increasing to 1,512.2 million (31 July 2014: 1,191.2 million), reflecting participation in the government's Funding for Lending Scheme.
Customer deposits remained broadly stable at 4,481.4 million (31 July 2014: 4,513.7 million) as did senior unsecured bonds at 516.8 million (31 July 2014: 505.4 million).
Term funding (funding with a maturity greater than 12 months) increased by 9% to 4,018.7 million (31 July 2014: 3,699.5 million) due to participation in the Funding for Lending Scheme, which runs for four years, and the facility renewals. At 31 July 2015, the loan book was 70% covered by term funding (31 July 2014: 70%) with an average maturity of 31 months (31 July 2014: 30 months), more than double the maturity of the loan book of 14 months (31 July 2014: 14 months).
Group Funding
 31 July
 2015
  million
31 July
2014
 million
Change
 million
Deposits by customers
4,481.4
4,513.7
(32.3)
Drawn and undrawn facilities1
1,512.2
1,191.2
321.0
Senior unsecured bonds
516.8
505.4
11.4
Equity
1,009.9
917.6
92.3
Total available funding
7,520.3
7,127.9
392.4
1Includes 245.0 million (31 July 2014: 265.0 million) of undrawn facilities and excludes 8.6 million (31 July 2014: 9.4 million) of non-facility overdrafts included in borrowings.
Group Funding Maturity Profile
Less than
one year
 million
One to
two years
 million
Greater than
two years
 million

Total
 million
Deposits by customers
3,330.9
851.2
299.3
4,481.4
Drawn and undrawn facilities 
152.2
643.4
716.6
1,512.2
Senior unsecured bonds
18.5
199.4
298.9
516.8
Equity
-
-
1,009.9
1,009.9
Total available funding at 31 July 2015 
3,501.6
1,694.0
2,324.7
7,520.3
Total available funding at 31 July 2014
3,428.4
1,777.1
1,922.4
7,127.9
Prudent approach to managing liquidity
The group takes a conservative approach to liquidity management, and the majority of our liquidity requirements and surplus funding are held in the form of high quality liquid assets. 
At 31 July 2015, our treasury assets totalled 1,173.4 million (31 July 2014: 1,217.3 million), of which 1,058.1 million (31 July 2014: 1,217.3 million) comprised high quality liquid assets, principally in the form of deposits with the Bank of England. From time to time we also place surplus funding in certificates of deposits ("CDs") or other liquid securities to maximise yield. At the year end, we held 115.3 million (31 July 2014: nil) in CDs.
We regularly assess our long and short-term liquidity requirements including extensive stress testing, with a clearly defined risk appetite. Therefore, we hold a prudent liquidity position at all times relative to both internal and external requirements, and expect to comfortably meet the Liquidity Coverage Ratio requirements under CRD IV when they come into force. 
Treasury Assets
31 July
2015
 million
31 July
2014
 million
Change
 million
Gilts 
20.1
45.6
(25.5)
Bank of England deposits
1,038.0
1,171.7
(133.7)
High quality liquid assets
1,058.1
1,217.3
(159.2)
Certificates of deposit
 115.3
 -
115.3
Total treasury assets
1,173.4
1,217.3
(43.9)
Credit ratings upgraded by Moody's
In May 2015, Moody's Investor Services ("Moody's") upgraded its long-term rating for Close Brothers Group ("CBG") and Close Brothers Limited ("CBL") to A3/P2 from Baa1/P2 and Aa3/P1 from A3/P2, respectively, both with stable outlooks. Earlier in the year, Fitch Ratings reaffirmed its ratings for CBG and CBL at A/F1, both with stable outlooks.
The rating upgrade reflects our proven business model, consistent track record through the cycle and prudent approach to funding and capital management, as well as the implementation of Moody's new bank rating methodology.
Group Capital Position
31 July
2015
 million
31 July
2014
 million
Common equity tier 1 capital ratio
13.7%
13.1%
Total capital ratio
14.3%
14.3%
Leverage ratio1
10.2%
9.2%
Common equity tier 1 capital
 813.2
710.8
Total regulatory capital
848.0
780.4
Risk weighted assets
5,932.1
5,445.8
1 The leverage ratio is calculated using the 2014 Basel Committee methodology as required by the Prudential Regulation Authority. It is calculated as Tier 1 capital as a percentage of total balance sheet assets, adjusting for certain capital deductions, including intangible assets, and off balance sheet exposures.
Maintaining a strong capital position 
We have always maintained a strong and prudent capital position, which in recent years has allowed us to invest in our business and consistently deliver strong loan book growth while at the same time meeting increasingly demanding regulatory requirements. In 2015, our capital position improved further with a common equity tier 1 capital ratio of 13.7% (31 July 2014: 13.1%) and a leverage ratio of 10.2% (31 July 2014: 9.2%), both comfortably ahead of minimum regulatory requirements. This reflects the strong profitability in the period, more than offsetting the impact of the growing loan book.
Common equity tier 1 capital increased to 813.2 million (31 July 2014: 710.8 million), reflecting profit for the year of 185.7 million, partly offset by the deduction for foreseeable dividend payments and other reserve movements. Total risk weighted assets increased 9% to 5,932.1 million (31 July 2014: 5,445.8 million), predominantly due to the increased credit and counterparty risk resulting from loan book growth in the period. Risk weighted assets in respect of operational risk also increased reflecting growth across the group, whilst market risk reduced due to the disposal of Close Brothers Seydler and lower trading in Winterflood.
Our current capital position is strong and our existing ratios are comfortably ahead of current requirements. However, the regulatory environment continues to evolve, with capital requirements across the industry being reviewed by both UK and international regulators, which could lead to changes in the future. We are confident that our strong capital position, the quality of our assets and overall prudent approach to managing our business and financial resources ensure we can absorb any future changes, while retaining the flexibility to pursue growth opportunities.
BUSINESS REVIEW
Banking
Key Financials

2015
 2014
Change
 million
  million
%
Operating income
498.6
446.7
12
Net interest and fees on loan book1
485.2
427.3
14
Retail
181.1
164.6
10
Commercial
207.3
187.3
11
Property
96.8
75.4
28
Treasury income
13.4
19.4
(31)
Adjusted operating expenses
(248.0)
(221.0)
12
Impairment losses on loans and advances
(41.9)
(44.1)
(5)
Adjusted operating profit
208.7
181.6
15
Key Performance Indicators
Net interest margin2
8.8%
8.6%
Bad debt ratio3
0.8%
0.9%
Expense/income ratio4
50%
49%
Return on opening equity5
27%
25%
Return on net loan book6
3.8%
3.7%
1 Includes 381.2 million (2014: 332.2 million) net interest income and 104.0 million (2014: 95.1 million) other income. Other income includes net fees and commissions, operating lease income, and other miscellaneous income.
2 Net interest and fees on average net loans and advances to customers.
3 Impairment losses on average net loans and advances to customers.
4 Adjusted operating expenses on operating income.
5 Adjusted operating profit after tax and non-controlling interests on the division's opening equity, excluding non-controlling interests. 
6 Adjusted operating profit on average net loans and advances to customers.
Delivering sustainable growth and strong returns over the long term
The Banking division's strategy remains unchanged: to deliver sustainable growth and strong returns throughout the economic cycle. To do this, we continuously invest in our business model to maintain our local presence and leading position in our chosen specialist markets, in order to build long-term client relationships. This strategy has driven strong performance for the business which delivered its sixth consecutive year of double-digit profit growth in 2015. 
In recent years, the division has achieved exceptionally strong growth, which combined with improving economic conditions and our disciplined approach to underwriting has resulted in reduced impairments and increasingly strong returns. As we continue to see a gradual increase in the supply of credit and a return of competition in some of our key markets, we remain focused on maintaining the high quality of our loan book and ensuring that we price risk appropriately. This will enable us to continue our long track record of delivering strong returns and sustainable growth through the cycle. 
