(Sharecast News) – Close Brothers hailed a “strong” first half on Thursday, and said it remained well placed for the rest of the year despite increased uncertainty.
Updating on trading for the five months to 31 December, the FTSE 250 banking group said all three of its divisions had seen positive trading.
In banking, the loan book increased 6.5% to £8.1bn, helped by strong demand for the government’s Coronavirus Business Interruption Loan Scheme, particularly in the asset finance business.
The net interest margin was largely unchanged at 7.6%, compared to 7.5% at the end of the 2020 full-year, while the annualised bad debt ratio was 0.9% against 2.3% previously. Close Brothers said it remained “confident” about the quality of its lending, although it added: “Nevertheless we will continue to closely monitor the performance of the loan book as the macroeconomic outlook evolves and government support schemes end in the coming months.”
As at 31 December 2020, lending under CBILS and associated schemes totalled £660m across 3,034 loans.
The asset management division annualised net inflows of 5.4%, managed assets rose from £12.6bn at the start of the year to £13.9bn, and total client assets increased by £1.3bn to £15.0bn.
Close Brothers said its stockbroker Winterflood’s year-to-date operating profit was “substantially ahead” of the prior year comparative period.
“Winterflood is well positioned to continue trading profitably in a range of conditions, but due to the nature of the business, it remains sensitive to changes in the market environment,” it said.
Looking ahead, the company noted: “The impact of further lockdown restrictions across the UK, Brexit and the end of the government support schemes on loan book growth and credit performance in the coming months remain highly uncertain.
“Our proven and resilient model and strong balance sheet, combined with our deep experience in navigating a wide range of economic conditions, leave us well placed to continue supporting our colleagues, customers and clients over the long term.”
Gary Greenwood, analyst at Shore Capital, said: “We anticipate putting through material current year forecast upgrades, primarily driven by lower than expected impairments in the banking division, but also by continued strong volumes in Winterflood.
“That said, we would view these as short-term benefits and would not extrapolate into further years.”
Close Brothers will report interim results for the six months to 31 January 2021 in March.
