CBG — Close Brothers News Story

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Market Cap
£746.40m
Enterprise Value
£1.02bn
Revenue
£790.80m

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REG - Close Bros Grp PLC - Half-year Report

Close BrothersAnnouncement

13/03/2018 07:05

RNS Number : 4828H
Close Brothers Group PLC
13 March 2018
Preliminary Results for the Six Months to 31 January 2018
Good Profit Growth in the First Half¹
The group reported a good performance for the first half, with a 6% increase in adjusted operating profit to 142.3 million and a return on opening equity² of 17.3%
Banking delivered an adjusted operating profit of 128.5 million, up 5% year on year, driven by both Commercial and Retail
The net interest margin was stable and impairments remained low with a bad debt ratio of 0.7%, stable on last year excluding provision releases
The loan book grew by 1.7% to 7.0 billion, up 7% year on year, as we continue to apply our disciplined approach to lending
Winterflood's strong performance continued with operating profit of 14.7 million, 2% up year on year, reflecting consistently high investor trading activity
Asset Management delivered a significant increase in adjusted operating profit to 11.4 million, up 25% year on year, supported by strong net inflows at 13% (annualised) of opening managed assets
The interim dividend per share of 21.0p is up 5% on last year
On a statutory basis, group operating profit before tax increased 5% to 138.6 million
Financial Highlights²
First half
2018 First half
2017 Change
%
Adjusted operating profit 142.3m 134.2m 6
Operating profit before tax 138.6m 131.4m 5
Adjusted basic earnings per share 71.2p 66.6p 7
Basic earnings per share 69.2p 65.1p 6
Dividend per share 21.0p 20.0p 5
Return on opening equity 17.3% 18.0% 
Net interest margin 8.2% 8.2% 
Bad debt ratio 0.7% 0.5%³ 
31 January
2018 31 July
2017 Change
%
Loan book 7.0bn 6.9bn 1.7
Total client assets 11.8bn 11.2bn 5.8
Common equity tier 1 capital ratio  12.7% 12.6% 
Total capital ratio  15.2% 15.2% 
1 Numbers are presented on an adjusted basis, unless indicated otherwise. Adjusted operating profit excludes 3.7 million (2017: 2.8 million) of amortisation of intangible assets on acquisition.
2 Please refer to definitions on page 16.
3 Includes provision releases. Bad debt ratio of 0.7% excluding provision releases.
Preben Prebensen, Chief Executive, said:
"We are pleased with our performance and progress in the first half, delivering higher profit while staying true to our client and customer focused model, and maintaining our prudent and disciplined approach.
All our businesses have achieved a good performance year to date, and we remain well positioned for the full year.
Longer term, we are confident that the consistent application of our business model, along with our strong customer relationships, the expertise of our people and the quality of our service will allow us to continue performing well in all market conditions."
Enquiries
Sophie Gillingham Close Brothers Group plc 020 7655 3844
Eva Hatfield
Liya Dashkina Close Brothers Group plc
Close Brothers Group plc 020 7655 3350
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 20 3936 2999, using participant access code 181169.
Basis of Presentation
Results are presented both on a statutory and an adjusted basis to aid comparability between periods. The adjusted basis excludes exceptional items and amortisation of intangible assets on acquisition.
About Close Brothers
Close Brothers is a leading UK merchant banking group providing lending, deposit taking, wealth management services and securities trading. We employ over 3,200 people, principally in the UK. Close Brothers Group plc is listed on the London Stock Exchange and is a member of the FTSE 250.
BUSINESS OVERVIEW
Close Brothers has delivered a good first half, with a strong contribution from all three divisions. Adjusted operating profit increased 6% to 142.3 million (2017: 134.2 million) and statutory operating profit before tax increased 5% to 138.6 million (2017: 131.4 million). Earnings per share were up 7% on an adjusted basis at 71.2p (2017: 66.6p), and 6% on a statutory basis at 69.2p (2017: 65.1p). Return on opening equity has remained strong at 17.3% (2017: 18.0%) and we are pleased to declare an interim dividend of 21.0p (2017: 20.0p) per share, up 5% year on year.
We have seen no change to the benign credit environment in our lending businesses in the period and market conditions for our Securities and Asset Management businesses remained supportive. In this environment, our focus remains on maintaining the long-term discipline of our business model, bringing service and expertise to our clients and customers, maintaining pricing and underwriting discipline, and investing in a number of infrastructure and new business initiatives.
Good Profitability in the Lending Businesses
The Banking division delivered a good performance across all three lending segments. Adjusted operating profit increased 5% to 128.5 million (2017: 122.7 million) with a stable net interest margin at 8.2% (2017: 8.2%) and a low bad debt ratio of 0.7% (2017: 0.5%).
In Banking, our focus remains on maintaining our strong net interest margin and underwriting discipline in all market conditions. As a result, loan book growth is slower at the current point in the cycle, reflecting continuing high credit supply in several of our markets. Overall the loan book increased 1.7% in the first half, in line with the first half last year.
Within the Retail segment, the Premium Finance business delivered further growth, benefiting from new broker relationships following significant investment in the business in recent years. In Motor Finance, we continue to prioritise our credit quality and margins in a highly competitive market, and as a result the loan book contracted slightly in the period.
Commercial delivered growth in both the loan book and operating profit in the first half. In Asset Finance, the loan book increased 2% despite continued competition, with growth driven by the more specialist product lines. We also achieved good growth in Invoice Finance.
Finally, in Property, the loan book continued to grow driven by consistently strong demand for new build family homes in both London and the regions. The business remains well positioned, with high levels of repeat business and a solid pipeline.
Good Performance in Winterflood and Asset Management
Winterflood's strong trading has continued, with operating profit of 14.7 million (2017: 14.4 million), benefiting from continued investor trading activity and rising markets. Trading was consistently profitable, with no loss days in the period.
Asset Management delivered a significant improvement in performance, with adjusted operating profit of 11.4 million (2017: 9.1 million), up 25% year on year, and an operating margin of 20%. Net inflows increased to 13% of opening managed assets (2017: 3%), reflecting the strength of our client proposition for both advice and investment management. 
Prudent Funding, Liquidity and Capital
The prudent management of our funding, liquidity and capital is a core part of our business model allowing us to grow, invest and pay a dividend, while meeting all regulatory requirements. We have maintained good access to a diverse range of funding markets and our capital ratios remained strong in the period, with a common equity tier 1 capital ratio of 12.7% (31 July 2017: 12.6%) and leverage ratio of 10.7% (31 July 2017: 10.7%).
Outlook
We remain committed to our proven business model, which supports our track record of lending successfully in all stages of the cycle. 
Our Banking division remains well positioned, benefiting from the diversity of its business portfolio and strong customer focus. We remain committed to protecting the margins, maintaining our prudent underwriting and investing to improve and extend our business in new and existing markets.
Winterflood continues to maintain its market-leading position and maximise its trading opportunities, but remains sensitive to any change in market conditions.
The Asset Management division continues to build on the strength of our client proposition and remains focused on growing its asset base.
At this stage, we have seen no significant change in trading conditions since the period end and remain well positioned to deliver a good result for the full year.
OVERVIEW OF FINANCIAL PERFORMANCE
Key Financials
First half
2018
 million 
First half
2017
 million 
Change
%
Operating income 405.5 378.3 7
Adjusted operating expenses (239.4) (226.8) 6
Impairment losses on loans and advances  (23.8) (17.3) 38
Adjusted operating profit 142.3 134.2 6
Banking 128.5 122.7 5
 Retail 42.8 39.9 7
 Commercial 39.7 36.5 9
 Property 46.0 46.3 (1)
Securities 14.7 14.4 2
Asset Management 11.4 9.1 25
Group (12.3) (12.0) 3
Amortisation of intangible assets on acquisition (3.7) (2.8) 32
Operating profit before tax 138.6 131.4 5
Adjusted basic earnings per share 71.2p 66.6p 7
Basic earnings per share 69.2p 65.1p 6
Dividend per share 21.0p 20.0p 5
Return on opening equity 17.3% 18.0% 
Good Performance in the First Half
Adjusted operating profit increased 6% to 142.3 million (2017: 134.2 million) and statutory operating profit before tax increased 5% to 138.6 million (2017: 131.4 million), resulting in an operating margin of 35% (2017: 35%). Return on opening equity ("RoE") remained strong at 17.3% (2017: 18.0%).
The Banking division continued to deliver strong returns and profit growth, with adjusted operating profit up 5% to 128.5 million (2017: 122.7 million). Winterflood, supported by continued investor trading activity, delivered an operating profit of 14.7 million (2017: 14.4 million), ahead of the prior year. Asset Management also performed well, with an adjusted operating profit of 11.4 million (2017: 9.1 million), up 25% year on year, driven by strong net inflows and positive market movements. Group net expenses, which include the central functions such as finance, legal and compliance, risk and human resources, were marginally higher at 12.3 million (2017: 12.0 million).
Operating income increased 7% to 405.5 million (2017: 378.3 million), with higher income in all three divisions. Income in Banking increased 7% with a stable net interest margin of 8.2% (2017: 8.2%), while income in Securities and Asset Management was up 3% and 12% respectively.
Adjusted operating expenses increased 6% to 239.4 million (2017: 226.8 million), driven predominantly by continued growth and investment in the Banking division. Costs in Securities and Asset Management were also up, reflecting higher variable costs due to strong trading performance. Overall, the expense/income ratio improved slightly to 59% (2017: 60%) and the compensation ratio remained stable at 38% (2017: 38%).
Impairments of 23.8 million (2017: 17.3 million) remained low with a bad debt ratio of 0.7% (2017: 0.5%). The increase reflects provision releases of 5.4 million in the comparative period, which did not recur. Excluding these provision releases, the ratio remained stable.
The tax charge in the period was 34.7million (2017: 34.8 million), which corresponds to an effective tax rate of 25% (2017: 26%), reflecting the reduction in the corporation tax rate.
As a result, adjusted basic earnings per share ("EPS") increased 7% to 71.2p (2017: 66.6p). Basic EPS increased 6% to 69.2p (2017: 65.1p).
The interim dividend of 21.0p (2017: 20.0p) represents an increase of 5% from the prior year, reflecting our progressive dividend policy. This interim dividend is due to be paid on 25 April 2018 to shareholders on the register at 23 March 2018.
Results are presented on both a statutory and adjusted basis. The adjusted basis excludes amortisation of intangible assets on acquisition. Adjusted operating profit is reported on a basis consistent with prior periods and is used by management for internal management reporting purposes. Amortisation of intangible assets on acquisition of 3.7 million (2017: 2.8 million) is excluded from adjusted operating profit to present the performance of the group's acquired businesses consistent with its other businesses.
Group Balance Sheet
31 January
2018
 million 31 July
2017
 million
Loans and advances to customers 6,998.4 6,884.7
Treasury assets¹ 1,135.2 1,029.0
Market-making assets² 705.5 643.4
Other assets 802.3 728.1
Total assets 9,641.4 9,285.2
Deposits by customers 5,250.2 5,113.1
Borrowings 2,144.5 2,041.2
Market-making liabilities² 674.4 556.9
Other liabilities 295.1 338.0
Total liabilities 8,364.2 8,049.2
Equity 1,277.2 1,236.0
Total liabilities and equity 9,641.4 9,285.2
1 Treasury assets comprise cash and balances at central banks, and debt securities held to support lending in the Banking division.
2 Market-making assets and liabilities comprise settlement balances, long and short trading positions and loans to or from money brokers.
We maintain a prudent approach to managing our financial resources, which is reflected in our simple and transparent balance sheet. Assets are made up predominantly of loans and advances to customers as well as treasury assets held for liquidity purposes, and settlement balances in our Securities division. Other assets principally comprise intangibles, property, plant and equipment, and prepayments. Liabilities are predominantly made up of customer deposits, and both secured and unsecured borrowings to fund the loan book.
Total assets increased to 9.6 billion (31 July 2017: 9.3 billion), driven predominantly by growth in the loan book and treasury assets. Total liabilities increased 315.0 million to 8.4 billion (31 July 2017: 8.0 billion), due to higher customer deposits and borrowings. Total equity increased to 1.3 billion (31 July 2017: 1.2 billion), with profit in the period partially offset by dividend payments of 59.7million. The group's return on assets remained broadly stable at 2.2% (31 July 2017: 2.1%).