Distinctive business model drives strong financial performance 
The Banking division has again delivered solid growth and strong returns in 2015. Adjusted operating profit increased 15% to 208.7 million (2014: 181.6 million) due to a 12% increase in adjusted operating income and lower impairment losses. As a result, the division's return on opening equity improved to 27% (2014: 25%) and the return on net loan book increased to 3.8% (2014: 3.7%). 
Operating income increased 12% to 498.6 million (2014: 446.7 million) driven by increases across all our businesses, with particularly strong growth in Property which increased 28% to 96.8 million (2014: 75.4 million). The net interest margin remained strong at 8.8% (2014: 8.6%), reflecting our focus on maintaining our margins and pricing risk appropriately as competition increases and supported by a modest decline in funding costs. Treasury and other income declined slightly to 13.4 million (2014: 19.4 million).
The bad debt ratio has improved steadily in recent years and declined further in 2015 to 0.8% (2014: 0.9%). The improvement in the year was principally driven by lower impairment charges in Commercial and Property, and reflects our ongoing focus on credit quality and the favourable economic conditions.
Adjusted operating expenses increased in line with income, up 12% to 248.0 million (2014: 221.0 million) reflecting an increase in volume related costs and continued investment in our service led business model to deliver further growth and consistent returns over the long term. Specifically, higher staff costs reflect increased headcount in our operational and control functions to support loan book growth and ensure we operate effectively in our regulated environment. IT costs also increased to meet the continued need to invest in our systems and technology to enhance our speed to market and customer focused service proposition. As a result the expense/income ratio has marginally increased to 50% (2014: 49%), whilst the compensation ratio remained stable at 27% (2014: 27%).
Continued loan book growth 
We have a track record of consistent growth through the cycle and delivered good growth in the year across our loan book despite a gradual increase in the supply of credit and increasing competition in some of our key markets.
In the 12 months to 31 July 2015, the overall loan book increased 8.5% to 5.7 billion (31 July 2014: 5.3 billion). Most importantly this growth was achieved with no change to our strict risk and return criteria and its key characteristics remained unchanged, with an average duration of 14 months (31 July 2014: 14 months) and around 90% secured.
Asset finance continues to deliver good growth due to our strong customer relationships and direct lending capabilities. In motor finance, strong demand in the overall car market has allowed us to deliver further loan book growth whilst maintaining our robust margins in the face of increasing competition. Property remains the area of highest growth in the period with continued strong demand for development finance.
Loan Book Analysis
31 July
2015
31 July
2014
Change
 million
 million
%
Retail
2,266.0
2,092.8
8.3
Motor finance
1,600.3
1,458.9
9.7
Premium finance
665.7
633.9
5.0
Commercial
2,172.8
2,047.2
6.1
Asset finance
1,796.2
1,656.0
8.5
Invoice finance
376.6
391.2
(3.7)
Property
1,299.0
1,149.7
13.0
Closing loan book
5,737.8
5,289.7
 8.5
Overall, the Retail loan book increased 8.3% to 2,266.0 million (31 July 2014: 2,092.8 million) in the 12 months to 31 July 2015. The motor finance loan book increased 9.7% to 1,600.3 million (31 July 2014: 1,458.9 million) as underlying growth in car market volumes and successful sales campaigns in the second half offset increased competition. The premium finance book increased 5.0% to 665.7 million (31 July 2014: 633.9 million) reflecting new business from both new and existing customers.
The Commercial loan book increased 6.1% to 2,172.8 million (31 July 2014: 2,047.2 million) driven by an 8.5% increase in asset finance to 1,796.2 million (31 July 2014: 1,656.0 million) due to good levels of new business across all sectors and the benefits of our growth initiatives in Ireland and energy finance. Invoice finance reduced by 3.7% to 376.6 million (31 July 2014: 391.2 million) in a market that continues to be highly competitive.
In Property, we continue to benefit from our strong positioning in the residential development market as we continued to see solid loan book growth in 2015 of 13.0% to 1,299.0 million (31 July 2014: 1,149.7 million). We have maintained our strict and consistent lending criteria throughout this period of increased demand and continue to lend at conservative loan to values focusing primarily on residential property development in the South East.
Well positioned for further growth at attractive margins 
We remain confident in the outlook for the Banking division and our ability to deliver further growth and good returns over the long term. To do this we will continue to invest in our tried and tested business model, which is built upon strong customer relationships and expertise in our chosen markets which deliver high levels of repeat business. We will also deliver further investment in both people and technology to adapt to changes in the wider regulatory and market environments as they continue to evolve.
We continue to see opportunities for growth and we will maximise these opportunities by investing in our people to extend our reach and distribution capacity in existing markets and looking at new initiatives in adjacent markets. At the same time we will remain focused on the quality of our lending to support strong returns over the long term.
BUSINESS REVIEW
Securities 
Key Financials (continuing operations)1
2015
 million
2014
 million
Change
%
Operating income2
94.6
96.1
(2) 
Operating expenses
(70.0)
(69.5)
1
Adjusted operating profit2
24.6
26.6
(8)
Key Performance Indicators
Average bargains per day ('000)
60.5
55.7
Operating margin3
26%
28%
Return on opening equity4
26%
28%
1 Results from continuing operations exclude Close Brothers Seydler, the sale of which was completed on 5 January 2015 and has been classified as a discontinued operation under IFRS 5. 
2 Operating income and adjusted operating profit include 6.8 million and 3.5 million respectively relating to the disposal of Euroclear shares. 
3 Adjusted operating profit on operating income.
4 Adjusted operating profit after tax and non-controlling interests on opening equity, excluding non-controlling interests. Opening equity relates to Winterflood only and excludes the brought forward equity of Seydler due to its disposal in the year.
Solid result despite mixed market conditions
Winterflood has maintained its leading market position and remained profitable by maximising revenue opportunities in all market conditions, benefiting from its experienced traders, proprietary technology and tight risk controls.
Winterflood experienced mixed market conditions throughout the financial year, with periods of increased volatility due to economic and political uncertainty, and the UK equity markets in general seeing lower levels of activity compared to 2014. 
Against this tough market backdrop, Winterflood has provided continuous liquidity to clients whilst maintaining consistent profitability and its variable cost model has allowed it to deliver good returns in the period with both operating margin and return on opening equity broadly stable at 26% (2014: 28%) and 26% (2014: 28%) respectively.
Diverse business model drives consistent profitability
Winterflood's operating income remained broadly stable at 94.6 million (2014: 96.1 million). This reflects a significant decline in trading revenues with lower activity and income seen across most markets, but particularly in AIM which was impacted by the weakness in commodity prices. This decline was broadly offset by a particularly strong year for investment trust activity, as well as proceeds from the Euroclear disposal in the first half. The relative stability of the division's income under these conditions illustrates the resilience and diversity of Winterflood's business model.
Total bargains and average bargains per day increased 9% to 15.3 million (2014: 14.1 million) and 60,494 (2014: 55,749) respectively, as Winterflood maintained its leading market position and increased the level of international trading. Income per bargain (excluding the income relating to the disposal of Euroclear shares) decreased to 5.73 (2014: 6.81) reflecting the adverse trading conditions seen in the first half and an increase in lower margin international trades. As a result the number of loss days increased to 14 (2014: four), the majority of which were in the first half.
Operating expenses increased slightly to 70.0 million (2014: 69.5 million) with lower staff costs offset by higher settlement fees due to increased bargains. As a result, the expense/income ratio increased slightly to 74% (2014: 72%) while the compensation ratio has remained broadly stable at 47% (2014: 48%).
Overall, this resulted in an 8% decline in adjusted operating profit to 24.6 million (2014: 26.6 million), which includes a 3.5 million benefit from the partial disposal of a long standing shareholding in Euroclear. 
