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(Alliance News) - Close Brothers Group PLC said Wednesday it has achieved a "resilient" performance so far in financial 2020, with activity in its stockbroking unit making up for a dip in its bank's loan book.
The FTSE 250-listed merchant banker noted higher impairment charges have hurt its Banking division, but Winterflood has benefited from higher trading volumes since the Covid-19 outbreak and the Asset Management division achieved strong net inflows.
Outgoing Chief Executive Officer Preben Prebensen said: "Despite these challenging and unprecedented times, the group has again proven resilient and we are confident that we will end the financial year in a strong financial and operational position. Our colleagues have continued to respond admirably, enabling us to help our customers and clients during this period."
Close Brothers said it will consider a dividend for the year ending July 31, which would be paid in September. The company said it would take into account its performance and "prevailing conditions" at the time. Close Brothers cancelled its interim dividend.
Turning to performance in the first 11 months of financial 2020, Close Brothers said its Banking unit saw a 2.3% decline in its loan book to GBP7.48 billion from GBP7.65 billion at the end of financial 2019.
Lower new business volumes were blamed for the decline, but Close Brothers noted it has seen early signs of an increase in client activity in June following the easing of lockdown restrictions.
"While we remain focused on our pricing and underwriting discipline, income in the period continued to be impacted by a reduction in fee income driven by lower activity levels and forbearance, particularly in recent months, with an annualised net interest margin of 7.6% - from 7.9%," the financial firm added.
Year-to-date, Close Brothers said the Banking unit has recognised GBP167 million in credit provisions, which reflect the "ongoing uncertainty in the external environment".
Its Asset Management unit delivered a 10% year on year rise in net inflows, with managed assets growing to GBP12.5 billion at the end of June from GBP11.7 billion at the end of financial 2019.
Total client assets increased to GBP13.7 billion from GBP13.3 billion.
Winterflood - the company's stockbroking unit - delivered a "very strong" performance, Close Brothers said, benefiting from significantly higher trading volumes since the Covid-19 outbreak.
Performance in the second half of the financial year to date was materially ahead of the first half, resulting in average year-to-date daily bargains of 82,000, 46% higher than last year.
"The division 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," Close Brothers cautioned.
The company's CET1 ratio ended June at 14.2% versus 13.0% at the end of July last year.
"The impact of higher impairment charges was largely offset by capital generation in the first half of the financial year, the capital add-back under transitional IFRS 9 arrangements, and a reduction in risk weighted assets from lower volumes of new loans," Close Brothers explained.
Close Brothers said it will issue its full annual results on September 22.
Shares in Close Brothers were down 0.6% in London on Wednesday morning at 1,156.00 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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