REG - Close Bros Grp PLC - Scheduled Trading Update

Close BrothersAnnouncement

20/05/2022 07:00

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RNS Number : 1826M  Close Brothers Group PLC  20 May 2022

 

 

Press Release
 

 Scheduled Trading Update
 20 May 2022

Embargoed for release until 7.00 am BST on 20 May 2022.

Close Brothers Group plc ("the group" or "Close Brothers") today issues its
scheduled trading update relating to the third quarter of its 2022 financial
year. All statements in this release relate to the period from 1 February 2022
to 30 April 2022 ("the quarter") unless otherwise indicated.

Adrian Sainsbury, Chief Executive Officer

"We have performed well in the quarter, with continued good momentum across
our lending businesses and robust demand in our core markets. We continue to
support our customers and clients and maintain our strategic discipline
against a backdrop of rising inflation and heightened uncertainty. We are
confident that our proven and resilient business model will allow us to
continue delivering on our long-term track record of growth and
profitability."

Group and divisional performance

The group performed well in the quarter with continued loan book growth in the
Banking division at strong margins. Client assets reduced in Close Brothers
Asset Management ("CBAM"), reflecting negative market movements and
Winterflood saw an improvement in trading income.

Our Common Equity Tier 1 ("CET1") ratio was 14.9% at 30 April 2022 (31 January
2022: 15.1%), well above the applicable minimum regulatory requirement(1).

In Banking, the loan book increased 1.8% in the quarter to £8.8 billion (31
January 2022: £8.6 billion, 31 July 2021: £8.4 billion), corresponding to
3.7% growth year-to-date. This was driven by continued good new business
volumes in Commercial and Motor Finance, and in Property, loan book growth
resumed, reflecting increased drawdowns from our strong pipeline.

The annualised year-to-date net interest margin was strong at 7.8% (H1 2022:
7.9%), reflecting our continued focus on pricing discipline and a reduction in
our cost of funds.

The impact of interest rate floors of 1% in certain businesses will gradually
fall away given recent rises in interest rates. Once the UK base rate is above
1%, we expect no further impact from these floors.

Whilst we are not yet seeing a direct impact of the deteriorating economic
conditions, in particular rising inflation, on our customers, the year-to-date
bad debt ratio increased marginally to 1.2% (0.5% excluding Novitas), which
reflects the recognition of higher IFRS 9 provisions to take into account the
cautious outlook for the external environment(2) (H1 2022: 1.1%, 0.2%
excluding Novitas). We continue to closely monitor the performance of the book
and incorporate updated macroeconomic scenarios.
 
 
 

We continue to progress our strategic investment programmes, including our
Internal Ratings Based ("IRB") application and have received confirmation from
the Prudential Regulation Authority ("PRA") that our application has
successfully transitioned to Phase 2.

CBAM achieved year-to-date annualised net inflows of 5% (H1 2022: 8%) and has
a strong pipeline of new business. In the quarter, managed assets decreased to
£15.4 billion (31 January 2022: £15.8 billion) and total client assets
decreased to £16.7 billion (31 January 2022: £17.2 billion), reflecting
negative market movements.

Winterflood's trading income improved in the quarter, although trading
conditions remain volatile. The team's experience and focus on managing risk
resulted in only one loss day in the quarter despite extreme market
volatility.

Outlook

Against a backdrop of rising inflation and heightened uncertainty, our proven
and resilient model, strong financial position and deep expertise leave us
well positioned to continue to support our customers and clients. We remain
committed to delivering against our strategy to protect, grow and sustain the
business.

 

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, the CET1 capital ratio would
be 14.0%. The applicable minimum regulatory requirement, excluding any
applicable PRA buffer was 7.6% at 30 April 2022.

2 Since the Half Year 2022 results, we have updated the macroeconomic
scenarios and the weightings assigned to them. At 30 April 2022, there was a
40% weighting to the baseline scenario, 20% to the upside and 40% to the
downside scenarios (31 January 2022: 40% baseline, 30% upside, 30% downside).
Moody's unemployment forecast for 2022 under the baseline scenario is 4.3%,
4.0% under the upside scenario and ranges between 4.6% and 5.3% in the
downside scenarios. Moody's inflation forecast for 2022 under the baseline
scenario is 7.5%, 7.2% for the upside scenario and ranges between 8.3% and
11.0% in the downside scenarios.

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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