Well positioned
Market conditions since the year end have been challenging but we are confident that our consistent strategy and robust business model will enable us to provide continuous liquidity and remain profitable in a variety of market conditions. 
Close Brothers Seydler disposal completed
During the first half of the year we completed the sale of Close Brothers Seydler. The profit on disposal of 10.3 million and the profit after tax of 0.9 million have been classified as discontinued operations and the results for 2014 have been restated. As a result, going forward the operations of the Securities division will relate exclusively to Winterflood.
BUSINESS REVIEW
Asset Management
Key Financials
2015
2014
Change
 million
 million
%
Operating income
95.6
84.4
13
Incomeon client assets
90.2
83.8
8
Advice and other services1
36.1
36.6
(1)
Investment management
54.1
47.2
15
Other income2
5.4
0.6
Adjusted operating expenses
(77.8)
(74.5)
4
Adjusted operating profit
17.8
9.9
80
Key Performance Indicators
Total client assets ( billion)
10.8
9.7
11
Revenue margin (basis points)3
88
89
Operating margin
19%
12%
Return on opening equity4
39%
25%
1 Income from advice to private and corporate clients and self directed services, excluding investment management income. 
2 Interest income and expense, income on principal investments and other income. 
3 Income from advice and other services and investment management over average client assets.
4 Adjusted operating profit after tax and non-controlling interests on opening equity, less non-controlling interests. 
Continued good progress
Asset Management has continued to deliver good growth in assets and improved profitability in 2015. We continue to see solid demand for our integrated advice and investment management services and the business remains well positioned to benefit from the ongoing regulatory and demographic changes.
The division delivered adjusted operating profit of 17.8 million (2014: 9.9 million), resulting in an improved operating margin of 19% (2014: 12%) and a return on opening equity of 39% (2014: 25%). Excluding a 4.4 million benefit from non-recurring private equity income, adjusted operating profit increased 35% to 13.4 million, with an operating margin of 15%.
Income on client assets increased 8% to 90.2 million (2014: 83.8 million), reflecting higher investment management revenues driven by solid growth in managed assets, offset by a slight decline in advice and other services. As a result, the revenue margin remained broadly stable at 88 basis points (2014: 89 basis points).
Other income increased to 5.4 million (2014: 0.6 million) due to the one-off income from our former private equity business. As a result, total operating income increased 13% to 95.6 million (2014: 84.4 million). 
Operating expenses increased by 4% to 77.8 million (2014: 74.5 million), less than the growth in income, reflecting the broadly stable fixed cost base and operating leverage within the business. This resulted in an improvement in both the expense/income ratio to 81% (2014: 88%) and the compensation ratio to 53% (2014: 58%).
Strong growth in client assets
Total client assets increased 11% year-on-year to 10.8 billion (31 July 2014: 9.7 billion), reflecting both solid net inflows and positive market movements with continued good demand for our integrated advice and investment management proposition.
We continue to see strong growth in our core investment management products, with good inflows from both our own advisers and investment managers and particularly from third party IFAs and other intermediaries. We also continue to deliver consistent investment performance for our clients, with three out of our five Close Portfolio Funds delivering top quartile performance over the last year.
Net inflows into our managed assets increased year-on-year to 700 million or 10% of opening total managed assets (2014: 554 million or 9%), while market movements added 374 million, benefiting from rising equity markets. As a result, total managed assets increased 16% in the year to 8.0 billion (31 July 2014: 6.9 billion).
This includes 2.7 billion (31 July 2014: 2.4 billion) of assets in our integrated advice and investment management proposition, a 14% increase year-on-year reflecting both strong new business levels and the ongoing migration of advised assets into our integrated investment management offering.
As a result, advised only assets remained broadly stable year-on-year at 2.8 billion resulting in overall growth in total advised assets of 7% to 5.5 billion (31 July 2014: 5.2 billion). 
Movement in Total Client Assets
2015 
 million
2014 
 million
Change
%
Total managed assets at 1 August
6,922
6,193
12
 Inflows
1,477
1,128
31
 Outflows
(777)
(574)
35
Net inflows
700
554
26
Market movements
374
175
114
Total managed assets at 31 July1
7,996
6,922
16
Advised only assets at 31 July2
2,797
2,783
1
Total client assets at 31 July 
10,793
9,705
11
1 Total managed assets include 2.7 billion (31 July 2014: 2.4 billion) of assets that are both advised and managed.
2 Total advised assets of 5.5 billion at 31 July 2015 comprise 2.8 billion of advised only assets and 2.7 billion of assets that are both advised and managed.
Since the year end we have entered into an agreement regarding the sale of our corporate advice and investment management activities which we expect to complete before the end of the calendar year. This transaction further focuses our business around our core personal advice and wealth management proposition, where we see greater opportunities for growth and operating leverage.
The activities disposed of represented 711 million of advised assets and 652 million of managed assets as at 31 July 2015, and contributed income of 5.8 million and adjusted operating profit of 0.7 million in the 2015 financial year.
Well positioned for further growth
Our business is well positioned for future growth given ongoing regulatory and demographic changes. We have a strong client offering covering a full range of financial planning advice and investment management services, distributed directly to clients through our own advisers and high net worth investment managers and an outsourced investment management offering to third party IFAs.
We continue to invest in the business to support its growth, providing training and development programmes for our advisers and improving internal processes to increase efficiency and accelerate the growth of both new business and, where appropriate, migration of existing advised assets into our range of investment management propositions.
We believe the UK government's recently announced changes to the pensions market create opportunities for the industry and expect them to increase demand for our products and services in the longer term. We will also continue to look selectively at opportunities to support our organic growth with infill acquisitions and hiring of high quality advisers and investment managers.
Consolidated Income Statement
for the year ended 31 July 2015
2015
20141
 Note
 million
 million
Interest income
528.8
491.2
Interest expense
(132.3)
(139.1)
Net interest income
396.5
352.1
Fee and commission income
195.7
177.9
Fee and commission expense
(30.2)
(27.4)
Gains less losses arising from dealing in securities
72.0
87.3
Other income
55.5
38.0
Non-interest income
293.0
275.8
Operating income
689.5
627.9
Administrative expenses
(422.7)
(390.1)
Impairment losses on loans and advances
7
(41.9)
(44.1)
Total operating expenses before amortisation of intangible 
 assets on acquisition
(464.6)
(434.2)
Operating profit before amortisation of intangible assets 
 on acquisition
224.9
193.7
Amortisation of intangible assets on acquisition
(5.0)
(4.9)
Operating profit before tax
219.9
188.8
Tax
3
(45.4)
(43.2)