Group Capital Position
31 January
2018
 million 31 July
2017
 million
Common equity tier 1 capital 1,032.3 990.6
Total capital 1,230.3 1,196.2
Risk weighted assets 8,119.6 7,859.0
Common equity tier 1 capital ratio 12.7% 12.6%
Total capital ratio 15.2% 15.2%
Leverage ratio 10.7% 10.7%
The group aims to maintain a strong capital position, which supports our ability to lend through the cycle, invest in our business and pay a progressive dividend to shareholders while continuing to meet all regulatory requirements.
In the first half, the common equity tier 1 ("CET1") capital ratio increased to 12.7% (31 July 2017: 12.6%), reflecting continued profitability and modest loan book growth at this stage in the cycle. CET1 capital increased to 1,032.3 million (31 July 2017: 990.6 million), reflecting 104.0 million of profit for the period, a regulatory deduction for foreseeable dividends of 47.9 million and other movements in reserves and intangibles. Risk weighted assets increased 3% to 8.1 billion (31 July 2017: 7.9 billion), driven by a combination of growth in the period and loan book mix at the period end.
The group's total capital ratio remained stable at 15.2% (31 July 2017: 15.2%), and the leverage ratio remained strong at 10.7% (31 July 2017: 10.7%).
Accordingly, all the group's capital ratios remain comfortably ahead of minimum regulatory requirements. At this stage, we expect limited impact from the changes to the standardised approach issued by the Basel Committee, but we continue to monitor regulatory developments carefully.
We are continuing to progress our plans towards a transition to the Internal Ratings Based approach, which remain at an early stage.
Group Funding¹
31 January
2018
 million 31 July
2017
 million
Customer deposits 5,250.2 5,113.1
Secured funding 1,268.9 1,297.3
Unsecured funding² 1,144.1 1,120.3
Equity 1,277.2 1,236.0
Total available funding 8,940.4 8,766.7
Of which term funding (over one year) 4,703.6 4,766.2
Total funding as % of loan book 128% 127%
Term funding as % of loan book 67% 69%
Average maturity of term funding (excluding equity) 37 months 38 months
Average maturity of funding allocated to loan book³ 21 months 21 months
1 Numbers relate to core funding and exclude working capital facilities at the business level.
2Unsecured funding includes 295.0 million (31 July 2017: 295.0 million) of undrawn facilities.
3 Average maturity of total funding excluding equity and funding held for liquidity purposes.
The main purpose of our treasury function is to manage funding and liquidity to support the lending businesses. We maintain a conservative approach, with diverse funding sources and a prudent maturity profile.
We continue to have access to a wide range of funding sources, including retail and corporate deposits, both secured and unsecured debt, and wholesale facilities. We have made limited use of the Term Funding Scheme, which represents c.4% of our total funding at the balance sheet date.
In the first half, total funding increased to 8.9 billion (31 July 2017: 8.8 billion), accounting for 128% of the loan book. The increase was driven by higher deposits, up 3% to 5.3 billion (31 July 2017: 5.1 billion), with growth principally in corporate deposits.
We also maintain a prudent funding maturity. At 31 January 2018, term funding with a residual maturity over one year covered 67% (31 July 2017: 69%) of the loan book, with the average maturity of funding allocated to the loan book remaining at 21 months (31 July 2017: 21 months), significantly ahead of the loan book maturity of 14 months (31 July 2017: 14 months).
The overall funding environment remains favourable and our average cost of funding reduced to 1.6% (2017: 1.9%), reflecting new lower cost funding, including a second public Motor securitisation placing of 200 million in November 2017.
In the period, we have also initiated an investment programme to implement a new deposit platform, which will allow us to build an online distribution channel and offer a wider range of savings products.
Since the financial year end, both Moody's Investors Services ("Moody's") and Fitch Ratings ("Fitch") reaffirmed our credit ratings. Moody's rates Close Brothers Group ("CBG") A3/P2 and Close Brothers Limited ("CBL") Aa3/P1, with stable outlook. Fitch rates both CBG and CBL A/F1 with stable outlook.
Group Liquidity
31 January
2018
 million 31 July
2017
 million
Bank of England deposits 841.4 805.1
Sovereign and central bank debt  42.8  43.6
High quality liquid assets¹ 884.2 848.7
Certificates of deposit 251.0 180.3
Treasury assets 1,135.2 1,029.0
1 In addition to, and not included in the above, at 31 July 2017 the group held 97.5 million of Treasury Bills drawn under the Funding for Lending Scheme but not in repurchase agreements, which have since been repaid.
We maintain a strong liquidity position, with the majority of our liquidity requirements and surplus funding held in the form of high quality liquid assets. We regularly assess and stress test our liquidity position, ensuring it is comfortably ahead of both internal risk appetite and regulatory requirements. We continue to comfortably meet the liquidity coverage ratio requirements under CRD IV.
Treasury assets at 31 January 2018 increased to 1.1 billion (31 July 2017: 1.0 billion), and were predominantly held on deposit with the Bank of England.
IFRS 9
As previously communicated, the provisions of IFRS 9 Financial Instruments will apply to the group for the year ending 31 July 2019. We are conducting a parallel run during the current financial year to validate and refine the models and assumptions ahead of implementation on 1 August 2018. We will provide further detail on the expected financial impact of the transition once we have sufficiently reliable estimates.
BUSINESS REVIEW
BANKING
Key Financials
First half
2018
 million First half
2017
 million 
Change
%
Operating income 293.9 274.0 7
Adjusted operating expenses (141.6) (134.0) 6
Impairment losses on loans and advances (23.8) (17.3) 38
Adjusted operating profit 128.5 122.7 5
Net interest margin 8.2% 8.2% 
Expense/income ratio 48% 49% 
Bad debt ratio 0.7% 0.5% 
Return on net loan book 3.6% 3.7% 
Return on opening equity 20% 23% 
Average loan book and operating lease assets 7,131.1 6,655.2 7
Good Financial Performance Continued in the First Half
Adjusted operating profit for the Banking division was up 5% to 128.5 million (2017: 122.7 million), driven by 7% income growth to 293.9 million (2017: 274.0 million) and continued low impairments. Statutory operating profit increased 4% to 127.5 million (2017: 122.4 million).
The loan book grew 1.7% (2017: 1.7%) in the period, in line with the first half last year, with a broadly stable return on net loan book of 3.6% (2017: 3.7%). Return on opening equity was slightly lower at 20% (2017: 23%), driven by higher equity following the increase in risk weighting of our property portfolio last year. 
The net interest margin remained stable at 8.2% (2017: 8.2%), reflecting our continued pricing discipline and benefiting from a lower cost of funding. Although price competition remains strong in some parts of our business, we continue to focus on holding our margins across the overall portfolio.
Adjusted operating expenses at 141.6 million (2017: 134.0 million) increased 6% year on year, with the increase driven predominantly by staff-related costs. Cost discipline remains a priority, as we tightly manage our operational costs while continuing to invest in the business. In Retail, investment continues across both Premium and Motor Finance, and we are continuing to progress a number of new business initiatives in Commercial. In the period, we have also initiated an investment in a new deposit platform, which, in time, will allow our treasury function to expand its product offering and build an online presence. The expense/income and compensation ratios both remained broadly in line with last year, at 48% (2017: 49%) and 29% (2017: 30%) respectively.
The bad debt ratio remained low at 0.7% (2017: 0.5%), reflecting continued strong underlying credit performance across the portfolio. The ratio increase from 0.5% to 0.7% reflects one-off provision releases in the first half of 2017, and the ratio was unchanged on an underlying basis.
Loan Book Analysis
31 January
2018 31 July
2017 Change
 million  million %
Retail 2,700.6 2,702.8 (0.1)
Motor Finance 1,715.5 1,761.9 (2.6)
Premium Finance 985.1 940.9 4.7
Commercial 2,603.7 2,552.6 2.0
Asset Finance 2,057.0 2,017.0 2.0
Invoice Finance 546.7 535.6  2.1
Property 1,694.1 1,629.3 4.0
Closing loan book 6,998.4 6,884.7 1.7
The loan book growth reflects the diversity of our portfolio, as we continue to prioritise margins and credit quality at the current point in the cycle. The loan book grew 1.7% year to date, and 7.0% year on year, to 7.0 billion (31 July 2017: 6.9 billion). Growth continues to be driven by Property and Premium Finance, with both Asset and Invoice Finance also growing in the period. In Motor Finance, the loan book contracted modestly, reflecting our commitment to pricing and underwriting discipline in the current environment.
Banking: Retail
First half
2018
 million First half
2017
 million Change
%
Operating income 118.6 110.3 8
Adjusted operating expenses (61.4) (58.5) 5
Impairment losses on loans and advances (14.4) (11.9) 21
Adjusted operating profit 42.8 39.9 7
Net interest margin 8.8% 8.7% 
Expense/income ratio 52% 53% 
Bad debt ratio 1.1% 0.9% 
Average loan book 2,701.7 2,540.9 6
The segment provides intermediated finance, principally to individuals, through motor dealers, insurance brokers and retailers, and incorporates our Premium and Motor Finance businesses.
The Retail loan book remained broadly flat at 2.7 billion (31 July 2017: 2.7 billion). In Premium Finance, we saw good growth of 4.7% to 1.0 billion (31 July 2017: 0.9 billion), driven by recent broker wins and increased volumes through existing brokers, supported by our ongoing investment in the business.
The Motor Finance loan book contracted 2.6% in the period, and is currently at 1.7 billion (31 July 2017: 1.8 billion), as we continue to consistently apply our model, holding margin and prioritising credit quality in a highly competitive UK motor finance market. As expected, the Irish portfolio continued to grow modestly.
Overall, adjusted operating profit for the Retail segment of 42.8 million (2017: 39.9 million) was up 7% on the prior year. Statutory operating profit was also up 7% at 42.7 million (2017: 39.9 million).
Operating income was up 8% year on year at 118.6 million (2017: 110.3 million) with the net interest margin marginally higher at 8.8% (2017: 8.7%).
Adjusted operating expenses increased 5% to 61.4 million (2017: 58.5 million). We continue our multi-year investment in the Premium Finance infrastructure, as well as an investment programme in the Motor Finance business initiated at the end of last year to improve the service proposition to dealers and end customers. Despite this investment, the expense/income ratio was broadly in line with the prior year at 52% (2017: 53%).
The bad debt ratio of 1.1% (2017: 0.9%) remains consistent with the second half of the last financial year. We remain comfortable with the credit quality of the Motor Finance loan book, supported by our prudent underwriting, focus on used cars and low exposure to Personal Contract Plan ("PCP").
Banking: Commercial
 First half
2018
 million First half
2017
 million Change
%
Operating income 110.4 105.6 5
Adjusted operating expenses (65.1) (61.5) 6
Impairment losses on loans and advances (5.6) (7.6) (26)
Adjusted operating profit 39.7 36.5 9
Net interest margin 8.0% 8.0% 
Expense/income ratio 59% 58% 
Bad debt ratio 0.4% 0.6% 
Average loan book and operating leases 2,767.7 2,633.3 5
The segment focuses on specialist, secured lending principally to the SME market and includes the Asset and Invoice Finance businesses.
The Commercial loan book increased 2.0% to 2.6 billion (31 July 2017: 2.6 billion), supported by growth in both Asset and Invoice Finance. Although competition in many areas remains strong, the Asset Finance book grew 2.0%, driven by the more specialist product lines, while the core portfolio remained broadly flat. In Invoice Finance, we saw good growth supported by Novitas, which was acquired at the end of the 2017 financial year and provides financing for legal fees. We also continue to see good demand for our asset based lending ("ABL") products, characterised by bigger ticket deals.
Adjusted operating profit of 39.7 million (2017: 36.5 million) was up 9%, driven by good income and lower bad debt. Statutory operating profit also increased 7% to 38.8 million (2017: 36.2 million).
Operating income of 110.4 million (2017: 105.6 million) was 5% higher than the prior year, reflecting loan book growth in the period. Our net interest margin remained strong at 8.0% (2017: 8.0%), as we maintain pricing discipline in the face of ongoing pricing competition in the asset finance market.
Costs were up 6% to 65.1 million (2017: 61.5 million), reflecting a number of ongoing new business initiatives. These include our technology services business and the recent expansion of our asset finance offering into Germany. The expense/income ratio remained broadly stable at 59% (2017: 58%).
The bad debt ratio reduced to 0.4% (2017: 0.6%), reflecting a particularly strong credit performance, with low arrears and a strong collections performance.

