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(Alliance News) - Close Brothers Group PLC on Friday reported a stronger and more stable performance in the latter part of its current financial year, despite citing a difficult and still uncertain environment.
The London-based merchant banking group said its Banking division's loan book increased 3.7% in the first 11 months of the year ending July 31, to GBP9.4 billion from GBP8.9 billion the previous year. Close Brothers said this reflected ongoing demand in its Commercials business, while increased drawdowns and slower repayments drove "strong growth" in Property Finance.
Marginal growth in its Premium Finance and UK Motor Finance loan books, however, was "more than offset" by the Irish Motor Finance business's run-off.
Close Brothers said its annualised year-to-date net interest margin remained strong at 7.7%, slightly down from 7.8% the year before. The annualised year-to-date bad debt ratio decreased to 2.3% from 2.6% in the third financial quarter, incorporating provisions taken in the first six months against its failed legal services financing business Novitas. The firm said these reflected the remaining list of credit losses for the Novatis loan book.
"We remain focused on cost control, although we experienced increased pressure from the inflationary environment, particularly in the second half of the financial year and we continued to invest in strategic programmes," Close Brothers said.
Close Brothers Asset Management, meanwhile, yielded year-to-date annualised net inflows of 9%, up from 5% in financial 2022. Since late May its managed assets "remained stable" at GBP16.1 billion, as did total client assets at GBP17.0 billion, although the inflows were mostly offset by "negative market movements".
"We have performed well in the second half of the financial year, maintaining the loan book growth momentum, strong net interest margin and stable credit performance in Banking reported at [the third quarter]," commented Chief Executive Officer Adrian Sainsbury.
"Close Brothers Asset Management continued to attract client assets and delivered a strong net inflow rate, although Winterflood's performance remains impacted by subdued trading activity."
Winterflood, the firm's market maker, generated around GBP3 million in operating profit in financial 2023. However, Close Brothers said the business "has a long track record of trading profitably in a range of market conditions and remains well positioned to benefit when investor confidence recovers".
Close Brothers said its second half year was progressing well after a "challenging" first half, with performance in line with expectations despite an uncertain climate.
"Our financial strength and proven business model leave us well placed and I am pleased with our progress towards resuming the group's track record of earnings growth and returns since the first half," added Sainsbury.
Shares in Close Brothers were down 0.7% at 969.50 pence in London on Friday morning.
By Emma Curzon, Alliance News reporter
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