Profit after tax from continuing operations
174.5
145.6
Profit from discontinued operations, net of tax
4
11.2
4.6
Profit after tax
185.7
150.2
Profit attributable to non-controlling interests from continuing operations
-
0.4
Profit attributable to shareholders
185.7
149.8
From continuing operations
Basic earnings per share
5
117.8p
98.4p
Diluted earnings per share
5
116.5p
96.9p
From continuing and discontinued operations
Basic earnings per share
5
125.4p
101.5p
Diluted earnings per share
5
124.0p
100.0p
Interim dividend per share paid
6
18.0p
16.5p
Final dividend per share
6
35.5p
32.5p
1 Restated - see note 4.
Consolidated Statement of COMPREHENSIVE INCOME
for the year ended 31 July 2015
2015
20141
 million
 million
Profit after tax 
185.7
150.2
Other comprehensive (expense)/income that may be
 reclassified to income statement from continuing operations
Currency translation losses
(3.0)
(1.7)
(Losses)/gains on cash flow hedging
(5.5)
4.7
(Losses)/gains on equity shares classified as available for sale
(0.5)
0.4
Available for sale investment gains transferred to income statement on disposal
(6.8)
-
Tax relating to items that may be reclassified
2.5
(0.8)
(13.3)
2.6
Other comprehensive (expense)/income that will not be reclassified to 
 income statement from continuing operations
Defined benefit pension scheme losses
(2.0)
(1.6)
Tax relating to items that will not be reclassified
0.4
0.3
(1.6)
(1.3)
Other comprehensive (expense)/income, net of tax from continuing 
 operations
(14.9)
1.3
Other comprehensive expense, net of tax from discontinued operations
(1.2)
(2.5)
Total comprehensive income
169.6
149.0
Attributable to
Non-controlling interests
-
0.4
Shareholders
169.6
148.6
169.6
149.0
1 Restated - see note 4.
Consolidated Balance Sheet
at 31 July 2015
2015
2014
Note
 million
 million
Assets 
Cash and balances at central banks
1,038.0
1,171.8
Settlement balances
398.3
465.8
Loans and advances to banks
84.6
87.4
Loans and advances to customers
7
5,737.8
5,289.7
Debt securities
8
149.5
94.2
Equity shares
9
41.2
76.1
Loans to money brokers against stock advanced
38.4
63.9
Derivative financial instruments
19.7
27.8
Intangible assets
10
144.2
146.3
Property, plant and equipment
148.4
117.0
Deferred tax assets
39.4
31.7
Prepayments, accrued income and other assets
117.8
128.7
Total assets
7,957.3
7,700.4
Liabilities
Settlement balances and short positions
12
404.3
494.0
Deposits by banks
13
35.1
49.6
Deposits by customers
13
4,481.4
4,513.7
Loans and overdrafts from banks
13
381.2
9.4
Debt securities in issue
13
1,365.0
1,354.4
Loans from money brokers against stock advanced
-
28.4
Derivative financial instruments
7.1
19.5
Current tax liabilities
17.9
24.1
Accruals, deferred income and other liabilities
209.0
212.5
Subordinated loan capital
46.4
77.2
Total liabilities
6,947.4
6,782.8
Equity
Called up share capital
37.7
37.7
Share premium account
284.0
283.8
Retained earnings
694.4
589.8
Other reserves
(6.3)
5.2
Total shareholders' equity
1,009.8
916.5
Non-controlling interests 
0.1
1.1
Total equity
1,009.9
917.6
Total liabilities and equity
7,957.3
7,700.4
COnsolidated Statement of CHANGES IN EQUITY
for the year ended 31 July 2015
Other reserves
Called up 
share 
capital
Share premium account
Retained earnings
Available 
for sale movements reserve
Share-based
payments 
reserve
Exchange movements reserve
Cash
flow hedging reserve
Total attributable to equity holders
Non-controlling interests
Total equity
 million
 million
 million
 million
 million
 million
 million
 million
 million
 million
At 1 August 2013
37.7
283.7
511.9
9.1
(13.1)
5.2
(1.7)
832.8
3.7
836.5
Profit for the year
-
-
149.8
-
-
-
-
149.8
0.4
150.2
Other comprehensive 
 (expense)/income
-
-
(1.3)
0.5
-
(4.2)
3.8
(1.2)
-
(1.2)
Total comprehensive 
 income/(expense) 
 for the year
-
-
148.5
0.5
-
(4.2)
3.8
148.6
0.4
149.0
Exercise of options
-
-
-
-
-
-
-
-
-
-
Dividends paid
-
-
(67.1)
-
-
-
-
(67.1)
(0.2)
(67.3)
Shares purchased
-
-
-
-
(7.8)
-
-
(7.8)
-
(7.8)
Shares issued
-
0.1
-
-
-
-
-
0.1
-
0.1
Shares released
-
-
-
-
13.7
-
-
13.7
-
13.7
Other movements
-
-
(5.7)
-
(0.3)
-
-
(6.0)
(2.8)
(8.8)
Income tax
-
-
2.2
-
-
-
-
2.2
-
2.2
At 31 July 2014
37.7
283.8
589.8
9.6
(7.5)
1.0
2.1
916.5
1.1
917.6
Profit for the year
-
-
185.7
-
-
-
-
185.7
-
185.7
Other comprehensive 
 (expense)/income
-
-
(1.6)
(6.3)
-
(3.8)
(4.4)
(16.1)
-
(16.1)
Total comprehensive 
 income/(expense) 
 for the year
-
-
184.1
(6.3)
-
(3.8)
(4.4)
169.6
-
169.6
Exercise of options
-
0.1
-
-
-
-
-
0.1
-
0.1
Dividends paid
-
-
(74.3)
-
-
-
-
(74.3)
(0.1)
(74.4)
Shares purchased
-
-
-
-
(18.2)
-
-
(18.2)
-
(18.2)
Shares issued
-
0.1
-
-
-
-
-
0.1
-
0.1
Shares released
-
-
-
-
20.5
-
-
20.5
-
20.5
Other movements
-
-
(8.3)
-
0.7
-
-
(7.6)
(0.9)
(8.5)
Income tax
-
-
3.1
-
-
-
-
3.1
-
3.1
At 31 July 2015
37.7
284.0
694.4
3.3
(4.5)
(2.8)
(2.3)
1,009.8
0.1
1,009.9
Consolidated Cash Flow Statement
for the year ended 31 July 2015
2015
20141
Note
 million
 million
Net cash (outflow)/inflow from operating activities15(a)
(18.0)
339.6
Net cash (outflow)/inflow from investing activities
Purchase of: 
Property, plant and equipment 
(14.8)
(5.9)
Intangible assets - software
(19.1)
(19.9)
Equity shares held for investment
-
(0.1)
Non-controlling interests15(b)
(1.0)
(7.5)
Sale of:
Property, plant and equipment
0.1
-
Equity shares held for investment
5.6
8.7
Subsidiary15(c) 
23.2
-
(6.0)
(24.7)
Net cash (outflow)/inflow before financing activities 
(24.0)
314.9
Financing activities
Issue of ordinary share capital, net of transaction costs15(d)
0.1
0.1
Purchase of own shares for employee share award schemes
(18.2)
(7.8)
Equity dividends paid
(74.2)
(67.1)
Dividends paid to non-controlling interests
(0.1)
(0.2)
Interest paid on subordinated loan capital and debt financing
(18.6)
(18.6)
Net (decrease)/increase in cash
(135.0)
221.3
Cash and cash equivalents at beginning of year
1,238.7
1,017.4
Cash and cash equivalents at end of year15(e)
1,103.7
1,238.7
1 Restated - see note 4.
THE NOTES
1. Basis of preparation and accounting policies
The financial information contained in this announcement does not constitute the statutory accounts for the years ended 31 July 2015 or 31 July 2014 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts. The accounting policies used are consistent with those set out in the Annual Report 2014 except for the adoption of the following standards, amendments and interpretations with effect from 1 August 2014:
 IFRS 10 "Consolidated financial statements"
 IFRS 11 "Joint arrangements"
 IFRS 12 "Disclosure of interests in other entities"
 IAS 27 "Separate financial statements"
 IAS 28 "Investments in associates"
 IAS 32 "Presentation: Offsetting financial assets and financial liabilities"
 IFRIC 21 "Levies"
 IFRS Annual Improvements 2010 to 2012 and 2011 to 2013.
The adoption of these standards, amendments and interpretations did not have a material impact on the financial statements. 
The financial statements are prepared on a going concern basis. 
Whilst the financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. The company expects to publish full financial statements that comply with IFRS by 16 October 2015. 
The financial information for the year ended 31 July 2015 has been derived from the audited financial statements of Close Brothers Group plc for that year. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the company's Annual General Meeting. The auditor, Deloitte LLP, has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.
