Close Bros beats forecasts as banking arm grows loan book
Good growth in its core merchant banking division enabled Close Brothers to lift annual profits 20% and beat analysts' earnings expectations.
Close Brothers Group
466.20p
16:40 25/04/24
In fact the FTSE 250 group enjoyed even stronger growth at its smaller securities and asset management arms, which helped lift adjusted operating profit 20% to £200.6m and earnings per share 25% to 102.6p versus consensus forecasts of 101.6p.
The final dividend was hiked 10% to 32.5p, just shy of the consensus.
The banking division benefited from strong demand in property and motor finance to grow the loan book 14% to £5.3bn, more than offsetting additional competition in some markets and helping the division grow adjusted operating profit 15% to £181.6m.
As the Bank of England plans interest rate rises, Close's banking division enjoys its all-time lowest bad debt ratio, at 0.9% of loans.
In the smaller securities arm, its Winterflood's market making services generated 57% growth in adjusted operating profit to £26.6m as trading conditions improved and investor risk appetite increased.
Finally, the asset management business more than doubled adjusted operating profit to £9.9m as assets under management grew 7% to £9.7bn driven by net inflows of 5%.
The balance sheet remains showed a core tier 1 ratio of 13.1% and leverage ratio of 9.2%, which broker Shore Capital said compared favourably to the large quoted UK banks where these two ratios typically range between 10-12% and 3-5% respectively.
Looking forward, managenent stated confidence that its prudent strategy, combined with its "modern merchant banking" values, will continue to appeal, with growth opportunities apparent in all three divisions.
"In banking, we continue to see ongoing growth opportunities in our core markets," the company said.
"Winterflood remains well placed to benefit from a sustained cyclical recovery but remains susceptible to market conditions. As it continues to build scale, we expect asset management to continue to deliver growth at attractive margins."