REG - Close Bros Grp PLC - Trading Statement

Close BrothersAnnouncement

16/11/2023 07:00

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RNS Number : 6161T  Close Brothers Group PLC  16 November 2023

 

Press Release
 

 Scheduled Trading Update
 16 November 2023

Embargoed for release until 7.00 am on 16 November 2023.

Close Brothers Group plc ("the group" or "Close Brothers") today issues its
scheduled trading update relating to the first quarter of its 2024 financial
year from 1 August 2023 to 31 October 2023.

Adrian Sainsbury, Chief Executive Officer, said:

"Performance in the first quarter of 2024 reflected continued momentum in
Banking, whilst our market-facing businesses were impacted by unfavourable
market conditions.

In Banking, we delivered loan book growth across our businesses, strong
margins and a stable credit performance. CBAM delivered strong net inflows, at
the top end of our target range, helped by our hiring strategy. At
Winterflood, performance was impacted by further weakening of investor
appetite but we remain well placed for any recovery.

We are successfully implementing our strategy in the current environment,
leveraging our long-term relationships, the deep expertise of our people and
our customer-centric approach to deliver disciplined growth. By maintaining
our pricing discipline, active management of costs and consistent approach to
lending through the cycle, we are able to support our customers and clients
through these uncertain times."

Performance in the three months to 31 October 2023

In Banking, the loan book increased 3.0% in the quarter (3.4% excluding
Novitas and the Irish Motor Finance business in run-off) and 7.5% year-on-year
to £9.8 billion (31 July 2023: £9.5 billion), reflecting a continuation of
the momentum seen in the second half of the 2023 financial year. We saw good
demand in Commercial, despite the roll-off of Government supported lending,
driven by strong new business volumes in Leasing and Invoice Finance. In
Retail, growth in the UK Motor Finance and Premium Finance businesses more
than offset the run-off of the Irish Motor Finance book. The Property loan
book continued to grow as we saw drawdowns from our strong pipeline.

We are pleased to confirm that the acquisition of Bluestone Motor Finance
(Ireland) DAC was completed on 31 October 2023. This provides a platform for
us to re-establish our Motor Finance business in Ireland and deliver
disciplined growth in a market that remains a strategic priority for the
group, following the cessation of our previous partnership in the Republic of
Ireland last year.

The annualised year-to-date net interest margin remained strong at 7.6% (7.5%
excluding Novitas) (FY 2023: 7.7%, 7.6% excluding Novitas), reflecting our
focus on maintaining pricing discipline in a higher interest rate environment.

We continued to invest in our strategic programmes and are making further
progress with our cost management initiatives, with growth in Banking costs in
full-year 2024 expected to be within the 8-10% range, as outlined in our
full-year 2023 results announcement.

The annualised year-to-date bad debt ratio was stable at 1.0% (FY 2023: 0.9%
excluding Novitas)(1). There has been no material change in relation to
Novitas in the quarter.

Whilst we have not seen a significant impact on credit performance, we
continue to monitor closely the evolving impacts of higher inflation and cost
of living on our customers. We remain confident in the quality of our loan
book, which is predominantly secured, prudently underwritten, diverse, and
supported by the deep expertise of our people.

Close Brothers Asset Management ("CBAM") delivered strong year-to-date
annualised net inflows of 10% (FY 2023: 9%), with the new bespoke investment
managers continuing to contribute significantly to the overall inflow rate. As
previously outlined, our successful hiring strategy continues to impact CBAM's
cost base in the near term.

In the quarter, managed assets decreased slightly to £16.2 billion (31 July
2023: £16.4 billion) and total assets decreased to £17.0 billion (31 July
2023: £17.3 billion), primarily reflecting unfavourable market movements.

Winterflood's performance has been adversely impacted by a further weakening
of investor appetite and market uncertainty, resulting in an operating loss of
£2.5 million in the first quarter.

The Group (central functions)(2) reported net expenses of £9.5 million in the
quarter (Q1 2023: net expenses of £7.1 million), with the year-on-year
movement primarily driven by net interest expenses from debt issued by the
holding company in June 2023(3).