2. Segmental analysis
The Executive Committee, which is considered to be the group's chief operating decision maker, manages the group by class of business as determined by the products and services offered and presents the segmental analysis on that basis. The group's activities are organised in three primary operating divisions: Banking, Securities and Asset Management. The Group segment includes the group's central functions which comprise Group Executive, Finance, Marketing, Communications, Investor Relations, Legal, Human Resources, Audit, Compliance, Corporate Development, Company Secretariat and Risk. Group administrative expenses include staff costs, legal and professional fees and property costs attributable to the central functions which support and assist the development of the divisions. Income within Group is typically immaterial and will include interest on cash balances at Group. In the segmental reporting information which follows, Group consists of the central functions described above as well as various non-trading head office companies and consolidation adjustments, in order that the information presented reconciles to the consolidated income statement and balance sheet.
Divisions charge market prices for services rendered to other parts of the group. Funding charges between Banking businesses are determined by the Banking division's Treasury operation taking into account commercial demands. Funding arrangements between other segments is limited. More than 90% of all the group's activities, revenue and assets are located in the UK.
Banking
Securities
Asset Management
Group
Continuing operations
Discontinued
operations
Total
 million
 million
 million
 million
 million
 million
 million
Summary Income 
 Statement for year 
 ended 31 July 2015
Net interest 
 income/(expense)
396.5
(0.9)
0.2
0.7
396.5
-
396.5
Non-interest income
102.1
95.5
95.4
-
293.0
11.7
304.7
Operating income 
498.6
94.6
95.6
0.7
689.5
11.7
701.2
Administrative expenses
(214.6)
(69.0)
(76.4)
(26.3)
(386.3)
(10.4)
(396.7)
Depreciation and 
 amortisation
(33.4)
(1.0)
(1.4)
(0.6)
(36.4)
-
(36.4)
Impairment losses on 
 loans and advances
(41.9)
-
-
-
(41.9)
-
(41.9)
Total operating 
 expenses 
(289.9)
(70.0)
(77.8)
(26.9)
(464.6)
(10.4)
(475.0)
Adjusted operating 
 profit/(loss)1
208.7
24.6
17.8
(26.2)
224.9
1.3
226.2
Amortisation of intangible 
 assets on acquisition
(0.5)
-
(4.5)
-
(5.0)
-
(5.0)
Profit on disposal of 
 discontinued operations
-
-
-
-
-
10.3
10.3
Operating profit/(loss) 
 before tax
208.2
24.6
13.3
(26.2)
219.9
11.6
231.5
Tax
(43.3)
(4.7)
(2.6)
5.2
(45.4)
(0.4)
(45.8)
Non-controlling interests
-
-
-
-
-
-
-
Profit/(loss) after tax and 
 non-controlling interests
164.9
19.9
10.7
(21.0)
174.5
11.2
185.7
External operating 
 income/expense
511.8
94.6
96.5
(13.4)
689.5
11.7
701.2
Inter segment operating 
 (expense)/income
(13.2)
-
(0.9)
14.1
-
-
-
Segment operating 
 income
498.6
94.6
95.6
0.7
689.5
11.7
701.2
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition, profit on disposal of discontinued operations and tax.
The following table provides further detail on operating income: 
2015
2014
 million
 million
Banking
Retail
181.1
164.6
Commercial
207.3
187.3
Property
96.8
75.4
Treasury income
13.4
19.4
Securities
Market-making and related activities
94.6
96.1
Asset Management
Advice and other services
36.1
36.6
Investment management
54.1
47.2
Other income
5.4
0.6
Group
0.7
0.7
Operating income from continuing operations
689.5
627.9
Operating income from discontinued operations
11.7
31.3
Operating income 
701.2
659.2
Banking
Securities
Asset 
Management
Group
Total 
 million
 million
 million
 million
 million
Summary Balance Sheet at 
 31 July 2015
Assets
Cash and loans and advances to banks
1,080.8
20.6
20.9
0.3
1,122.6
Settlement balances, long trading
 positions and loans to money brokers
-
481.9
-
-
481.9
Loans and advances to customers
5,737.8
-
-
-
5,737.8
Non-trading debt securities 
135.4
-
-
-
135.4
Intangible assets
65.7
25.5
52.9
0.1
144.2
Other assets 
283.4
10.7
27.3
14.0
335.4
Total assets
7,303.1
538.7
101.1
14.4
7,957.3
Liabilities
Settlement balances, short trading
 positions and loans from money brokers
-
404.3
-
-
404.3
Deposits by banks
35.1
-
-
-
35.1
Deposits by customers
4,481.4
-
-
-
4,481.4
Borrowings
1,583.7
3.3
-
205.6
1,792.6
Other liabilities
140.8
35.5
41.9
15.8
234.0
Intercompany balances
351.0
23.7
11.6
(386.3)
-
Total liabilities
6,592.0
466.8
53.5
(164.9)
6,947.4
Equity
711.1
71.9
47.6
179.3
1,009.9
Total liabilities and equity
7,303.1
538.7
101.1
14.4
7,957.3
Other segmental information for the year ended 31 July 2015
Property, plant, equipment and 
 intangible asset expenditure
74.7
3.5
2.6
0.1
80.9
Employees (average number)
1,910
232
562
63
2,767
Banking
Securities 
Asset Management
Group
Continuing operations 
Discontinued
operations
Total
 million
 million
 million
 million
 million
 million
 million
Summary Income Statement for
 the year ended 31 July 2014
Net interest 
 income/(expense)
352.9
(1.2)
(0.3)
0.7
352.1
-
352.1
Non-interest income
93.8
97.3
84.7
-
275.8
31.3
307.1
Operating income 
446.7
96.1
84.4
0.7
627.9
31.3
659.2
Administrative expenses
(194.7)
(68.6)
(73.1)
(24.4)
(360.8)
(23.9)
(384.7)
Depreciation and 
 amortisation
(26.3)
(0.9)
(1.4)
(0.7)
(29.3)
(0.5)
(29.8)
Impairment losses on 
 loans and advances
(44.1)
-
-
-
(44.1)
-
(44.1)
Total operating expenses 
(265.1)
(69.5)
(74.5)
(25.1)
(434.2)
(24.4)
(458.6)
Adjusted operating 
 profit/(loss)1
181.6
26.6
9.9
(24.4)
193.7
6.9
200.6
Amortisation of intangible 
 assets on acquisition
(0.5)
-
(4.4)
-
(4.9)
-
(4.9)
Profit on disposal of 
 discontinued operations
-
-
-
-
-
-
-
Operating profit/(loss) 
 before tax
181.1
26.6
5.5
(24.4)
188.8 
6.9
195.7
Tax
(42.0)
(5.5)
(0.9)
5.2
(43.2)
(2.3)
(45.5)
Non-controlling interests
(0.3)
-
-
(0.1)
(0.4)
-
(0.4)
Profit/(loss) after tax and 
 non-controlling interests
138.8
21.1
4.6
(19.3)
145.2
4.6
149.8
External operating 
 income/expense
459.5
96.1
85.5
(13.2)
627.9
31.3
659.2
Inter segment operating 
 (expense)/income
(12.8)
-
(1.1)
13.9
-
-
-
Segment operating 
 income
446.7
96.1
84.4
0.7
627.9
31.3
659.2
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition, profit on disposal of discontinued operations and tax.