Banking: Property
 First half
2018
 million First half
2017
 million 
Change
%
Operating income 64.9 58.1 12
Operating expenses (15.1) (14.0) 8
Impairment losses on loans and advances (3.8) 2.2 
Operating profit 46.0 46.3 (1)
Net interest margin 7.8% 7.8% 
Expense/income ratio 23% 24% 
Bad debt ratio 0.5% (0.3%) 
Average loan book 1,661.7 1,481.0 12
The segment is focused on specialist residential development finance to established professional developers in the UK. We do not lend to the buy-to-let sector, or provide residential or commercial mortgages.
The Property segment performed well in the period, delivering loan book growth of 4.0% to 1.7 billion (31 July 2017: 1.6 billion), or 12.6% year on year. We continue to see good demand for residential property development finance and the pipeline remains solid. Our focus is on new build family homes where we see continued strong structural demand. In recent years we have also extended our offering to high-quality regional locations, and we continue to see good growth potential in these markets.
The business delivered an operating profit of 46.0 million (2017: 46.3 million), broadly in line year on year. This reflects the benefit of one-off provision releases which resulted in a net bad debt recovery in the comparative period. Therefore, the bad debt ratio in the current period was higher at 0.5% (2017: -0.3%). The net interest margin was stable at 7.8% (2017: 7.8%).
Operating expenses of 15.1 million (2017: 14.0 million) were up 8%, and the expense/income ratio remained low at 23% (2017: 24%), reflecting the lower operational requirements of the business.
SECURITIES
Key Financials
First half
2018
 million First half
2017
 million 
Change
%
Operating income 55.6 53.9 3
Operating expenses (40.9) (39.5) 4
Operating profit 14.7 14.4 2
Bargains per day 70k 58k 22
Operating margin 26% 27% 
Return on opening equity 30% 30% 
Strong Trading Continued
Winterflood remains focused on delivering high-quality execution services to retail intermediaries, wealth managers and institutional investors.
Winterflood continued to benefit from positive market sentiment and investor risk appetite throughout the period, with particularly favourable conditions in the second quarter. As a result, the operating profit increased 2% to 14.7 million (2017: 14.4 million).
Operating income grew 3% to 55.6 million (2017: 53.9 million) reflecting higher trading income particularly in FTSE 350 and AIM stocks. Average daily bargains increased to 70,228 (2017: 57,782), up 22% year on year but broadly in line with the second half, reflecting higher FTSE 350 volumes. There were no loss days (2017: no loss days) in the period.
Operating expenses increased 4%, broadly in line with income, reflecting Winterflood's variable cost model. Both the expense/income ratio and the compensation ratio remained broadly stable at 74% (2017: 73%) and 48% respectively (2017: 48%).
ASSET MANAGEMENT
Key Financials
First half
2018
 million First half
2017³
 million 
Change
%
Investment management 35.8 30.8 16
Advice and other services¹ 20.0 17.4 15
Other income² 0.2 1.9 (11)
Operating income 56.0 50.1 12
Adjusted operating expenses (44.6) (41.0) 9
Adjusted operating profit 11.4 9.1 25
Revenue margin (bps) 97 96 
Operating margin 20% 18% 
Return on opening equity 33% 27% 
1 Income from advice and self-directed services, excluding investment management income.
2 Net interest income and expense, income on principal investments and other income.
3 The first half of 2017 includes 1.6 million profit on disposal of OLIM Investment Managers ("OLIM"), which completed in November 2016. Overall, OLIM contributed 2.3 million of income and 1.9 million of profit, including the profit on disposal.
Profit Growth Supported by Continued Strong Inflows
Asset Management delivered strong results in the first half, with adjusted operating profit growth of 25% to 11.4 million (2017: 9.1 million). Statutory operating profit increased 32% to 8.7 million (2017: 6.6 million). All our channels performed well, delivering positive net flows of 573 million representing an annualised rate of 13% (2017: 3%) of opening managed assets.
Operating income increased 12% to 56.0 million (2017: 50.1 million) with strong growth in investment management fees and advisory income. This reflects the consistent growth in our managed assets over the last 12 months as well as continued demand for our advisory services. The revenue margin improved marginally to 97bps.
Adjusted operating expenses increased 9% to 44.6 million (2017: 41.0 million), below income growth, reflecting the operating leverage of the business. The expense/income ratio reduced to 80% (2017: 82%) while the compensation ratio increased slightly to 57% (2017: 54%), reflecting new hires and an increase in variable compensation in the period.
Movement in Client Assets
31 January 2018
 million
Opening managed assets 8,900
Inflows 947
Outflows (374)
Net inflows 573
Market movements 240
Total managed assets 9,713
Advised only assets 2,088
Total client assets¹ 11,801
Net flows as % of opening managed assets  13%
1 Total client assets include 4.1 billion of assets that are both advised and managed.
Total managed assets increased 9% to 9.7 billion (31 July 2017: 8.9 billion), benefiting from both strong net inflows and favourable market movements. Net inflows, at 573 million, improved significantly in the first half of the year (31 January 2017: 125 million), with strong flows across both our integrated wealth and investment management services. Positive market movements in the period contributed 240 million.
Total client assets, which include advised assets under third-party management, closed 6% higher at 11.8 billion (31 July 2017: 11.2 billion).
Our funds and segregated bespoke portfolios are designed to provide attractive risk adjusted returns for our clients, in line with their long-term goals. Over the 12 month period to 31 January 2018, 11 out of our 13 unitised funds outperformed their relevant benchmarks, with particularly good performance across our Direct and Managed funds. Over the year to 31 December 2017, 75% of our segregated bespoke strategies outperformed their relevant peer groups. This compares to 100% over the 3 year period, in line with our strong long term outperformance track record for our bespoke strategies.
DEFINITIONS
Adjusted: Adjusted measures are used to increase comparability between periods and exclude amortisation of intangible assets on acquisition and any exceptional items
Bad debt ratio: Impairment losses as a percentage of average net loans and advances to customers and operating lease assets
Compensation ratio: Total staff costs as a percentage of operating income
Dividend per share ("DPS"): Comprises the final dividend proposed for the respective year together with the interim dividend declared and paid in the year
Earnings per share ("EPS"): Profit attributable to shareholders divided by number of basic shares
Effective tax rate: Tax on operating profit/(loss) as a percentage of operating profit/(loss) on ordinary activities before tax
Expense/income ratio: Total adjusted operating expenses divided by operating income
Funding allocated to loan book: Total funding excluding equity and funding held for liquidity purposes
Funding % loan book: Total funding divided by net loans and advances to customers
High-quality liquid assets ("HQLAs"): Assets which qualify for regulatory liquidity purposes, including Bank of England deposits, and sovereign and central bank debt, including funds drawn under the Funding for Lending Scheme
Leverage ratio: Tier 1 capital as a percentage of total balance sheet assets, adjusted for certain capital deductions, including intangible assets, and off balance sheet exposures
Liquidity coverage ratio: Measure of the group's HQLAs as a percentage of expected net cash outflows over the next 30 days in a stressed scenario
Loan to value ratio ("LTV"): For a secured loan, the loan balance as a percentage of the total value of the asset
Net interest margin ("NIM"): Income generated by lending activities, including interest income net of interest expense, fees and commissions income net of fees and commissions expense, and operating lease income net of operating lease expense, less depreciation on operating lease assets, divided by average loans and advances to customers (net of impaired loans) and operating lease assets
Operating margin: Adjusted operating profit divided by operating income
Return on assets: Profit attributable to shareholders divided by total assets at balance sheet date
Return on net loan book ("RoNLB"): Adjusted operating profit from lending activities divided by average net loans and advances to customers, and operating lease assets
Return on opening equity ("RoE"): Adjusted operating profit after tax and non-controlling interests divided by opening equity, excluding non-controlling interests
Revenue margin: Income from advice, investment management and related services divided by average total client assets
Term funding: Funding with a remaining maturity greater than 12 months
Principal Risks and Uncertainties
The group faces a number of risks in the normal course of business. The framework we use to manage these risks is as follows:
adhering to our established and proven business model;
implementing an integrated "three lines of defence" risk management approach; and
operating within a clearly defined risk appetite which is monitored with defined metrics and set limits.
A detailed description of the principal risks and our approach to managing and mitigating these risks is disclosed on pages 16 to 19 of the Annual Report 2017 which can be accessed via the Investor Relations home page on the group's website at www.closebrothers.com.
There have been no significant changes to our risk management approach in the period. The principal risks faced by the group remain unchanged and are summarised below.
Credit losses - the group provides loans to a range of small businesses and individuals. There is a risk that customers are unable to repay their loans and any outstanding interest and fees resulting in credit losses. The group also has exposure to counterparties with which it places deposits or trades and also has a small number of derivative contracts to hedge interest rate and foreign exchange exposures.
Economic environment - any downturn in economic conditions may impact the group's performance through lower demand for the group's products and services, lower investor risk appetite, higher credit losses and increased volatility in funding markets.
Legal and regulatory - changes to existing legal, regulatory and tax environments, or failure to comply with existing requirements could adversely impact the group's performance, as well as capital, liquidity and the markets in which we operate. Failing to treat customers fairly also has the potential to damage the group's reputation and may lead to legal or regulatory sanctions including litigation and customer redress.
Competition - the group operates in competitive markets. Elevated levels of competition may impact demand for the group's products and services.
Technology and operational resilience - providing robust, contemporary and secure IT services is fundamental to enabling the group to provide a high quality customer experience, respond to new technology, protect client and company data and counter the evolving cyber threat. Failure to evolve with our customers' technological expectations or provide reliable, secure IT services has the potential to impact group performance.
Employees - the quality and expertise of our employees is critical to our success. The loss of key individuals or teams may have an adverse impact on the group's operations and ability to deliver its strategy.
Funding and liquidity - access to funding remains key to support our lending activities and the group's liquidity requirements. Any material change to funding or liquidity capacity has the potential to impact the group's ongoing performance.
Market risk - market volatility impacting equity and fixed income exposures, and/or changes in interest and exchange rates have the potential to impact the group's performance. 
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
the condensed set of consolidated financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting";
the Half Yearly Report 2018 includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
the Half Yearly Report 2018 includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related parties' transactions and changes therein).
On behalf of the board
Michael N. Biggs
Chairman P. Prebensen
Chief Executive
13 March 2018
Independent Review Report
Our conclusion
We have reviewed Close Brothers Group plc's interim financial information (the "condensed half yearly financial statements") in the half yearly report of Close Brothers Group plc for the six month period ended 31 January 2018. Based on our review, nothing has come to our attention that causes us to believe that the condensed half yearly financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The condensed half yearly financial statements comprise:
 the consolidated balance sheet at 31 January 2018;
 the consolidated income statement and consolidated statement of comprehensive income for the period then ended;
 the consolidated cash flow statement for the period then ended;
 the consolidated statement of changes in equity for the period then ended; and
 the explanatory notes to the condensed half yearly financial statements.
The condensed half yearly financial statements included in the half yearly report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the condensed half yearly financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards ("IFRSs") as adopted by the European Union.
Responsibilities for the condensed half yearly financial statements and the review
