REG - Close Bros Grp PLC - Scheduled Trading Update

Close BrothersAnnouncement

21/01/2022 07:05

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RNS Number : 1587Z  Close Brothers Group PLC  21 January 2022

 
 

 Scheduled Trading Update

 

Close Brothers Group plc ("the group" or "Close Brothers") today issues its
scheduled pre-close trading update ahead of its 2022 half year end. Close
Brothers will release its half year results for the six months ending 31
January 2022 on 15 March 2022.

All statements in this release relate to the five months to 31 December 2021
("the period") unless otherwise indicated.

Adrian Sainsbury, Chief Executive Officer

"We have seen good momentum in our business, as we continue to make the most
of opportunities in our core markets. We are navigating the current
environment effectively and remain confident that our proven and resilient
model, supported by the hard work and expertise of our people, leave us well
positioned to protect, grow and sustain our business over the long term."

Group and divisional performance

The group has performed well, with good loan book growth at strong margins in
Banking and continued growth momentum in Close Brothers Asset Management
("CBAM"), although trading income in Winterflood has moderated since the end
of the 2021 financial year.

Our Common Equity Tier 1 ("CET1") ratio was 15.7% at 31 December 2021 (31 July
2021: 15.8%), well above the applicable minimum regulatory requirement(1).

In Banking, we have seen good demand across our businesses. The loan book
increased 2.9% to £8.69 billion (31 July 2021: £8.44 billion) driven by good
new business levels in Asset Finance and Motor Finance and improved
utilisation in Invoice Finance, despite continued high repayments in the
Property business.

The annualised net interest margin remained strong as we continued to focus on
our pricing discipline.

Our key strategic investment programmes are progressing well and we continue
to exercise rigorous control of our costs while remaining mindful of
inflationary pressures.

The underlying credit performance of the loan book was strong, and our lending
remains predominantly secured, prudently underwritten and diverse. The
annualised bad debt ratio was broadly in line with the previous financial year
(FY 2021: 1.1%) and includes the impact of updated loss rate assumptions for
the Novitas business(2).

CBAM has continued to deliver good growth in the period, achieving annualised
net inflows of 8% (FY 2021: 7%) and benefiting from rising markets. Managed
assets grew to £16.6 billion (31 July 2021: £15.6 billion) and total client
assets increased to £18.0 billion (31 July 2021: £17.0 billion).

As highlighted in the Q1 2022 trading update, Winterflood's trading
performance has moderated since the end of the 2021 financial year. As a
result, operating profit in the period is broadly in line with the H1 2020 run
rate (H1 2020 operating profit: £10.6 million). There were no loss days in
the period.

Outlook

The group has performed well so far this year and expects to deliver a solid
first half performance across our businesses. Although we remain mindful of
ongoing uncertainty, we are well placed to continue to make the most of
opportunities in the remainder of the year.

 

Footnotes

1 The group's capital ratios are presented on a transitional basis after the
application of IFRS 9 transitional arrangements which allows banks to add back
to their capital base a proportion of the IFRS 9 impairment charges during the
transitional period. Without their application, and excluding the benefit
related to the treatment of software assets at 31 December 2021, the CET1
ratio would be 14.3%. In line with the amended CRR, effective on 23 December
2020, the CET1 capital ratio at 31 December 2021 includes a c.40bps benefit
related to software assets which are exempt from the deduction requirement for
intangible assets from CET1. The Prudential Regulation Authority ("PRA")
published PS17/21 'Implementation of Basel standards' on 9 July 2021,
confirming the removal of this benefit from the CET1 capital ratio from 1
January 2022. The applicable minimum regulatory requirement, excluding any
PRA buffer was 7.6% at 31 December 2021.

2 In July 2021, the group decided to cease permanently the approval of lending
to new customers across all of the products offered by Novitas Loans
("Novitas"), a wholly owned subsidiary of Close Brothers acquired in 2017, and
withdraw from the legal services financing market. This followed a strategic
review of Novitas, which concluded that the overall risk profile of the
business is no longer compatible with our long-term strategy and risk
appetite. As of 31 July 2021, Novitas had a loan book net of provisions of
£181.5 million, representing 2.1% of the group's total loans at this date.

Enquiries

 Sophie Gillingham  Close Brothers Group plc                  020 3857 6574
 Camila Sugimura    Close Brothers Group plc                  020 3857 6577
 Kimberley Taylor   Close Brothers Group plc                  020 3857 6233
 Irene Galvan       Close Brothers Group plc                  020 3857 6217
 Sam Cartwright     Maitland                                  07827 254561

 

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 3,700 people, principally in the UK. Close Brothers Group plc is listed
on the London Stock Exchange and is a member of the FTSE 250.

Cautionary Statement

Certain statements included 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 shares or other securities in the company or any of its group
members, nor does it constitute a recommendation regarding the shares or 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.

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