TIDMCBG
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
GBP8.8 billion (31 January 2022: GBP8.6 billion, 31 July 2021:
GBP8.4 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 GBP15.4 billion (31 January
2022: GBP15.8 billion) and total client assets decreased to GBP16.7
billion (31 January 2022: GBP17.2 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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