We maintained our strong balance sheet and the prudent management of our
financial resources.

Our funding base increased to £12.7 billion (31 July 2023: £12.4 billion)
and we grew our retail deposit base by 5% to £4.4 billion in the quarter,
reflecting the strength of our Savings proposition. Our liquidity coverage
ratio was substantially above regulatory requirements as we maintained our
prudent liquidity position.

Our Common Equity Tier 1 ("CET1") capital and Total Capital ratios were 12.7%
and 14.7%,  respectively, at 31 October 2023 (31 July 2023: 13.3% and 15.3%).
The reduction in the quarter was primarily driven by loan book growth
(c.40bps) and the Bluestone Motor Finance acquisition (c.20bps)(4). We remain
committed to optimising further our capital structure, including the issuance
of debt capital market securities if appropriate, targeting a CET1 capital
ratio range of 12% to 13% over the medium term.

Outlook

Our Banking business is sustaining its growth momentum and focusing on pricing
discipline, and remains well positioned to make the most of opportunities in
the current environment. In CBAM, we remain committed to driving growth
organically, through high quality hiring, and through in-fill acquisitions.
Winterflood is well positioned for when investor confidence recovers.

Footnotes

1 At 31 October 2023, there was a 32.5% weighting to the baseline scenario,
30.0% to the upside and 37.5% to the downside scenarios (unchanged from 31
July 2023). Moody's October unemployment forecast for Q4 2023 under the
baseline scenario is 4.4%, 4.1% under the upside scenario and ranges between
4.6% and 4.9% in the downside scenarios. Moody's October inflation forecast
for Q4 2023 under the baseline scenario is 5.0%, 4.6% for the upside scenario
and ranges between 3.8% and 3.1% in the downside scenarios. Moody's October
forecast for the Bank of England base rate for Q4 2023 is 5.3% in the baseline
scenario, 5.3% in the upside scenario and ranges from 5.2% to 5.1% in the
downside scenarios.

2 Group consists of central functions (such as finance, legal and compliance,
risk and human resources) as well as the non-trading head office company and
consolidation adjustments and is set out in order that the information
presented reconciles to the consolidated income statement.

3 In June 2023, Close Brothers Group plc issued a £250 million senior
unsecured bond at an interest rate of 7.75% with the net proceeds to be used
for general corporate purposes.

4 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 and Total capital
ratios would be 12.6% and 14.5%, respectively. The applicable minimum CET1 and
Total capital ratio regulatory requirements, excluding any applicable PRA
buffer, were 9.5% and 13.4% at 31 October 2023. The group's capital ratios are
unaudited and include unverified profits net of foreseeable dividend.

Financial Calendar (provisional)*

As announced at the Preliminary Results 2023, going forward, the group has
decided to discontinue the issuance of pre-close trading updates in order to
align more closely with prevailing market and industry practice.

The provisional financial calendar for the remainder of the 2024 financial
year is as follows:

 Half Year Results 2024    19 March 2024
 Q3 2024 Trading Update    22 May 2024
 Preliminary Results 2024  24 September 2024

* All dates are subject to change.

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

Ingrid
Diaz
Close Brothers Group
plc                              020 3857 6088

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
approximately 4,000 people, principally in the United Kingdom and Ireland.
Close Brothers Group plc is listed on the London Stock Exchange and is a
constituent of the FTSE 250.

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. All
statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements. 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. There are also
a number of factors that could cause actual future operations, performance,
financial conditions, results or developments to differ materially from the
plans, goals and expectations expressed or implied by these forward-looking
statements and forecasts. These factors include, but are not limited to, those
contained in the Group's annual report (available at:
https://www.closebrothers.com/investor-relations
(https://www.closebrothers.com/investor-relations) ). 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. Past performance cannot
be relied upon as a guide to future performance and persons needing advice
should consult an independent financial adviser.

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
shall it or any part of it or the fact of its distribution form the basis of,
or be relied on in connection with, any contract or commitment or investment
decisions relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the company or any of its group members.
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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