Our responsibilities and those of the directors
The half yearly report, including the condensed half yearly financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the condensed half yearly financial statements in the half yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of condensed half yearly financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed half yearly financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
13 March 2018
Consolidated Income Statement
for the six months ended 31 January 2018
Six months ended Year ended
31 January 31 July
2018 2017 2017
Unaudited Unaudited Audited
Note  million  million  million
Interest income 301.7 289.6 578.9
Interest expense (56.0) (62.5) (117.3)
Net interest income 245.7 227.1 461.6
Fee and commission income 106.4 100.2 206.5
Fee and commission expense (14.3) (15.0) (29.0)
Gains less losses arising from dealing in securities 51.8 48.7 94.2
Other income 31.4 29.2 57.3
Depreciation of operating lease assets (15.5) (11.9) (25.0)
Non-interest income 159.8 151.2 304.0
Operating income 2 405.5 378.3 765.6
Administrative expenses (239.4) (226.8) (460.6)
Impairment losses on loans and advances 6 (23.8) (17.3) (40.2)
Total operating expenses before amortisation of intangible assets
 on acquisition 
(263.2) 
(244.1) 
(500.8)
Operating profit before amortisation of intangible assets on 
 acquisition 
142.3 
134.2 
264.8
Amortisation of intangible assets on acquisition (3.7) (2.8) (6.2)
Operating profit before tax 138.6 131.4 258.6
Tax 3 (34.7) (34.8) (67.7)
Profit after tax for the period 103.9 96.6 190.9
Loss attributable to non-controlling interests (0.1) (0.2) (0.3)
Profit attributable to shareholders 104.0 96.8 191.2
Basic earnings per share 4 69.2p 65.1p 128.3p
Diluted earnings per share 4 68.7p 64.9p 127.5p
Ordinary dividend per share 5 21.0p 20.0p 60.0p
Consolidated Statement of COMPREHENSIVE INCOME
for the six months ended 31 January 2018
Six months ended Year ended
31 January 31 July
2018 2017 2017
Unaudited Unaudited Audited
 million  million  million
Profit after tax for the period 103.9 96.6 190.9
Other comprehensive income/(expense) that may be reclassified
 to income statement 
Currency translation gains 0.1 0.2 0.4
Gains on cash flow hedging 3.7 3.9 4.7
(Losses)/gains on financial instruments classified as available for sale: 
 Sovereign and central bank debt - (0.7) 0.7
 Equity shares - 0.1 -
 Contingent consideration (0.3) - 0.3
Tax relating to items that may be reclassified (0.9) (0.9) (2.3)
2.6 
2.6 
3.8
Other comprehensive income/(expense) that will not be
 reclassified to income statement 
Defined benefit pension scheme gains 1.1 2.8 2.7
Tax relating to items that will not be reclassified (0.2) (0.6) (0.5)
0.9 
2.2 
2.2
Other comprehensive income for the period, net of tax 3.5 4.8 6.0
Total comprehensive income for the period 107.4 101.4 196.9
Attributable to 
Non-controlling interests (0.1) (0.2) (0.3)
Shareholders 107.5 101.6 197.2
107.4 101.4 196.9
Consolidated Balance Sheet
at 31 January 2018
31 January 31 July
2018 2017 2017
Unaudited Unaudited Audited
Note  million  million  million
Assets 
Cash and balances at central banks 841.4 1,120.8 805.1
Settlement balances 575.4 460.7 546.7
Loans and advances to banks 133.5 103.6 99.8
Loans and advances to customers 6 6,998.4 6,543.8 6,884.7
Debt securities 7 318.7 200.5 240.1
Equity shares 8 37.9 35.6 32.7
Loans to money brokers against stock advanced 67.9 55.4 48.6
Derivative financial instruments 18.9 29.8 27.0
Intangible assets 199.0 161.4 191.7
Property, plant and equipment 230.8 201.0 202.7
Deferred tax assets 45.5 51.5 47.4
Prepayments, accrued income and other assets 174.0 161.3 158.7
Total assets 9,641.4 9,125.4 9,285.2
Liabilities 
Settlement balances and short positions 9 644.9 466.3 552.6
Deposits by banks 10 58.6 70.0 72.0
Deposits by customers 10 5,250.2 4,864.9 5,113.1
Loans and overdrafts from banks 10 376.6 418.9 330.9
Debt securities in issue 10 1,550.0 1,703.1 1,489.6
Loans from money brokers against stock advanced 29.5 10.1 4.3
Derivative financial instruments 16.8 17.9 11.5
Current tax liabilities 22.1 25.1 21.4
Accruals, deferred income and other liabilities 197.6 188.7 233.1
Subordinated loan capital 10 217.9 219.4 220.7
Total liabilities 8,364.2 7,984.4 8,049.2
Equity 
Called up share capital 38.0 37.7 38.0
Share premium account 11 - 284.0 307.8
Retained earnings 1,260.1 840.7 906.6
Other reserves (20.3) (21.1) (15.9)
Total shareholders' equity 1,277.8 1,141.3 1,236.5
Non-controlling interests (0.6) (0.3) (0.5)
Total equity 1,277.2 1,141.0 1,236.0
Total liabilities and equity 9,641.4 9,125.4 9,285.2
Consolidated Statement of CHANGES IN EQUITY
for the six months ended 31 January 2018
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 2016
 (audited) 
37.7 
284.0 
797.5 
- 
(14.3) 
(1.1) 
(6.7) 
1,097.1 
(0.2) 
1,096.9
Profit/(loss) for the
 period 
- 
- 
96.8 
- 
- 
- 
- 
96.8 
(0.2) 
96.6
Other comprehensive
 income/(expense)
 for the period 
- 
- 
2.2 
(0.4) 
- 
0.2 
2.8 
4.8 
- 
4.8
Total comprehensive
 income/(expense)
 for the period 
- 
- 
99.0 
(0.4) 
- 
0.2 
2.8 
101.6 
(0.2) 
101.4
Exercise of options - - - - - - - - - -
Dividends paid - - (56.0) - - - - (56.0) - (56.0)
Shares purchased - - - - (12.7) - - (12.7) - (12.7)
Shares issued - - - - - - - - - -
Shares released - - - - 13.3 - - 13.3 - 13.3
Other movements - - (0.7) - (2.2) - - (2.9) 0.1 (2.8)
Share premium
 cancellation 
- 
- 
- 
- 
- 
- 
- 
- 
- 
-
Income tax - - 0.9 - - - - 0.9 - 0.9
At 31 January 2017
 (unaudited) 
37.7 
284.0 
840.7 
(0.4) 
(15.9) 
(0.9) 
(3.9) 
1,141.3 
(0.3) 
1,141.0
Profit/(loss) for the
 period 
- 
- 
94.4 
- 
- 
- 
- 
94.4 
(0.1) 
94.3
Other comprehensive
 income/(expense)
 for the period 
- 
- 
- 
1.1 
- 
(0.6) 
0.7 
1.2 
- 
1.2
Total comprehensive
 income/(expense)
 for the period 
- 
- 
94.4 
1.1 
- 
(0.6) 
0.7 
95.6 
(0.1) 
95.5
Exercise of options - 0.1 - - - - - 0.1 - 0.1
Dividends paid - - (29.6) - - - - (29.6) - (29.6)
Shares purchased - - - - - - - - - -
Shares issued 0.3 23.7 - - - - - 24.0 - 24.0
Shares released - - - - 2.5 - - 2.5 - 2.5
Other movements - - 0.9 - 1.5 - - 2.4 (0.1) 2.3
Share premium
 cancellation 
- 
- 
- 
- 
- 
- 
- 
- 
- 
-
Income tax - - 0.2 - - - - 0.2 - 0.2
At 31 July 2017
 (audited) 
38.0 
307.8 
906.6 
0.7 
(11.9) 
(1.5) 
(3.2) 
1,236.5 
(0.5) 
1,236.0
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 31 July 2017
 (audited) 
38.0 
307.8 
906.6 
0.7 
(11.9) 
(1.5) 
(3.2) 
1,236.5 
(0.5) 
1,236.0
Profit/(loss) for the
 period 
- 
- 
104.0 
- 
- 
- 
- 
104.0 
(0.1) 
103.9
Other comprehensive
 income/(expense)
 for the period 
- 
- 
0.9 
(0.2) 
- 
0.1 
2.7 
3.5 
- 
3.5
Total comprehensive
 income/(expense)
 for the period 
- 
- 
104.9 
(0.2) 
- 
0.1 
2.7 
107.5 
(0.1) 
107.4
Exercise of options - - - - - - - - - -
Dividends paid - - (59.7) - - - - (59.7) - (59.7)
Shares purchased - - - - (15.9) - - (15.9) - (15.9)
Shares issued - - - - - - - - - -
Shares released - - - - 11.2 - - 11.2 - 11.2
Other movements - - 0.3 - (2.3) - - (2.0) - (2.0)
Share premium
 cancellation 
- 
(307.8) 
307.8 
- 
- 
- 
- 
- 
- 
-
Income tax - - 0.2 - - - - 0.2 - 0.2
At 31 January 2018
 (unaudited) 
38.0 
- 
1,260.1 
0.5 
(18.9) 
(1.4) 
(0.5) 
1,277.8 
(0.6) 
1,277.2
Consolidated Cash Flow Statement
for the six months ended 31 January 2018
Six months ended Year ended
31 January 31 July
2018 2017 2017
Unaudited Unaudited Audited
Note  million  million  million
Net cash inflow from operating activities 15(a) 149.8 359.2 120.0
Net cash (outflow)/inflow from investing activities 
Purchase of: 
Property, plant and equipment (8.5) (5.4) (7.1)
Intangible assets - software (19.0) (11.5) (33.1)
Subsidiaries and non-controlling interest 15(b) (0.9) (6.3) (6.3)
Sale of: 
Property, plant and equipment - 0.1 -
Equity shares held for investment - - 1.3
Subsidiary 15(c) 0.7 (0.3) (0.3)
(27.7) (23.4) (45.5)
Net cash inflow before financing activities 122.1 335.8 74.5
Financing activities 
Purchase of own shares for employee share award schemes (15.9) (12.7) (12.7)
Equity dividends paid (59.7) (56.0) (85.6)
Interest paid on subordinated loan capital and debt financing (5.4) (8.2) (13.6)
Redemption of group bond - - (200.0)
Issuance ofsubordinated loan capital, net of transaction costs - - 173.7
Net increase/(decrease) in cash 41.1 258.9 (63.7)
Cash and cash equivalents at beginning of period 859.6 923.3 923.3
Cash and cash equivalents at end of period 15(d) 900.7 1,182.2 859.6
THE NOTES
1. Basis of preparation and accounting policies
The half yearly financial information has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and in accordance with the International Financial Reporting Standards ("IFRS") endorsed by the European Union. These include International Accounting Standard ("IAS") 34, Interim Financial Reporting, which specifically addresses the contents of condensed half yearly financial statements. The consolidated financial statements incorporate the individual financial statements of Close Brothers Group plc and the entities it controls, using the acquisition method of accounting. The accounting policies applied are consistent with those set out on pages 109 to 114 of the Annual Report 2017.
After making enquiries, the directors have a reasonable expectation that the company and the group as a whole have adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated half yearly financial statements.
The preparation of the half yearly report requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the half yearly report. Although these estimates and assumptions are based on the management's best judgement at that date, actual results may differ from these estimates. There have been no significant changes in the basis upon which estimates have been determined compared to that applied at 31 July 2017.
Following a competitive tender process for the audit of the group and its subsidiaries in 2017, PricewaterhouseCoopers LLP was formally appointed as the group's auditors at the 2017 Annual General Meeting.
The half yearly report is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. However, the information has been reviewed by the company's auditor, PricewaterhouseCoopers LLP, and their report appears on pages 19 and 20.
The financial information for the year ended 31 July 2017 contained within this half yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of those statutory accounts has been delivered to the Registrar of Companies. The group's previous auditor, Deloitte LLP has reported on those accounts. The report of the auditor on those statutory accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
2. Segmental analysis
The directors manage the group by class of business and we present the segmental analysis on that basis. The group's activities are presented in five (2017: five) operating segments: Retail, Commercial, Property, Securities and Asset Management.
In the segmental reporting information that follows, Group consists of central functions as well as various non-trading head office companies and consolidation adjustments and is presented in order that the information presented reconciles to the consolidated income statement. The Group balance sheet primarily includes treasury assets and liabilities comprising cash and balances at central banks, debt securities, customer deposits and other borrowings.
Divisions continue to charge market prices for the limited services rendered to other parts of the group. Funding charges between segments take into account commercial demands. More than 90% of the group's activities, revenue and assets are located in the UK.
Summary Income Statement for the six months ended 31 January 2018
Banking 
Retail 
Commercial 
Property 
Securities Asset
Management 
Group 
Total
 million  million  million  million  million  million  million
Net interest
 income/(expense) 
104.0 
77.1 
64.9 
(0.4) 
- 
0.1 
245.7
Non-interest income 14.6 33.3 - 56.0 56.0 (0.1) 159.8
Operating income 118.6 110.4 64.9 55.6 56.0 - 405.5
Administrative
 expenses 
(56.7) 
(61.8) 
(13.3) 
(40.0) 
(43.7) 
(12.3) 
(227.8)
Depreciation and
 amortisation 
(4.7) 
(3.3) 
(1.8) 
(0.9) 
(0.9) 
- 
(11.6)
Impairment losses on
 loans and advances 
(14.4) 
(5.6) 
(3.8) 
- 
- 
- 
(23.8)
Total operating
 expenses 
(75.8) 
(70.7) 
(18.9) 
(40.9) 
(44.6) 
(12.3) 
(263.2)
Adjusted operating
 profit/(loss)¹ 
42.8 
39.7 
46.0 
14.7 
11.4 
(12.3) 
142.3
Amortisation of
 intangible assets on
 acquisition 
(0.1) 
(0.9) 
- 
- 
(2.7) 
- 
(3.7)
Operating
 profit/(loss)
 before tax 
42.7 
38.8 
46.0 
14.7 
8.7 
(12.3) 
138.6
External operating
 income/(expense) 
138.4 
132.2 
76.3 
55.6 
56.1 
(53.1) 
405.5
Inter segment
 operating
 income/(expense) 
(19.8) 
(21.8) 
(11.4) 
- 
(0.1) 
53.1 
-
Segment operating
 income 
118.6 
110.4 
64.9 
55.6 
56.0 
- 
405.5
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition and tax.
Balance Sheet Information at 31 January 2018
Banking 
Retail 
Commercial 
Property 
Securities Asset Management 
Group² 
Total
 million  million  million  million  million  million  million
Total assets¹ 2,700.6 2,805.0 1,694.1 807.0 107.6 1,527.1 9,641.4
Total liabilities - - - 736.2 51.9 7,576.1 8,364.2
1 Total assets for the Banking operating segments comprise the loan book and operating lease assets only.
2 Includes 1,518.9 million assets and 7,677.2 million liabilities attributable to the Banking division primarily comprising the treasury
balances described in the second paragraph of this note.
Equity is allocated across the Group as shown below. Banking division equity, which is managed as a whole rather than on a segmental basis, reflects loan book and operating lease assets of 7,199.7 million, in addition to assets and liabilities of 1,518.9 million and 7,677.2 million respectively primarily relating to treasury balances.
Banking total 
Securities Asset Management 
Group 
Total
 million  million  million  million  million
Equity 1,041.4 70.8 55.7 109.3 1,277.2
