Close Brothers Group PLC on Wednesday said it was encouraged by ongoing strong demand despite a ‘moderation’ in some of its businesses.
Shares in Close Brothers fell 5.1% to 465.80 pence in London on Wednesday. They are down 41% in the year to date.
In a trading update for the three months to April 30, the London-based merchant bank said in Banking, its loan book increased 1.5% in the quarter and 5.4% year-to-date to £10.0 billion compared with £9.5 billion at July 31, 2023.
This mainly reflected strong customer demand in Property and continued growth in the UK Motor Finance and Invoice Finance loan books, Close Brothers said.
This was partly offset by moderation from the selective loan book actions, as well as a seasonal reduction in Premium Finance and a stabilisation in Asset Finance, following a period of strong growth.
The annualised year-to-date net interest margin was 7.4% compared to 7.5% at January 31.
Close Brothers said it was ‘well positioned’ to maintain a strong NIM and expects it to remain broadly stable for the remainder of the year.
Close Brothers Asset Management delivered strong year-to-date annualised net inflows of 9% in the quarter, the company said, and continued to attract new client assets.
In the quarter, managed assets increased to £18.5 billion from £17.7 billion at January 31, with total assets rising to £19.6 billion from £18.5 billion, driven by net inflows and positive market movements.
Whilst Winterflood’s performance continued to be impacted by weakness in investor appetite, trading conditions marginally improved in the quarter, resulting in an operating profit of £1.7 million in the quarter, up from £1.2 million a year prior.
Close Brothers said its Common Equity Tier 1 capital and total capital ratios were 12.9% and 16.6%, respectively, at April 30 compared with 13.0% and 16.9% at January 31. The decrease in the quarter was primarily driven by growth in the loan book more than offsetting retained profit, it noted.
In Banking, Close Brothers said it remains ‘encouraged’ by the ongoing strength of customer demand and are committed to maintaining pricing discipline, whilst progressing cost management initiatives.
In CBAM, following a period of strong growth, the priority is to consolidate its position and maximise opportunities to accelerate profitability, the company stated.
Winterflood remains well placed to retain our market-leading position and benefit when investor appetite returns, Close Brothers added.
Chief Executive Adrian Sainsbury said: ‘Performance in the third quarter reflected continued loan book growth, strong margins and resilient credit quality in Banking. Notwithstanding moderation in some of our businesses, due to seasonality and selective loan book actions we identified at the half-year 2024 results, we are encouraged by the ongoing strength in overall customer demand and continue to focus on providing excellent service to our customers.’
Salisbury said the company was making ‘good progress against the actions previously outlined to further strengthen our capital position and are focused on positioning the group to resume our track record of earnings growth and attractive returns.’
In March, Close Brothers announced plans to bolster its financial position as it grapples with the uncertainties of the probe into commission payments in
the UK motor finance industry.
At the time, the company said there was ‘significant uncertainty’ in relation to the UK Financial Conduct Authority’s review but did not make any provisions in its first half results.
In January, the UK financial services watchdog explained it is probing whether compensation could be due for people who were potentially overcharged for car loans.
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