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LONDON (Alliance News) - Arbuthnot Banking Group PLC on Thursday reported a rise in annual income as customer lending rose, with investee Secure Trust Bank PLC presenting a similar story.
Arbuthnot Banking's principal banking subsidiary, Arbuthnot Latham & Co Ltd, holds a 15.5% interest in Secure Trust Bank, which was lowered during the year from 18.6%.
In 2018, Arbuthnot Banking saw its pretax profit nearly triple to GBP6.8 million from GBP2.5 million in 2017. The lender's net interest income increased 35% to GBP55.2 million from GBP41.1 million the year before.
Arbuthnot Banking declared a final dividend of 20 pence, an increase of 5% on 2017's 19p final dividend. The rise in final dividend resulted in a 6.1% increase in total dividend to 35p from 33p distributed the year before.
Arbuthnot Latham, a private bank and commercial bank, saw its customer loans increase 17% in 2018 to GBP1.23 billion. The company's written loan volume was marginally higher at GBP469 million. Customer deposits increased 23% to GBP1.71 billion.
Arbuthnot Latham's assets under management ended the year 5.3% lower than at the start of the year at GBP985 million.
Arbuthnot Latham posted a 33% increase in pretax profit to GBP14.6 million. The lender's average net margin in 2018 was 4.7%, slightly ahead of the year before. Arbuthnot Latham ended 2018 with a core tier 1 capital ratio of 15.9% and a total capital ratio of 17.8%, both down on the year before.
"The group has had another good year with further deployment of capital. Diversity of earnings increased with good progress being made by the Commercial bank, along with the launch of our new ventures, Asset Based Lending, Arbuthnot Direct and Specialist Finance. These new businesses should give the group a strong basis from which to develop in the future," said Arbuthnot Chair & Chief Executive Henry Angest.
Looking ahead, Arbuthnot is "confident" its balance sheet can "withstand any likely downturn in the economy" due to the lender's "cautious approach" to banking.
Angest added: "The UK economy might surprise us. It has proved to be very resilient, despite all the doom and gloom, and with a strong government introducing the right economic policies to promote business, Brexit could well deliver a bright future."
Secure Trust Bank - a retail and commercial bank - said its profit rise in 2018 stemmed from a repositioned business model focusing on lower risk lending with continued growth from its Business Finance and Consumer Finance businesses.
STB's pretax profit increased 18% in 2018 to GBP34.7 million from GBP29.3 million in 2017. The lender's net interest income increased 9.1% to GBP133.7 million from GBP122.6 million.
Operating income increased 17% to GBP151.6 million from GBP129.5 million, with STB's interest, fee & commission income increasing 20% to GBP188.6 million from GBP157.3 million.
The bank's loans & advances to customers increased 27% to GBP2.03 billion, with total annual business lending increasing 17% to GBP1.26 billion. Customer deposits increased 25% to GBP1.85 billion.
STB's net interest margin in 2018 was 7.4% compared to 8.1% in 2017.
STB ended 2018 with a common equity tier one ratio of 13.8% compared to 16.5% the year before.
STB Chair Michael Forsyth said: "2018 has been a successful year for the group in unsettling economic circumstances. Reducing our exposure to higher risk, higher margin consumer lending activities whilst focusing on lower risk lending has delivered a good set of financial results. Despite the uncertain economic environment that the group continues to monitor carefully, the group enters 2019 well positioned to deliver further substantial progress in the periods ahead."
The lender declared a final dividend of 64p, 4.9% higher than 2017's final dividend of 61p. This increase led to a 5.1% rise in STB's total dividend for 2018 of 83p compared to 79p in 2017.
STB said its trading in the earl part of 2019 is in line with management expectations.
STB Chief Executive Paul Lynam added: "The group entered 2019 with positive business momentum, healthy capital positions and very strong liquidity and remains well placed to pursue its strategic priorities."
Shares in Arbuthnot were up 4.2% Thursday at 1,355.01 pence. Secure Trust Bank was trading up 6.8% at 1,366.75p.