Banking
Securities
Asset 
Management
Group
Total 
 million
 million
 million
 million
 million
Summary Balance Sheet at 31 July 2014
Assets
Cash and loans and advances to banks
1,225.1
16.2
17.5
0.4
1,259.2
Settlement balances, long trading 
 positions and loans to money brokers
-
634.8
-
-
634.8
Loans and advances to customers
5,289.7
-
-
-
5,289.7
Non-trading debt securities 
45.6
-
-
-
45.6
Intangible assets
61.7
28.1
56.4
0.1
146.3
Other assets 
251.6
19.6
34.0
19.6
324.8
Total assets
6,873.7
698.7
107.9
20.1
7,700.4
Liabilities
Settlement balances, short trading 
 positions and loans from money brokers
-
522.4
-
-
522.4
Deposits by banks
49.6
-
-
-
49.6
Deposits by customers
4,510.3
3.4
-
-
4,513.7
Borrowings
1,229.7
6.0
-
205.3
1,441.0
Other liabilities
145.5
40.8
52.7
17.1
256.1
Intercompany balances
330.6
27.1
18.8
(376.5)
-
Total liabilities
6,265.7
599.7
71.5
(154.1)
6,782.8
Equity
608.0
99.0
36.4
174.2
917.6
Total liabilities and equity 
6,873.7
698.7
107.9
20.1
7,700.4
Other segmental information for the year ended 31 July 2014
Property, plant, equipment and 
 intangible asset expenditure
70.1
0.8
0.3
0.7
71.9
Employees (average number)
1,776
321
567
67
2,731
3. Taxation
2015
20141
 million
 million
Tax charged/(credited) to the income statement
Current tax:
UK corporation tax 
49.1
48.8
Foreign tax
2.6
1.2
Adjustments in respect of previous years
(0.2)
0.4
51.5
50.4
Deferred tax:
Deferred tax credit for the current year
(6.5)
(7.2)
Adjustments in respect of previous years
0.4
-
45.4
43.2
Tax on items not (credited)/charged to the income statement
Current tax relating to:
Share-based transactions tax allowance in excess of expense recognised
(4.1)
(3.0)
Deferred tax relating to: 
Cash flow hedging 
(1.1)
0.9
Defined benefit pension scheme
(0.4)
(0.3)
Financial instruments classified as available for sale
(1.0)
(0.1)
Share-based transactions tax allowance in excess of expense recognised
1.0
0.8
Currency translation losses
(0.4)
-
(6.0)
(1.7)
Reconciliation to tax expense
UK corporation tax for the year at 20.7% (2014: 22.3%) on operating profit
45.5
42.2
Effect of different tax rates in other jurisdictions
(0.8)
(0.6)
Disallowable items and other permanent differences
0.3
0.6
Deferred tax impact of reduced UK corporation tax rate
0.2
0.6
Prior year tax provision
0.2
0.4
45.4
43.2
1 Restated - see note 4.
The effective tax rate for the year is 20.6% (2014: 22.9%) which is in line with the UK corporation tax rate of 20.7% (2014: 22.3%). On 8 July 2015, the Government proposed reductions in the UK corporation tax rate to 19% from April 2017 and 18% from April 2020, and an additional 8% tax surcharge on profits of banking companies from January 2016. These proposals are expected to be enacted later in 2015. 
 
Movements in deferred tax assets and liabilities were as follows:
Capital 
allowances
Pension scheme
Share-based payments and deferred compensation
Available for sale assets
Cash flow hedging
Intangible assets
Other 
Total
 million
 million
 million
 million
 million
 million
 million
 million
At 1 August 2013
21.2
(1.2)
11.9 
(1.8)
0.4
(5.2)
0.5
25.8
Credit/(charge) to the 
 income statement
6.6
(0.1)
(0.2)
-
- 
1.0
(0.1)
7.2
Credit/(charge) to other 
 comprehensive income
-
0.3
-
0.1
(0.9)
-
-
(0.5)
Charge to equity
-
-
(0.8)
-
-
-
-
(0.8)
Acquisition
-
-
-
-
- 
-
-
-
At 31 July 2014
27.8
(1.0)
10.9
(1.7)
(0.5)
(4.2)
0.4
31.7
Credit/(charge) to the 
 income statement
4.9
-
0.3
-
-
0.9
-
6.1
Credit/(charge) to other 
 comprehensive income
0.4
0.4
-
1.0
1.1
-
-
2.9
Charge to equity
-
-
(1.0)
-
-
-
-
(1.0)
Acquisition
-
-
-
-
-
(0.3)
-
(0.3)
At 31 July 2015
33.1
(0.6)
10.2
(0.7)
0.6
(3.6)
0.4
39.4
As the group has been and is expected to continue to be consistently profitable, it is appropriate to recognise the 
full deferred tax assets.
4. Discontinued operations
On 5 January 2015, the group completed the sale of Close Brothers Seydler ("Seydler") to Oddo & Cie for a gross cash consideration of 46.5 million (36.4 million), which includes a post year end adjustment of 0.5 million following finalisation of completion accounts. The profit on disposal was 10.3 million. 
Based in Frankfurt, Seydler provided equity and debt capital markets services, securities trading and research primarily in German small and mid-sized companies and was part of the Securities division. 
The transaction fulfilled the requirements of IFRS 5 to be classified as "Discontinued operations" in the consolidated income statement, the results of which are set out below:
Results of discontinued operations 
20151
2014
 million
 million
Operating income
11.7
31.3
Operating expenses
(10.4)
(24.4)
Operating profit before tax
1.3
6.9
Tax
(0.4)
(2.3)
Profit after tax
0.9
4.6
Profit on disposal of discontinued operations, net of tax
10.3
-
Profit from discontinued operations
11.2
4.6
1 Profit after tax is up until the point of disposal.
Cash flow from discontinued operations 
20151
2014
 million
 million
Net cash flow from operating activities
6.6
(9.5)
Net cash flow from investing activities
(0.1)
(0.2)
Net cash flow from financing activities
-
-
1 Up until the point of disposal.
5. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to shareholders and the number of basic weighted average shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effects of all dilutive share options and awards.
2015
20141
Continuing operations
Basic
117.8p
98.4p
Diluted
116.5p
96.9p
Adjusted basic2
120.5p
101.0p
Adjusted diluted2
119.2p
99.5p
Continuing and discontinued operations
Basic
125.4p
101.5p
Diluted
124.0p
100.0p
Discontinued operations
Basic
7.6p
3.1p
Diluted
7.5p
3.1p
1 Restated - see note 4.
2 Excludes amortisation of intangible assets on acquisition, discontinued operations and their tax effects.
2015
20141
 million
 million
Profit attributable to shareholders
185.7
149.8
Less profit from discontinued operations, net of tax
11.2
4.6
Profit attributable to shareholders on continuing operations
174.5
145.2
Adjustments: 
Amortisation of intangible assets on acquisition
5.0
4.9
Tax effect of adjustments
(1.0)
(1.0)
Adjusted profit attributable to shareholders on continuing operations
178.5
149.1
1 Restated - see note 4.
2015
2014
million
million
Average number of shares
Basic weighted
148.1
147.6
Effect of dilutive share options and awards
1.7
2.2
Diluted weighted 
149.8
149.8
6. Dividends
2015
2014
 million
 million
For each ordinary share
Final dividend for previous financial year paid in November 2014: 32.5p 
 (2013: 29.5p)
47.6
42.9
Interim dividend for current financial year paid in April 2015: 18.0p 
 (2014: 16.5p)
26.7
24.2
74.3
67.1
A final dividend relating to the year ended 31 July 2015 of 35.5p, amounting to an estimated 52.4 million, is proposed. This final dividend, which is due to be paid on 24 November 2015 to shareholders on the registerat 16 October 2015, is not reflected in these financial statements.
7. Loans and advances to customers 
On 
demand
Within three months
Between three 
months and 
one year
Between one and two years
Between two and five years
After more than five years
Impairment provisions
Total
 million
 million
 million
 million
 million
 million
 million
 million
At 31 July 2015
45.4
1,543.5
1,797.8
1,108.2
1,254.1
44.9
(56.1)
5,737.8
At 31 July 2014
60.9
1,463.3
1,660.8
1,038.3
1,093.3
21.4
(48.3)
5,289.7
2015
2014
 million
 million
Impairment provisions on loans and advances to customers
At 1 August
48.3
61.9
Charge for the year
41.9
44.1
Amounts written off net of recoveries
(34.1)
(57.7)
At 31 July
56.1
48.3
Loans and advances to customers comprise
Hire purchase agreement receivables
2,552.9
2,341.4
Finance lease receivables
473.0
466.5
Other loans and advances
2,711.9
2,481.8
At 31 July
5,737.8
5,289.7
At 31 July 2015, gross impaired loans were 162.3 million (31 July 2014: 159.9 million) and equate to 3% (31 July 2014: 3%) of the gross loan book before impairment provisions. The majority of the group's lending is secured and therefore the gross impaired loans quoted do not reflect the expected loss.