Summary Income Statement for the six months ended 31 January 2017
Banking 
Retail 
Commercial 
Property 
Securities Asset Management 
Group 
Total
 million  million  million  million  million  million  million
Net interest
 income/(expense) 
98.2 
72.2 
57.0 
(0.5) 
(0.1) 
0.3 
227.1
Non-interest income 12.1 33.4 1.1 54.4 50.2 - 151.2
Operating income 110.3 105.6 58.1 53.9 50.1 0.3 378.3
Administrative
 expenses 
(52.7) 
(57.7) 
(12.9) 
(38.6) 
(39.9) 
(12.1) 
(213.9)
Depreciation and
 amortisation 
(5.8) 
(3.8) 
(1.1) 
(0.9) 
(1.1) 
(0.2) 
(12.9)
Impairment losses on
 loans and advances 
(11.9) 
(7.6) 
2.2 
- 
- 
- 
(17.3)
Total operating
 expenses 
(70.4) 
(69.1) 
(11.8) 
(39.5) 
(41.0) 
(12.3) 
(244.1)
Adjusted operating
 profit/(loss)¹ 
39.9 
36.5 
46.3 
14.4 
9.1 
(12.0) 
134.2
Amortisation of intangible
 assets on acquisition 
- 
(0.3) 
- 
- 
(2.5) 
- 
(2.8)
Operating profit/(loss)
 before tax 
39.9 
36.2 
46.3 
14.4 
6.6 
(12.0) 
131.4
External operating
 income/(expense) 
134.2 
130.7 
69.8 
53.9 
50.3 
(60.6) 
378.3
Inter segment operating
 income/(expense) 
(23.9) 
(25.1) 
(11.7) 
- 
(0.2) 
60.9 
-
Segment operating
 income 
110.3 
105.6 
58.1 
53.9 
50.1 
0.3 
378.3
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition and tax.
Balance Sheet Information at 31 January 2017
Banking 
Retail 
Commercial 
Property 
Securities Asset Management 
Group² 
Total
 million  million  million  million  million  million  million
Total assets¹ 2,570.8 2,643.2 1,504.8 626.7 105.3 1,674.6 9,125.4
Total liabilities - - - 556.8 49.7 7,377.9 7,984.4
1 Total assets for the Banking operating segments comprise the loan book and operating lease assets only.
2 Includes 1,665.5 million assets and 7,485.3 million liabilities attributable to the Banking division primarily comprising the treasury
 balances described in the second paragraph of this note.
Banking total 
Securities Asset Management 
Group 
Total
 million  million  million  million  million
Equity¹ 899.0 69.9 55.6 116.5 1,141.0
1Equity of the Banking division reflects loan book and operating lease assets of 6,718.8 million, in addition to assets and
liabilities of 1,665.5 million and 7,485.3 million respectively primarily relating to treasury balances.
Summary Income Statement for the year ended 31 July 2017
Banking 
Retail 
Commercial 
Property 
Securities Asset Management 
Group 
Total 
 million  million  million  million  million  million  million 
Net interest
 income/(expense) 
195.9 
146.4 
119.8 
(0.9) 
(0.1) 
0.5 
461.6
Non-interest income 26.5 66.9 (0.2) 107.6 103.0 0.2 304.0
Operating income 222.4 213.3 119.6 106.7 102.9 0.7 765.6
Administrative
 expenses 
(106.7) 
(117.4) 
(24.9) 
(76.7) 
(83.7) 
(24.9) 
(434.3)
Depreciation and
 amortisation 
(11.0) 
(7.8) 
(3.8) 
(1.9) 
(1.8) 
- 
(26.3)
Impairment losses on
 loans and advances 
(25.8) 
(15.5) 
1.1 
- 
- 
- 
(40.2)
Total operating
 expenses 
(143.5) 
(140.7) 
(27.6) 
(78.6) 
(85.5) 
(24.9) 
(500.8)
Adjusted operating
 profit/(loss)¹ 
78.9 
72.6 
92.0 
28.1 
17.4 
(24.2) 
264.8
Amortisation of intangible
 assets on acquisition 
(0.4) 
(0.5) 
- 
- 
(5.3) 
- 
(6.2)
Operating profit/(loss)
 before tax 
78.5 
72.1 
92.0 
28.1 
12.1 
(24.2) 
258.6
External operating
 income/(expense) 
266.2 
260.9 
141.8 
106.7 
103.2 
(113.2) 
765.6
Inter segment
 operating
 income/(expense) 
(43.8) 
(47.6) 
(22.2) 
- 
(0.3) 
113.9 
-
Segment operating
 income 
222.4 
213.3 
119.6 
106.7 
102.9 
0.7 
765.6
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition and tax.
Balance Sheet Information at 31 July 2017
Banking 
Retail 
Commercial 
Property 
Securities Asset Management 
Group² 
Total
 million  million  million  million  million  million  million
Total assets¹ 2,702.8 2,730.4 1,629.3 699.5 113.2 1,410.0 9,285.2
Total liabilities - - - 628.8 57.7 7,362.7 8,049.2
1 Total assets for the Banking operating segments comprise the loan book and operating lease assets only.
2 Includes 1,402.7 million assets and 7,490.9 million liabilities attributable to the Banking division primarily comprising the treasury
balances described in the second paragraph of this note.
Banking total 
Securities Asset Management 
Group 
Total
 million  million  million  million  million
Equity¹ 974.3 70.7 55.5 135.5 1,236.0
1 Equity of the Banking division reflects loan book and operating lease assets of 7,062.5 million, in addition to assets and
 liabilities of 1,402.7 million and 7,490.9 million respectively primarily relating to treasury balances.
3. Taxation
Six months ended
31 January Year ended
31 July
2018 2017 2017
 million  million  million
Tax charged/(credited) to the income statement 
Current tax: 
UK corporation tax 32.8 32.8 64.8
Foreign tax 1.0 1.2 2.1
Adjustments in respect of previous periods - - (0.6)
33.8 34.0 66.3
Deferred tax: 
Deferred tax charge for the current period 0.9 0.7 0.5
Adjustments in respect of previous periods - 0.1 0.9
34.7 34.8 67.7
Tax on items not (credited)/charged to the income statement 
Current tax relating to: 
Financial instruments classified as available for sale - (0.2) 0.2
Share-based payments (0.1) (0.9) (1.0)
Deferred tax relating to: 
Cash flow hedging 1.0 1.1 1.2
Defined benefit pension scheme 0.2 0.6 0.5
Financial instruments classified as available for sale (0.1) - 0.1
Share-based payments (0.1) - (0.1)
Currency translation gains - - 0.8
0.9 0.6 1.7
Reconciliation to tax expense 
UK corporation tax for the period at 19.0% (2017: 19.7%) on
 operating profit 
26.3 
25.9 
50.9
Gain on sale of subsidiaries and available for sale investment - (0.3) (0.3)
Effect of different tax rates in other jurisdictions (0.1) (0.1) (0.4)
Disallowable items and other permanent differences 0.6 0.6 0.9
Banking surcharge 7.8 7.6 14.2
Deferred tax impact of decreased tax rates 0.1 1.1 2.1
Prior period tax provision - - 0.3
34.7 34.8 67.7
The effective tax rate for the period is 25.0% (six months ended 31 January 2017: 26.5%; year ended 31 July 2017: 26.2%), representing the best estimate of the annual effective tax rate expected for the full year.
The standard UK corporation tax rate for the financial year is 19.0% (six months ended 31 January 2017: 19.7%; year ended 31 July 2017: 19.7%). However, an additional 8% surcharge applies to banking company profits as defined in legislation. The effective tax rate is above the UK corporation tax rate primarily due to the surcharge applying to most of the group's profits.
4. 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.
Six months ended Year ended
31 January 31 July
2018 2017 2017
Earnings per share 
Basic 69.2p 65.1p 128.3p
Diluted 68.7p 64.9p 127.5p
Adjusted basic¹ 71.2p 66.6p 131.7p
Adjusted diluted¹ 70.7p 66.4p 130.8p
1 Excludes amortisation of intangible assets on acquisition and their tax effects.
Six months ended Year ended
31 January 31 July
2018 2017 2017
 million  million  million
Profit attributable to shareholders 104.0 96.8 191.2
Adjustment: 
Amortisation of intangible assets on acquisition 3.7 2.8 6.2
Tax effect of adjustment (0.7) (0.6) (1.2)
Adjusted profit attributable to shareholders 107.0 99.0 196.2
Six months ended Year ended
31 January 31 July
2018 2017 2017
million million million
Average number of shares 
Basic weighted 150.3 148.6 149.0
Effect of dilutive share options and awards 1.0 0.6 1.0
Diluted weighted 151.3 149.2 150.0
5. Dividends
Six months ended Year ended
31 January 31 July
2018 2017 2017
 million  million  million
For each ordinary share 
Interim dividend for previous financial year paid in April 2017: 20.0p - - 29.6
Final dividend for previous financial year paid in November 2017: 40.0p
 (November 2016: 38.0p) 
59.7 
56.0 
56.0
59.7 56.0 85.6
An interim dividend relating to the six months ended 31 January 2018 of 21.0p, amounting to an estimated 31.3 million, is declared. This interim dividend, which is due to be paid on 25April 2018 to shareholders on the register at 23 March 2018, is not reflected in these condensed half yearly financial statements.
6. Loans and advances to customers
The contractual maturity of loans and advances to customers is set out below:
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 January 2018 78.8 2,171.4 2,031.4 1,341.5 1,349.7 76.5 (50.9) 6,998.4
At 31 January 2017 58.3 1,900.7 1,872.4 1,324.6 1,355.9 81.9 (50.0) 6,543.8
At 31 July 2017 59.3 1,914.3 2,115.2 1,340.7 1,431.6 76.0 (52.4) 6,884.7
31 January 31 July
2018 2017 2017
 million  million  million
Impairment provisions on loans and advances to customers 
Opening balance 52.4 59.7 59.7
Charge for the period 23.8 17.3 40.2
Amounts written off net of recoveries (25.3) (27.0) (47.5)
Impairment provisions 50.9 50.0 52.4
At 31 January 2018, gross impaired loans were 129.4 million (31 January 2017: 126.2 million; 31 July 2017: 135.8 million) and equate to 2% (31 January 2017: 2%; 31 July 2017: 2%) 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. 
7. Debt securities
Held for trading Available for sale Loans and receivables 
Total
 million  million  million  million
Long trading positions in debt securities 24.9 - - 24.9
Certificates of deposit - - 251.0 251.0
Sovereign and central bank debt - 42.8 - 42.8
At 31 January 2018 24.9 42.8 251.0 318.7
Held for trading Available for sale Loans and receivables 
Total
 million  million  million  million
Long trading positions in debt securities 14.5 - - 14.5
Certificates of deposit - - 145.3 145.3
Sovereign and central bank debt - 40.7 - 40.7
At 31 January 2017 14.5 40.7 145.3 200.5
Held for trading Available for sale Loans and receivables 
Total
 million  million  million  million
Long trading positions in debt securities 16.2 - - 16.2
Certificates of deposit - - 180.3 180.3
Sovereign and central bank debt - 43.6 - 43.6
At 31 July 2017 16.2 43.6 180.3 240.1
Movements in the book value of sovereign and central bank debt comprise:
Six months ended Year ended
31 January 31 July
2018 2017 2017
 million  million  million
Sovereign and central bank debt at beginning of period 43.6 - -
Additions - 41.6 41.6
Currency translation difference (0.8) - 1.7
Changes in fair value - (0.9) 0.3
Sovereign and central bank debt at end of period 
42.8 
40.7 
43.6
8. Equity shares
31 January 31 July
2018 2017 2017
 million  million  million
Long trading positions 37.3 33.5 31.9
Other equity shares 0.6 2.1 0.8
37.9 35.6 32.7
Movements in the book value of other equity shares comprise:
Six months ended Year ended
31 January 31 July
2018 2017 2017
 million  million  million
Other equity shares held at beginning of period 0.8 2.1 2.1
Disposals (0.2) (0.1) (1.4)
Currency translation difference - - 0.1
Changes in fair value of: 
Equity shares classified as available for sale - 0.1 -
Other equity shares held at end of period 
0.6 
2.1 
0.8
9. Settlement balances and short positions
31 January 31 July
2018 2017 2017
 million  million  million
Settlement balances 619.4 442.3 524.9
Short positions held for trading: 
Debt securities 10.5 11.2 11.5
Equity shares 15.0 12.8 16.2
25.5 24.0 27.7
644.9 466.3 552.6
10. Financial liabilities
The contractual maturity of financial liabilities relating predominantly to funding is set out below:
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 10.5 10.3 35.9 1.9 - - 58.6
Deposits by customers 96.9 1,027.6 2,729.3 936.7 459.7 - 5,250.2
Loans and overdrafts
 from banks 
21.5 
5.1 
- 
- 
350.0 
- 
376.6
Debt securities in issue 0.8 21.5 114.1 586.4 539.8 287.4 1,550.0
Subordinated loan
 capital¹ 
- 
1.4 
0.2 
- 
- 
216.3 
217.9
At 31 January 2018 129.7 1,065.9 2,879.5 1,525.0 1,349.5 503.7 7,453.3
1 Comprises issuances of 175 million and 45 million with contractual maturity dates of 2027 and 2026 and optional prepayment dates of 2022 and 2021 respectively.
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 17.1 17.2 34.2 1.5 - - 70.0
Deposits by customers 112.8 770.7 2,284.3 1,111.8 585.3 - 4,864.9
Loans and overdrafts
 from banks 
13.1 
54.7 
50.8 
90.2 
210.1 
- 
418.9
Debt securities in issue 10.4 208.8 111.1 189.0 897.4 286.4 1,703.1
Subordinated loan
 capital¹ 
(0.9) 
1.4 
0.2 
- 
- 
218.7 
219.4
At 31 January 2017 152.5 1,052.8 2,480.6 1,392.5 1,692.8 505.1 7,276.3
1 Comprises issuances of 175 million and 45 million with contractual maturity dates of 2027 and 2026 and optional prepayment dates of 2022 and 2021 respectively.
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 18.4 15.4 37.5 0.7 - - 72.0
Deposits by customers 123.4 956.6 2,528.2 991.3 513.6 - 5,113.1
Loans and overdrafts
 from banks 
12.3 
74.9 
- 
20.5 
223.2 
- 
330.9
Debt securities in issue 13.6 22.8 108.4 516.0 540.9 287.9 1,489.6
Subordinated loan
 capital¹ 
- 
1.4 
0.2 
- 
- 
219.1 
220.7
At 31 July 2017 167.7 1,071.1 2,674.3 1,528.5 1,277.7 507.0 7,226.3
1 Comprises issuances of 175 million and 45 million with contractual maturity dates of 2027 and 2026 and optional prepayment dates of 2022 and 2021 respectively.
At 31 January 2018, the group was a participant of the Bank of England's Term Funding Scheme. Under this scheme, asset finance loan receivables of 714.4 million (31 January 2017: 745.7 million; 31 July 2017: 525.1 million) were positioned as collateral with the Bank of England, against which 350.0 million of cash (31 January 2017: 210.0 million; 31 July 2017: 224.4 million) was drawn. The term of these transactions is four years from the date of each drawdown but the group may choose to repay earlier at its discretion. The risks and rewards of the loan receivables remain with the group and continue to be recognised in loans and advances to customers on the consolidated balance sheet.
The Bank of England's Funding for Lending Scheme was closed for new drawings on 31 January 2018 and the group no longer had any drawings from the scheme at this date. UK Treasury Bills drawn under the scheme of 197.5 million at 31 July 2017 (31 January 2017: 275.0 million) were fully repaid during the six months ended 31 January 2018. 
