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(Alliance News) - Close Brothers Group PLC on Friday said its loan book had shrunk and the net interest margin was slightly lower in its third quarter as Covid-19 hit new business levels and fee income.
Shares in the merchant banking firm were down 2.0% at 1,059.00 pence in London at midday.
In its Banking unit, Close Bros reported that the loan book had fallen 1.2% to GBP7.53 in the three months ended April 30, having been GBP7.62 billion on January 31. On top of which, the net interest margin dipped to 7.7% year-to-date from 7.8% in the first half its financial year.
Close Bros said the loan book reduction and interest margin drop reflected "the impact of Covid-19 on new business levels and lower fee income, particularly in April".
The company's bad debt charge was much higher in the third quarter, at GBP86.7 million compared to GBP36.7 million in the first half of Close Bros' financial year. This reflected "the application of expert judgement to determine the appropriate staging of the loan portfolio, to the incorporation of updated macroeconomic scenario assumptions, and to the review of provision coverage at the individual portfolio level," it said.
In Asset Management, annualised net inflows amounted to 10% year-to-date, having been 12% in the first half. Managed assets were hit by negative market movements, falling to GBP11.8 billion from GP12.7 billion on January 31.
The firm's Winterflood business, in contrast, saw trading volumes rise following amid the recent financial market volatility, with daily average volumes almost double compared to the first half of its year.
Close Bros' common equity tier 1 capital ratio rose 50 basis points to 13.9% in the third quarter from 13.4%
The firm cancelled payment of its interim dividend in April, but will consider in September paying a full year dividend for its year ending July 31 "taking into account the group's performance and prevailing conditions at the time".
"We have a long track record of navigating a range of economic conditions, with a strong financial and operational position, and we remain committed to supporting our colleagues, customers and clients throughout this challenging period," said Close Bros.
"While the effects of Covid-19 on the UK economic outlook remain highly uncertain, we are confident that our prudent and disciplined business model, and the deep expertise of our people, leave us well prepared to respond to the challenges and opportunities ahead," the company added.
By Anna Farley; annafarley@alliancenews.com
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