8. Debt securities
Held for trading
Available for sale
Loans and receivables
Total
 million
 million
 million
 million
Long trading positions 
14.1
-
-
14.1
Certificates of deposit
-
-
115.3
115.3
Gilts 
-
20.1
-
20.1
At 31 July 2015
14.1
20.1
115.3
149.5
Held for trading
Available for sale
Loans and receivables
Total
 million
 million
 million
 million
Long trading positions 
48.6
-
-
48.6
Certificates of deposit
-
-
-
-
Gilts 
-
45.6
-
45.6
At 31 July 2014
48.6
45.6
-
94.2
Movements on the book value of gilts and floating rate notes ("FRNs") comprise:
Available for sale
Gilts
Floating rate notes
Total
 million
 million
 million
At 1 August 2013
46.7
39.4
86.1
Disposals
-
(37.8)
(37.8)
Redemptions at maturity
-
-
-
Currency translation differences
-
(1.6)
(1.6)
Movement in value 
(1.1)
-
(1.1)
At 31 July 2014
45.6
-
45.6
Disposals
-
-
-
Redemptions at maturity
(25.0)
-
(25.0)
Currency translation differences
-
-
-
Movement in value 
(0.5)
-
(0.5)
At 31 July 2015
20.1
-
20.1
9. Equity shares
31 July
31 July
2015
2014
 million
 million
Long trading positions
31.1
56.5
Other equity shares
10.1
19.6
41.2
76.1
Movements on the book value of other equity shares held during the year comprise:
Available 
for sale
Fair value through profit 
or loss
Total
 million
 million
 million
At 1 August 2013
27.1
0.6
27.7
Additions
0.1
-
0.1
Disposals
(8.2)
(0.5)
(8.7)
Currency translation differences
(1.8)
-
(1.8)
Movement in value of: 
Equity shares classified as available for sale
2.3
-
2.3
At 31 July 2014
19.5
0.1 
19.6
Additions
-
- 
-
Disposals
(8.1)
-
(8.1)
Currency translation differences
(0.4)
-
(0.4)
Movement in value of: 
Equity shares classified as available for sale
(1.0)
-
(1.0)
At 31 July 2015
10.0
0.1
10.1
10. Intangible assets
Goodwill
Software
Intangible assets on acquisition
Total
 million
 million
 million
 million
Cost
At 1 August 2013
156.5
51.6
42.4
250.5
Additions
-
19.9
-
19.9
Disposals
-
(2.7)
-
(2.7)
Foreign exchange
(0.4)
-
-
(0.4)
At 31 July 2014
156.1
68.8
42.4
267.3
Additions
0.3
20.3
1.5
22.1
Disposals
(10.4)
(8.1)
-
(18.5)
Foreign exchange
-
-
-
-
At 31 July 2015
146.0
81.0
43.9
270.9
Amortisation and impairment
At 1 August 2013
68.0
28.0
12.9
108.9
Amortisation charge for the year
-
9.8
4.9
14.7
Disposals
-
(2.6)
-
(2.6)
At 31 July 2014
68.0
35.2
17.8
121.0
Amortisation charge for the year
-
13.5
5.0
18.5
Disposals
(6.2)
(6.5)
(0.1)
(12.8)
At 31 July 2015
61.8
42.2
22.7
126.7
Net book value at 31 July 2015
84.2
38.8
21.2
144.2
Net book value at 31 July 2014
88.1
33.6
24.6
146.3
Net book value at 1 August 2013
88.5
23.6
29.5
141.6
Additions in goodwill of 0.3 million relate to the 100% acquisition of Mackay Stewart and Brown Limited, a Scottish Independent Financial Adviser with 72.0 million of client assets, for cash consideration of 1.1 million for the equity of the business. This acquisition is not regarded as material in the context of the group's financial statements and therefore information required for material acquisitions by IFRS 3 has not been disclosed.
The goodwill disposals of 10.4 million relate to the Seydler disposal of 4.2 million, and the write off of fully impaired goodwill of 6.2 million relating to the wind up of Fortune Asset Management Limited. 
Intangible assets on acquisition relates to broker and customer relationships and are amortised over a period of eight to 20 years. 
In the 2015 financial year, 5.0 million (2014: 4.9 million) of the amortisation charge is included in amortisation of intangible assets on acquisition and 13.5 million (2014: 9.8 million) of the amortisation charge is included in administrative expenses shown in the consolidated income statement.
11. Property, plant and equipment
Leasehold
property
Fixtures,
fittings and
equipment
Assets
held under
operating
leases
Motor
vehicles
Total
 million
 million
 million
 million
 million
Cost
At 1 August 2013
9.3
40.9
99.1
1.2
150.5
Additions
0.8
4.6
46.1
0.5
52.0
Disposals
-
(10.6)
(12.5)
(0.5)
(23.6)
At 31 July 2014
10.1
34.9
132.7
1.2
178.9
Additions
7.4
7.7
43.7
-
58.8
Disposals
(0.1)
(8.0)
(11.3)
(0.4)
(19.8)
At 31 July 2015
17.4
34.6
165.1
0.8
217.9
Depreciation
At 1 August 2013
4.4
32.6
23.1
0.7
60.8
Charge for the year
1.3
4.5
13.9
0.3
20.0
Disposals
-
(10.4)
(8.1)
(0.4)
(18.9)
At 31 July 2014
5.7
26.7
28.9
0.6
61.9
Charge for the year
1.6
4.5
16.7
0.1
22.9
Disposals
(0.1)
(7.5)
(7.5)
(0.2)
(15.3)
At 31 July 2015
7.2
23.7
38.1
0.5
69.5
Net book value at 31 July 2015
10.2
10.9
127.0
0.3
148.4
Net book value at 31 July 2014
4.4
8.2
103.8
0.6
117.0
Net book value at 1 August 2013
4.9
8.3
76.0
0.5
89.7
Assets held under operating leases relate to our rentals businesses within the Banking division. In addition to the depreciation charged in the year of 16.7 million (2014: 13.9 million), these assets generated other income of 39.1 million (2014: 32.4 million) and interest and fee expense of 12.5 million (2014: 11.1 million). The gains/(losses) from the sale of assets held under operating leases for the year ended 31 July 2015 was nil (2014: 0.3 million gain). 
12. Settlement balances and short positions 
31 July
31 July
2015
2014
 million
 million
Settlement balances
376.5
444.1
Short positions held for trading:
Debt securities
13.7
34.3
Equity shares
14.1
15.6
27.8
49.9
404.3
494.0
13. Financial liabilities
On demand
Within three
months
Between three months and one year
Between
one and 
two years
Between two and five years
After 
more than 
five years
Total
 million
 million
 million
 million
 million
 million
 million
Deposits by banks
11.5
0.3
22.8
0.5
-
-
35.1
Deposits by customers
154.8
828.4
2,347.7
851.2
299.3
-
4,481.4
Loans and overdrafts 
 from banks
8.6
99.1
123.7
59.9
89.9
-
381.2
Debt securities in issue
11.2
6.7
1.1
747.8
299.3
298.9
1,365.0
At 31 July 2015
186.1
934.5
2,495.3
1,659.4
688.5
298.9
6,262.7
On demand
Within three
months
Between
three months and one year
Between
one and 
two years
Between
two and 
five years
After
more than 
five years
Total
 million
 million
 million
 million
 million
 million
 million
Deposits by banks
21.1
20.0
8.5
-
-
-
49.6
Deposits by customers
165.0
1,256.5
1,532.5
1,399.3
160.4
-
4,513.7
Loans and overdrafts 
 from banks
4.4
5.0
-
-
-
-
9.4
Debt securities in issue
-
6.7
350.5
227.8
470.4
299.0
1,354.4
At 31 July 2014
190.5
1,288.2
1,891.5
1,627.1
630.8
299.0
5,927.1
Of the debt securities in issue, 298.9 million mature on 27 June 2021, 199.4 million mature on 10 February 2017 and 847.7 million relate to the insurance premium and motor loan receivables securitisations.