The group has securitised without recourse 1,577.3 million (31 January 2017: 1,458.2 million; 31 July 2017: 1,486.3 million) of its insurance premium and motor loan receivables in return for cash and asset-backed securities in issue of 1,081.8 million (31 January 2017: 1,065.5 million; 31 July 2017: 1,046.9 million). This includes 162.9 million (31 January 2017: 168.1 million; 31 July 2017: 157.3 million) asset-backed securities in issue retained for liquidity purposes. As the group has retained exposure to substantially all the credit risks and rewards of the residual benefit of the underlying assets, it continues to recognise these assets in loans and advances to customers on the consolidated balance sheet.
11. Share premium
Following approval by shareholders at the Close Brothers Annual General Meeting on 16 November 2017 and an order made by the High Court of Justice of England and Wales on 13 December 2017, the group's share premium account of 307.8 million was cancelled and the amount credited to distributable profits.
12. Capital
The group's individual regulated entities and the group as a whole complied with all of the externally imposed capital requirements to which they were subject for the periods to 31 January 2018 and 31 January 2017, and the year ended 31 July 2017. The table below summarises the composition of regulatory capital and Pillar 1 risk weighted assets at those financial period ends.
31 January 31 July
2018 2017 2017
 million  million  million
Common equity tier 1 ("CET1") capital 
Called up share capital 38.0 37.7 38.0 
Share premium account - 284.0 307.8 
Retained earnings¹ 1,260.1 840.7 906.6 
Other reserves recognised for CET1 capital 19.0 19.3 21.4 
Deductions from CET1 capital 
Intangible assets, net of associated deferred tax liabilities (194.3) (158.2) (186.3)
Foreseeable dividend² (47.9) (44.8) (59.8)
Investment in own shares (38.8) (36.6) (34.1)
Pension asset, net of associated deferred tax liabilities (3.6) (3.1) (2.8)
Prudent valuation adjustment (0.2) (0.2) (0.2)
CET1 capital 1,032.3 938.8 990.6 
Tier 2 capital - subordinated debt³ 198.0 203.9 205.6 
Total regulatory capital 1,230.3 1,142.7 1,196.2
Risk weighted assets (notional) 
Credit and counterparty risk 7,204.5 6,585.2 6,967.6 
Operational risk⁴ 806.8 784.9 806.8 
Market risk⁴ 108.3 85.9 84.6 
8,119.6 7,456.0 7,859.0
CET1 capital ratio 12.7% 12.6% 12.6%
Total capital ratio 15.2% 15.3% 15.2%
1 Retained earnings for periods ended 31 January 2018 and 31 January 2017 include all profits (both verified and unverified) for the respective six month period.
2 Under the Regulatory Technical Standard on own funds, a deduction has been recognised for a foreseeable dividend. In accordance with this standard, for 31 January 2018 and 31 January 2017 a foreseeable dividend has been determined based on the average payout ratio over the previous three years applied to the retained earnings for the period. For 31 July 2017 a foreseeable dividend was determined as the proposed final dividend.
3 Shown after applying the Capital Requirement Regulations transitional and qualifying own funds arrangements.
4 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 CET1 capital after deductions:
31 January 31 July
2018 2017 2017
 million  million  million
Equity 1,277.2 1,141.0 1,236.0 
Regulatory deductions from equity: 
Intangible assets, net of associated deferred tax liabilities (194.3) (158.2) (186.3)
Foreseeable dividend¹ (47.9) (44.8) (59.8)
Pension asset, net of associated deferred tax liabilities (3.6) (3.1) (2.8)
Prudent valuation adjustment (0.2) (0.2) (0.2)
Other reserves not recognised for CET1 capital: 
Available for sale movements reserve - (0.1) -
Cash flow hedging reserve 0.5 3.9 3.2 
Non-controlling interests 0.6 0.3 0.5 
CET1 capital 1,032.3 938.8 990.6
1 Under the Regulatory Technical Standard on own funds, a deduction has been recognised for a foreseeable dividend. In accordance with this standard, for 31 January 2018 and 31 January 2017 a foreseeable dividend has been determined based on the average payout ratio over the previous three years applied to the retained earnings for the period. For 31 July 2017 a foreseeable dividend was determined as the proposed final dividend.
The following table shows the movement in CET1 capital during the period:
 million
CET1 capital at 31 July 2017 990.6
Profit in the period attributable to shareholders 104.0
Dividends paid and foreseen (47.8)
Other movements in reserves recognised for CET1 capital 302.1
Share premium (307.8)
Increase in intangible assets, net of associated deferred tax liabilities (8.0)
Other movements in deductions from CET1 capital (0.8)
CET1 capital at 31 January 2018 1,032.3
13. Contingent liabilities
Financial Services Compensation Scheme ("FSCS")
As disclosed in note 22 of the Annual Report 2017, the group is exposed to the FSCS which provides compensation to customers of financial institutions in the event that an institution is unable, or is likely to be unable, to pay claims against it. 
Compensation has previously been paid out by the FSCS funded by loan facilities provided by HM Treasury to FSCS in support of the FSCS's obligations to the depositors of banks declared in default. The facilities are expected to be repaid wholly from recoveries from the failed deposit-takers. In the event of a shortfall, the FSCS will recover the shortfall by raising levies on the industry. The amount of future levies payable by the group depends on a number of factors including the potential recoveries of assets by the FSCS, the group's participation in the deposit-taking market at 31 December, the level of protected deposits and the population of FSCS members.
14. Related party transactions
Related party transactions, including salary and benefits provided to directors and key management, did not have a material effect on the financial position or performance of the group during the period. There were no changes to the type and nature of the related party transactions disclosed in the Annual Report 2017 that could have a material effect on the financial position and performance of the group in the six months to 31 January 2018.
15. Consolidated cash flow statement reconciliation
31 January 31 July
2018 2017 2017
 million  million  million
(a) Reconciliation of operating profit before tax to net cash
inflow from operating activities 
Operating profit before tax 138.6 131.4 258.6
Tax paid (33.1) (27.5) (63.6)
Depreciation and amortisation 30.8 27.6 57.5
(Increase)/decrease in: 
Interest receivable and prepaid expenses (11.4) (15.5) (18.1)
Net settlement balances and trading positions 49.5 6.5 6.7
Net loans to/from money broker against stock advanced 5.9 (22.9) (21.9)
(Decrease)/increase in interest payable and accrued expenses (31.9) (17.7) 19.1
Net cash inflow from trading activities 148.4 81.9 238.3
(Increase)/decrease in: 
Loans and advances to banks not repayable on demand (28.9) 3.4 0.3
Loans and advances to customers (113.7) (112.2) (453.1)
Assets held under operating leases (38.7) (27.1) (43.2)
Certificates of deposit (70.7) 55.7 20.7
Sovereign and central bank debt 0.8 (41.6) (44.5)
Other assets less other liabilities 9.5 9.2 22.5
Increase/(decrease) in: 
Deposits by banks (13.4) (1.1) 0.9
Deposits by customers 137.1 (29.7) 218.5
Loans and overdrafts from banks 45.7 (50.2) (138.2)
Debt securities in issue, net of transaction costs 73.7 470.9 297.8
Net cash inflow from operating activities 149.8 359.2 120.0
(b) Analysis of net cash outflow in respect of the purchase of subsidiaries and non-controlling interests 
Cash consideration paid (0.9) (6.3) (6.3)
(c) Analysis of net cash inflow/(outflow) in respect of the sale of a subsidiary 
Cash consideration received 0.7 0.3 0.3
Cash and cash equivalents disposed of - (0.6) (0.6)
0.7 (0.3) (0.3)
31 January 31 July
2018 2017 2017
 million  million  million
(d) Analysis of cash and cash equivalents¹ 
Cash and balances at central banks 834.3 1,113.8 798.2
Loans and advances to banks repayable on demand 66.4 68.4 61.4
900.7 1,182.2 859.6
1 Excludes Bank of England cash reserve account, amounts held as collateral and settlement money held in accordance with Financial Conduct Authority Client Asset rules.
During the period ended 31 January 2018, the non-cash changes on debt financing amounted to 2.6 million (31 January 2017: 8.4 million; 31 July 2017: 8.3 million) arising largely from interest accretion.
16. Fair value of financial assets and liabilities
The main differences between the fair values and the carrying values of the group's financial assets and financial liabilities are as follows:
31 January 2018 31 January 2017 31 July 2017
Fair
value Carrying value Fair value Carrying value Fair value Carrying value
 million  million  million  million  million  million
Subordinated loan capital 237.8 217.9 230.9 219.4 242.0 220.7
Debt securities in issue 1,581.4 1,550.0 1,722.3 1,703.1 1,522.8 1,489.6
The group holds financial instruments that are measured at fair value subsequent to initial recognition. Each instrument has been categorised within one of three levels using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. These levels are based on the degree to which the fair value is observable and are defined in note 27 "Financial risk management" of the Annual Report 2017. The table below shows the classification of financial instruments held at fair value into the valuation hierarchy:
Level 1 Level 2 Level 3 Total
 million  million  million  million
At 31 January 2018 
Assets 
Debt securities: 
Long trading positions in debt securities held for trading 20.7 4.2 - 24.9
Sovereign and central bank debt classified as
 available for sale 
42.8 
- 
- 
42.8
Equity shares: 
Held for trading 7.0 30.3 - 37.3
Available for sale - - 0.6 0.6
Derivative financial instruments - 18.9 - 18.9
Contingent consideration - - 1.8 1.8
70.5 53.4 2.4 126.3
Liabilities 
Short positions: 
Debt securities 8.0 2.5 - 10.5
Equity shares 6.8 8.2 - 15.0
Derivative financial instruments - 16.8 - 16.8
Contingent consideration - - 6.1 6.1
14.8 27.5 6.1 48.4
Level 1 Level 2 Level 3 Total
 million  million  million  million
At 31 January 2017 
Assets 
Debt securities: 
Long trading positions in debt securities held for trading 12.7 1.8 - 14.5
Sovereign and central bank debt classified as
 available for sale 
40.7 
- 
- 
40.7
Equity shares: 
Held for trading 5.8 27.7 - 33.5
Available for sale - - 2.1 2.1
Derivative financial instruments - 29.8 - 29.8
Contingent consideration - - 2.4 2.4
59.2 59.3 4.5 123.0
Liabilities 
Short positions: 
Debt securities 8.6 2.6 - 11.2
Equity shares 3.7 9.1 - 12.8
Derivative financial instruments - 17.9 - 17.9
Contingent consideration - - 4.6 4.6
12.3 29.6 4.6 46.5
Level 1 Level 2 Level 3 Total
 million  million  million  million
At 31 July 2017 
Assets 
Debt securities: 
Long trading positions in debt securities held for trading 13.7 2.5 - 16.2
Sovereign and central bank debt classified as
 available for sale 
43.6 
- 
- 
43.6
Equity shares: 
Held for trading 5.4 26.5 - 31.9
Available for sale - - 0.8 0.8
Derivative financial instruments - 27.0 - 27.0
Contingent consideration - - 2.7 2.7
62.7 56.0 3.5 122.2
Liabilities 
Short positions: 
Debt securities 8.0 3.5 - 11.5
Equity shares 4.7 11.5 - 16.2
Derivative financial instruments - 11.5 - 11.5
Contingent consideration - - 6.6 6.6
12.7 26.5 6.6 45.8
At 31 January 2018, financial instruments classified as Level 3 predominantly comprise a legacy investment property fund and contingent consideration payable and receivable in relation to two acquisitions and the disposal of a subsidiary (as described in note 27 "Financial risk management" of the Annual Report 2017).
The valuation of contingent consideration is determined on a discounted expected cash flow basis. The group believes that there is no reasonably possible change to the inputs used in the valuation of this position which would have a material effect on the group's consolidated income statement.
There were no significant transfers between Level 1, 2 and 3 during the six months ended 31 January 2018 (six months ended 31 January 2017: none; year ended 31 July 2017: none).
Movements in financial instruments categorised as Level 3 during the periods were:
Equity shares available
for sale 
Contingent consideration
 million  million
At 1 August 2016 2.0 -
Total losses recognised in the consolidated income statement - -
Total gains recognised in other comprehensive income 0.1 -
Purchases and issues - (4.6)
Sales and settlements - 2.4
At 31 January 2017 2.1 (2.2)
Total losses recognised in the consolidated income statement - -
Total gains recognised in other comprehensive income - -
Purchases and issues - (2.0)
Sales and settlements (1.3) 0.3
At 31 July 2017 0.8 (3.9)
Total losses recognised in the consolidated income statement - (0.3)
Total losses recognised in other comprehensive income - (0.3)
Purchases and issues - -
Sales and settlements (0.2) 0.2
At 31 January 2018 0.6 (4.3)
The losses recognised in the consolidated income statement relating to instruments held at 31 January 2018 amounted to 0.3 million (31 January 2017: nil; 31 July 2017: nil).
Cautionary Statement
Certain statements included or incorporated by reference within this 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. Except as may be required by law or regulation, 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 announcement should be construed as a profit forecast.
This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any sharesor other securities in the company or any of its group members, nor does it constitute a recommendation regarding the sharesor other securities of the company or any of its group members. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser or other professional. Statements in this announcement reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this announcement shall be governed by English law. Nothing in this announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFETVDIFLIT

