Close Brothers – Preliminary Results

Adrian Sainsbury, Chief Executive, said:

“Against a backdrop of continued market uncertainty, we have delivered a solid performance. The Banking division has performed well as we continued to see good demand across our lending businesses and strong margins. CBAM was affected by falling markets but continued to attract client assets. Winterflood faced declining markets and reduced trading activity, in sharp contrast to the exceptionally strong conditions in the prior year. Although we are aware of the pressures that the rising inflation and interest rates will have on our customers and colleagues, I am confident that our proven and resilient business model, strong financial position and deep expertise leave us well positioned to continue to support them now and into the future. “

Highlights

• The group delivered a solid performance with strong income growth in Banking, while our market-facing businesses were impacted by volatility and falling markets. Group adjusted operating profit reduced 13% to £234.8 million (2021: £270.7 million)
• Adjusted operating profit in the Banking division increased 7% to £227.2 million, reflecting a strongnet interest margin of 7.8% (2021: 7.7%) and loan book growth of 5.0% year-on-year. In the second half, we saw loan book growth of 3.0% as momentum picked up
• The bad debt ratio was broadly stable at 1.2% (2021: 1.1%). Excluding Novitas, the bad debt ratio was 0.5% (2021: 0.2%)
• Close Brothers Asset Management (“CBAM”) continued to attract client assets and generated net inflows of 5%
• Cyclicality seen in the trading business impacted Winterflood's performance, with a market wide slowdown in trading activity and periods of volatility in falling markets
• Winterflood Business Services (“WBS”) delivered another strong performance , with assets under administration up 16% to £7.2 billion (31 July 2021: £6.2 billion)
• The group maintained strong capital, funding and liquidity positions, with our common equity tier 1 (“CET1”) capital ratio of 14.6% (31 July 2021: 15.8%) significantly above the applicable minimum regulatory requirements
• We are considering the further optimisation of 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
• The Board is proposing a final dividend of 44.0p per share, resulting in a full-year dividend per share of 66.0p (2021: 60.0p), up 10% and marking a return to our pre-pandemic dividend level
• The group achieved a return on opening equity (“ROE”) of 10.6% (2021: 14.5%), reflecting the reduction in Winterflood's profit and continued growth in the equity base. The return on average tangible equity (“ROTE”) was 12.2% (2021: 16.5%)