The group has repurchase agreements at 31 July 2015 (2014: none) whereby 375.0 million Treasury Bills have been drawn and lent in exchange for cash which is included within loans and overdrafts from banks. Residual maturities of the repurchase agreements are as follows:
On demand
Within three
months
Between
three months and one year
Between
one and 
two years
Between
two and 
five years
After
more than 
five years
Total
 million
 million
 million
 million
 million
 million
 million
At 31 July 2015
-
99.1
123.7
59.9
89.9
-
372.6
14. Capital 
At 31 July 2015, the group's common equity tier 1 capital ratio increased to 13.7% (31 July 2014: 13.1%). 
Common equity tier 1 capital increased to 813.2 million (31 July 2014: 710.8 million) primarily due to growth in profit attributable to shareholders.
Risk weighted assets increased to 5,932.1 million (31 July 2014: 5,445.8 million) as a result of growth in credit and counterparty risk associated with the loan book, which was partly offset by a reduction in market risk due to the disposal of Seydler as well as lower trading balances at Winterflood. Notional risk weighted assets for operational risk also increased reflecting increased performance over recent years. 
The composition of capital remained broadly stable with 95.9% (31 July 2014: 91.1%) of the total capital consisting of common equity tier 1 capital.
31 July
31 July
2015
2014
 million
 million
Common equity tier 1 capital
Called up share capital
37.7
37.7
Share premium account 
284.0
283.8
Retained earnings 
694.4
589.8
Other reserves recognised for common equity tier 1 capital
18.3
21.4
Deductions from common equity tier 1 capital
Intangible assets, net of associated deferred tax liabilities
(140.6)
(142.1)
Foreseeable dividend1
(52.4)
(47.7)
Investment in own shares
(25.6)
(27.9)
Pension asset, net of associated deferred tax liabilities
(2.5)
(3.9)
Additional valuation adjustments
(0.1)
(0.3)
Common equity tier 1 capital
813.2
710.8
Tier 2 capital
Subordinated debt2
31.5
60.0
Unrealised gains on available for sale equity shares
3.3
9.6
Tier 2 capital
34.8
69.6
Total regulatory capital
848.0
780.4
Risk weighted assets (notional) - unaudited 
Credit and counterparty credit risk
5,103.2
4,564.5
Operational risk3
753.5
695.5
Market risk3
75.4
185.8
5,932.1
5,445.8
Common equity tier 1 capital ratio
13.7%
13.1%
Total capital ratio 
14.3%
14.3%
1 Under the Regulatory Technical Standard on own funds, a deduction has been recognised at 31 July 2015 and 31 July 2014 
 for a foreseeable dividend being the proposed final dividend as set out in note 6.
2 Under the Capital Requirements Regulation's transitional arrangements, 70% (31 July 2014: 80%) of the principal value of 
 subordinated debt is recognised. 
3 Operational and market risk include a notional adjustment at 8% in order to determine notional risk weighted assets. 
The following table shows a reconciliation between equity and common equity tier 1 capital after deductions:
31 July
31 July
2015
2014
 million
 million
Equity
1,009.9
917.6
Regulatory deductions from equity:
Intangible assets, net of associated deferred tax liabilities
(140.6)
(142.1)
Foreseeable dividend1
(52.4)
(47.7)
Pension asset, net of associated deferred tax liabilities
(2.5)
(3.9)
Additional valuation adjustments
(0.1)
(0.3)
Other reserves not recognised for common equity tier 1 capital: 
Available for sale movements reserve
(3.3)
(9.6)
Cash flow hedging reserve
2.3
(2.1)
Non-controlling interests
(0.1)
(1.1)
Common equity tier 1 capital
813.2
710.8
1 Under the Regulatory Technical Standard on own funds, a deduction has been recognised at 31 July 2015 and 31 July 2014 
 for a foreseeable dividend being the proposed final dividend as set out in note 6.
15. Consolidated cash flow statement reconciliation
31 July
31 July
2015
20141
 million
 million
(a)
Reconciliation of operating profit before tax to net cash inflow from
 operating activities
Operating profit before tax from continuing operations
219.9
188.8
Profit before tax on discontinued operations
11.6
6.9
Tax paid
(53.4)
(35.3)
Depreciation and amortisation 
41.4
34.7
(Increase)/decrease in:
Interest receivable and prepaid expenses
(4.2)
4.9
Net settlement balances and trading positions
22.8
(8.8)
Net loans to/from money broker against stock advanced
(2.9)
0.2
Increase in interest payable and accrued expenses
8.2
15.9
Net cash inflow from trading activities
243.4
207.3
Decrease/(increase) in:
Loans and advances to banks not repayable on demand
1.6
(2.6)
Loans and advances to customers
(448.1)
(644.1)
Assets let under operating leases
(39.8)
(41.4)
Floating rate notes classified as available for sale
-
37.8
Certificates of deposit
(115.3)
-
Debt securities held for liquidity
25.0
-
Other assets less other liabilities
(19.1)
30.5
(Decrease)/increase in:
Deposits by banks
(14.5)
(17.0)
Deposits by customers
(23.0)
498.3
Loans and overdrafts from banks
371.8
(28.2)
Debt securities in issue, net of transaction costs
-
299.0
Net cash inflow from operating activities
(18.0)
339.6
(b)
Analysis of net cash outflow in respect of the purchase of 
 non-controlling interests 
Cash consideration paid
(1.0)
(7.5)
(c)
Analysis of net cash inflow in respect of the sale of a subsidiary
Cash consideration received
36.9
-
Cash and cash equivalents disposed of
(13.7)
-
23.2
-
(d)
Analysis of changes in financing activities
Share capital (including premium) and subordinated loan capital2:
Opening balance
396.5
396.4
Shares issued for cash
0.1
0.1
396.6
396.5
(e)
Analysis of cash and cash equivalents3
Cash and balances at central banks
1,031.2
1,164.7
Loans and advances to banks repayable on demand
72.5
74.0
1,103.7
1,238.7
1 Restated - see note 4.
2 Excludes accrued interest.
3 Excludes Bank of England cash reserve account and amounts held as collateral. 
16. Post balance sheet event
On 14 September 2015, the group agreed the sale of its corporate advice and investment management activities, which are part of the Asset Management division, to JLT Benefit Solutions Ltd. The activities disposed of represented net assets of 0.3 million and operating profit before tax of 0.7 million for the year ended 31 July 2015. The timing for completion is subject to the satisfaction of customary conditions.
Cautionary statement
Certain statements included or incorporated by reference within this preliminary results announcement may constitute "forward-looking statements" in respect of the group's operations, performance, prospects and/or financial condition. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims", "due", "could", "may", "will", "should", "expects", "believes", "intends", "plans", "potential", "targets", "goal" or "estimates". By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this preliminary results announcement should be construed as a profit forecast. This preliminary results announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any sharesor other securities in the company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the sharesand other securities of the company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this preliminary results announcement reflect the knowledge and information available at the time of its preparation.Liability arising from anything in this preliminary results announcement shall be governed by English Law. Nothing in this preliminary results announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws. 

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