CBG — Close Brothers News Story

REG - Close Bros Grp PLC - Half-year Report

Our conclusion

What we have reviewed

Responsibilities for the condensed half yearly financial statements and the review

Our responsibilities and those of the directors

What a review of condensed half yearly financial statements involves

Consolidated Income Statement

Recent news on Close Brothers

REG - Close Bros Grp PLC - Transaction in Own Shares

REG - Close Bros Grp PLC - Transaction in Own Shares

REG - Close Bros Grp PLC - Director/PDMR Shareholding

REG - Close Bros Grp PLC - Transaction in Own Shares

REG - Close Bros Grp PLC - Result of Tender Offer

	The group reported a good performance for the first half, with a 6% increase in adjusted operating profit to 142.3 million and a return on opening equity² of 17.3%
	Banking delivered an adjusted operating profit of 128.5 million, up 5% year on year, driven by both Commercial and Retail
	The net interest margin was stable and impairments remained low with a bad debt ratio of 0.7%, stable on last year excluding provision releases
	The loan book grew by 1.7% to 7.0 billion, up 7% year on year, as we continue to apply our disciplined approach to lending
	Winterflood's strong performance continued with operating profit of 14.7 million, 2% up year on year, reflecting consistently high investor trading activity
	Asset Management delivered a significant increase in adjusted operating profit to 11.4 million, up 25% year on year, supported by strong net inflows at 13% (annualised) of opening managed assets
	The interim dividend per share of 21.0p is up 5% on last year
	On a statutory basis, group operating profit before tax increased 5% to 138.6 million

	First half 2018	First half 2017	Change %
Adjusted operating profit	142.3m	134.2m	6
Operating profit before tax	138.6m	131.4m	5
Adjusted basic earnings per share	71.2p	66.6p	7
Basic earnings per share	69.2p	65.1p	6
Dividend per share	21.0p	20.0p	5
Return on opening equity	17.3%	18.0%
Net interest margin	8.2%	8.2%
Bad debt ratio	0.7%	0.5%³

	31 January 2018	31 July 2017	Change %
Loan book	7.0bn	6.9bn	1.7
Total client assets	11.8bn	11.2bn	5.8
Common equity tier 1 capital ratio	12.7%	12.6%
Total capital ratio	15.2%	15.2%
1 Numbers are presented on an adjusted basis, unless indicated otherwise. Adjusted operating profit excludes 3.7 million (2017: 2.8 million) of amortisation of intangible assets on acquisition. 2 Please refer to definitions on page 16. 3 Includes provision releases. Bad debt ratio of 0.7% excluding provision releases.

	First half 2018 million	First half 2017 million	Change %
Operating income	405.5	378.3	7
Adjusted operating expenses	(239.4)	(226.8)	6
Impairment losses on loans and advances	(23.8)	(17.3)	38
Adjusted operating profit	142.3	134.2	6
Banking	128.5	122.7	5
Retail	42.8	39.9	7
Commercial	39.7	36.5	9
Property	46.0	46.3	(1)
Securities	14.7	14.4	2
Asset Management	11.4	9.1	25
Group	(12.3)	(12.0)	3
Amortisation of intangible assets on acquisition	(3.7)	(2.8)	32
Operating profit before tax	138.6	131.4	5

Adjusted basic earnings per share	71.2p	66.6p	7
Basic earnings per share	69.2p	65.1p	6
Dividend per share	21.0p	20.0p	5
Return on opening equity	17.3%	18.0%

	31 January 2018 million	31 July 2017 million
Loans and advances to customers	6,998.4	6,884.7
Treasury assets¹	1,135.2	1,029.0
Market-making assets²	705.5	643.4
Other assets	802.3	728.1
Total assets	9,641.4	9,285.2
Deposits by customers	5,250.2	5,113.1
Borrowings	2,144.5	2,041.2
Market-making liabilities²	674.4	556.9
Other liabilities	295.1	338.0
Total liabilities	8,364.2	8,049.2
Equity	1,277.2	1,236.0
Total liabilities and equity	9,641.4	9,285.2

	31 January 2018 million	31 July 2017 million
Common equity tier 1 capital	1,032.3	990.6
Total capital	1,230.3	1,196.2
Risk weighted assets	8,119.6	7,859.0

Common equity tier 1 capital ratio	12.7%	12.6%
Total capital ratio	15.2%	15.2%
Leverage ratio	10.7%	10.7%

	31 January 2018 million	31 July 2017 million
Customer deposits	5,250.2	5,113.1
Secured funding	1,268.9	1,297.3
Unsecured funding²	1,144.1	1,120.3
Equity	1,277.2	1,236.0
Total available funding	8,940.4	8,766.7
Of which term funding (over one year)	4,703.6	4,766.2

Total funding as % of loan book	128%	127%
Term funding as % of loan book	67%	69%
Average maturity of term funding (excluding equity)	37 months	38 months
Average maturity of funding allocated to loan book³	21 months	21 months

	31 January 2018 million	31 July 2017 million
Bank of England deposits	841.4	805.1
Sovereign and central bank debt	42.8	43.6
High quality liquid assets¹	884.2	848.7
Certificates of deposit	251.0	180.3
Treasury assets	1,135.2	1,029.0

	31 January 2018	31 July 2017	Change
	million	million	%
Retail	2,700.6	2,702.8	(0.1)
Motor Finance	1,715.5	1,761.9	(2.6)
Premium Finance	985.1	940.9	4.7
Commercial	2,603.7	2,552.6	2.0
Asset Finance	2,057.0	2,017.0	2.0
Invoice Finance	546.7	535.6	2.1
Property	1,694.1	1,629.3	4.0
Closing loan book	6,998.4	6,884.7	1.7

	First half 2018 million	First half 2017³ million	Change %
Investment management	35.8	30.8	16
Advice and other services¹	20.0	17.4	15
Other income²	0.2	1.9	(11)
Operating income	56.0	50.1	12
Adjusted operating expenses	(44.6)	(41.0)	9
Adjusted operating profit	11.4	9.1	25

Revenue margin (bps)	97	96
Operating margin	20%	18%
Return on opening equity	33%	27%

	31 January 2018 million
Opening managed assets	8,900
Inflows	947
Outflows	(374)
Net inflows	573
Market movements	240
Total managed assets	9,713
Advised only assets	2,088
Total client assets¹	11,801
Net flows as % of opening managed assets	13%
1 Total client assets include 4.1 billion of assets that are both advised and managed.

	the condensed set of consolidated financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting";
	the Half Yearly Report 2018 includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
	the Half Yearly Report 2018 includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related parties' transactions and changes therein).

		Six months ended		Year ended
		31 January		31 July
		2018	2017	2017
		Unaudited	Unaudited	Audited
Note		million	million	million
Interest income		301.7	289.6	578.9
Interest expense		(56.0)	(62.5)	(117.3)

Net interest income		245.7	227.1	461.6

Fee and commission income		106.4	100.2	206.5
Fee and commission expense		(14.3)	(15.0)	(29.0)
Gains less losses arising from dealing in securities		51.8	48.7	94.2
Other income		31.4	29.2	57.3
Depreciation of operating lease assets		(15.5)	(11.9)	(25.0)

Non-interest income		159.8	151.2	304.0

Operating income	2	405.5	378.3	765.6

Administrative expenses		(239.4)	(226.8)	(460.6)
Impairment losses on loans and advances	6	(23.8)	(17.3)	(40.2)
Total operating expenses before amortisation of intangible assets on acquisition		(263.2)	(244.1)	(500.8)
Operating profit before amortisation of intangible assets on acquisition		142.3	134.2	264.8
Amortisation of intangible assets on acquisition		(3.7)	(2.8)	(6.2)

Operating profit before tax		138.6	131.4	258.6
Tax	3	(34.7)	(34.8)	(67.7)

Profit after tax for the period		103.9	96.6	190.9
Loss attributable to non-controlling interests		(0.1)	(0.2)	(0.3)

Profit attributable to shareholders		104.0	96.8	191.2

Basic earnings per share	4	69.2p	65.1p	128.3p
Diluted earnings per share	4	68.7p	64.9p	127.5p

Ordinary dividend per share	5	21.0p	20.0p	60.0p

					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 2016 (audited)	37.7		284.0	797.5	-	(14.3)	(1.1)	(6.7)	1,097.1	(0.2)	1,096.9
Profit/(loss) for the period	-		-	96.8	-	-	-	-	96.8	(0.2)	96.6
Other comprehensive income/(expense) for the period		-	-	2.2	(0.4)	-	0.2	2.8	4.8	-	4.8
Total comprehensive income/(expense) for the period		-	-	99.0	(0.4)	-	0.2	2.8	101.6	(0.2)	101.4
Exercise of options	-		-	-	-	-	-	-	-	-	-
Dividends paid	-		-	(56.0)	-	-	-	-	(56.0)	-	(56.0)
Shares purchased	-		-	-	-	(12.7)	-	-	(12.7)	-	(12.7)
Shares issued	-		-	-	-	-	-	-	-	-	-
Shares released	-		-	-	-	13.3	-	-	13.3	-	13.3
Other movements	-		-	(0.7)	-	(2.2)	-	-	(2.9)	0.1	(2.8)
Share premium cancellation	-		-	-	-	-	-	-	-	-	-
Income tax	-		-	0.9	-	-	-	-	0.9	-	0.9
At 31 January 2017 (unaudited)	37.7		284.0	840.7	(0.4)	(15.9)	(0.9)	(3.9)	1,141.3	(0.3)	1,141.0

Profit/(loss) for the period	-		-	94.4	-	-	-	-	94.4	(0.1)	94.3
Other comprehensive income/(expense) for the period		-	-	-	1.1	-	(0.6)	0.7	1.2	-	1.2
Total comprehensive income/(expense) for the period		-	-	94.4	1.1	-	(0.6)	0.7	95.6	(0.1)	95.5
Exercise of options	-		0.1	-	-	-	-	-	0.1	-	0.1
Dividends paid	-		-	(29.6)	-	-	-	-	(29.6)	-	(29.6)
Shares purchased	-		-	-	-	-	-	-	-	-	-
Shares issued	0.3		23.7	-	-	-	-	-	24.0	-	24.0
Shares released	-		-	-	-	2.5	-	-	2.5	-	2.5
Other movements	-		-	0.9	-	1.5	-	-	2.4	(0.1)	2.3
Share premium cancellation	-		-	-	-	-	-	-	-	-	-
Income tax	-		-	0.2	-	-	-	-	0.2	-	0.2
At 31 July 2017 (audited)	38.0		307.8	906.6	0.7	(11.9)	(1.5)	(3.2)	1,236.5	(0.5)	1,236.0

	Six months ended 31 January			Year ended 31 July
	2018		2017	2017
	million		million	million
Tax charged/(credited) to the income statement
Current tax:
UK corporation tax	32.8		32.8	64.8
Foreign tax	1.0		1.2	2.1
Adjustments in respect of previous periods	-		-	(0.6)
	33.8		34.0	66.3
Deferred tax:
Deferred tax charge for the current period	0.9		0.7	0.5
Adjustments in respect of previous periods	-		0.1	0.9

	34.7		34.8	67.7

Tax on items not (credited)/charged to the income statement
Current tax relating to:
Financial instruments classified as available for sale	-		(0.2)	0.2
Share-based payments	(0.1)		(0.9)	(1.0)
Deferred tax relating to:
Cash flow hedging	1.0		1.1	1.2
Defined benefit pension scheme	0.2		0.6	0.5
Financial instruments classified as available for sale	(0.1)		-	0.1
Share-based payments	(0.1)		-	(0.1)
Currency translation gains	-		-	0.8

	0.9		0.6	1.7

Reconciliation to tax expense
UK corporation tax for the period at 19.0% (2017: 19.7%) on operating profit	26.3	25.9		50.9
Gain on sale of subsidiaries and available for sale investment	-	(0.3)		(0.3)
Effect of different tax rates in other jurisdictions	(0.1)	(0.1)		(0.4)
Disallowable items and other permanent differences	0.6	0.6		0.9
Banking surcharge	7.8	7.6		14.2
Deferred tax impact of decreased tax rates	0.1	1.1		2.1
Prior period tax provision	-	-		0.3

	34.7	34.8		67.7

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	Impairment provisions	Total
million		million	million	million	million	million	million	million
At 31 January 2018	78.8	2,171.4	2,031.4	1,341.5	1,349.7	76.5	(50.9)	6,998.4
At 31 January 2017	58.3	1,900.7	1,872.4	1,324.6	1,355.9	81.9	(50.0)	6,543.8
At 31 July 2017	59.3	1,914.3	2,115.2	1,340.7	1,431.6	76.0	(52.4)	6,884.7

	Held for trading	Available for sale	Loans and receivables	Total
	million	million	million	million
Long trading positions in debt securities	24.9	-	-	24.9
Certificates of deposit	-	-	251.0	251.0
Sovereign and central bank debt	-	42.8	-	42.8

At 31 January 2018	24.9	42.8	251.0	318.7

	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		10.5	10.3	35.9	1.9	-	-	58.6
Deposits by customers		96.9	1,027.6	2,729.3	936.7	459.7	-	5,250.2
Loans and overdrafts from banks		21.5	5.1	-	-	350.0	-	376.6
Debt securities in issue		0.8	21.5	114.1	586.4	539.8	287.4	1,550.0
Subordinated loan capital¹		-	1.4	0.2	-	-	216.3	217.9

At 31 January 2018		129.7	1,065.9	2,879.5	1,525.0	1,349.5	503.7	7,453.3

		million
CET1 capital at 31 July 2017		990.6
Profit in the period attributable to shareholders		104.0
Dividends paid and foreseen		(47.8)
Other movements in reserves recognised for CET1 capital		302.1
Share premium		(307.8)
Increase in intangible assets, net of associated deferred tax liabilities		(8.0)
Other movements in deductions from CET1 capital		(0.8)

CET1 capital at 31 January 2018		1,032.3

	31 January 2018		31 January 2017		31 July 2017
	Fair value	Carrying value	Fair value	Carrying value	Fair value	Carrying value
	million	million	million	million	million	million
Subordinated loan capital	237.8	217.9	230.9	219.4	242.0	220.7
Debt securities in issue	1,581.4	1,550.0	1,722.3	1,703.1	1,522.8	1,489.6

	Level 1		Level 2	Level 3	Total
	million		million	million	million
At 31 January 2018
Assets
Debt securities:
Long trading positions in debt securities held for trading		20.7	4.2	-	24.9
Sovereign and central bank debt classified as available for sale	42.8		-	-	42.8
Equity shares:
Held for trading	7.0		30.3	-	37.3
Available for sale	-		-	0.6	0.6
Derivative financial instruments	-		18.9	-	18.9
Contingent consideration	-		-	1.8	1.8

	70.5		53.4	2.4	126.3

Liabilities
Short positions:
Debt securities	8.0		2.5	-	10.5
Equity shares	6.8		8.2	-	15.0
Derivative financial instruments	-		16.8	-	16.8
Contingent consideration	-		-	6.1	6.1

	14.8		27.5	6.1	48.4

	Equity shares available for sale	Contingent consideration
	million	million
At 1 August 2016	2.0	-
Total losses recognised in the consolidated income statement	-	-
Total gains recognised in other comprehensive income	0.1	-
Purchases and issues	-	(4.6)
Sales and settlements	-	2.4

At 31 January 2017	2.1	(2.2)
Total losses recognised in the consolidated income statement	-	-
Total gains recognised in other comprehensive income	-	-
Purchases and issues	-	(2.0)
Sales and settlements	(1.3)	0.3

At 31 July 2017	0.8	(3.9)
Total losses recognised in the consolidated income statement	-	(0.3)
Total losses recognised in other comprehensive income	-	(0.3)
Purchases and issues	-	-
Sales and settlements	(0.2)	0.2

At 31 January 2018	0.6	(4.3)