Close Brothers Group Plc · LSE:CBG
Close Brothers — FY2022 Earnings Presentation
36 slides from Close Brothers's earnings presentation, Sep 27, 2022
Slide 1: Preliminary Results 2022
Close Brothers Group plc Preliminary Results 2022 27 September 2022
Slide 2: Disclaimer
Disclaimer Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the group’s operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, unc
Slide 3: Agenda
Agenda 01 Introduction Adrian Sainsbury, Chief Executive Officer 02 Financial update Mike Morgan, Group Finance Director 03 Business update Adrian Sainsbury, Chief Executive Officer 04 CBAM business update Eddy Reynolds, CBAM Chief Executive Officer 05 Wrap-up and Q&A 3
Slide 4: Introduction
Introduction 01 Adrian Sainsbury Chief Executive Officer
Slide 5: Overview
Overview Banking performed well, with market-facing businesses negatively impacted by volatility and falling markets Group ROE1 of 10.6% and ROTE2 Banking delivered 5% loan Asset Management continued to of 12.2% reflecting increased profit in book growth Y-o-Y and strong attract client assets and Ba
Slide 6: Delivering against our strategic priorities
Delivering against our strategic priorities We are building on the core strengths of our business and taking it forward responsibly • Disciplined application of prudent underwriting and pricing of our lending Keeping it safe • Considering the further optimisation of our capital structure, including
Slide 7: Financial update
Financial update 02 Mike Morgan Group Finance Director
Slide 8: Income statement
Income statement Decline in adjusted operating profit reflects reduced income in Winterflood and an increase in impairment charges % £ million 2022 2021 change • Income marginally down as growth in Banking and Asset Management was offset by a reduction in Winterflood Operating income 936.1 952.6 (2)
Slide 9: Divisional performance
Divisional performance Diversification continues to support solid overall performance % £ million 2022 2021 change Banking • 10% income growth offset by continued investment, Banking 227.2 212.5 7 higher staff costs and impairment charges • Significantly higher profits in Commercial, partly offset b
Slide 10: Banking
Banking Good loan book growth and a strong margin % £ million 2022 2021 change • Increase in income reflects good loan book growth and a strong net interest margin Operating income 693.1 631.7 10 • Net interest margin of 7.8%, primarily driven by lower cost Adjusted operating expenses (362.6) (329.1
Slide 11: Banking: loan book growth
Banking Over £400 million increase in loan book in the year; continued good demand across our businesses Loan book movement by business1 (£ million) Continued good demand across our Property Retail (1.9%) businesses Commercial +3.0% +5.0% • 1.9% growth in H1, supplemented by 3.0% in H2 as +8.8% mome
Slide 12: Banking: net interest margin
Banking Strong net interest margin primarily reflected lower cost of funds Net interest margin Sensitivity to interest rates 7.8% • With the UK base rate now above 1%, no further 7.7% 7.5% impact expected from the Property floors in respect of future rate rises Outlook for NIM • Well positioned to m
Slide 13: Banking: costs
Banking Continued investment and rigorous control of costs, whilst recognising the current inflationary environment Movement in costs1,2 (£ million) Business as usual (BAU) costs3 • Disciplined control of BAU costs +10% • BAU costs increased to £278.8 million, primarily driven by higher staff costs
Slide 14: Banking: bad debt ratio
Banking Stable bad debt ratio of 1.2% Long-term bad debt ratio of 1.0%1 Stable credit performance with bad debt ratio of 1.2% • Excluding Novitas, bad debt ratio of 0.5%, reflected release of Covid-19 provisions, partly offset by ongoing review of provisions and coverage across our portfolios 2.3% •
Slide 15: Asset Management
Asset Management Continued positive net inflows despite volatile market conditions % £ million 2022 2021 change • Income up 6% with positive net inflows and market performance in the first half, despite falling markets and the Operating income 148.0 139.4 6 impact on wider client sentiment in the se
Slide 16: Winterflood
Winterflood Cyclicality in trading business negatively impacted performance % £ million 2022 2021 change • Decline in income reflected market wide slowdown in trading activity and a change in the mix of trading volumes, Operating income 95.2 182.0 (48) exacerbated by falling markets in the second ha
Slide 17: Winterflood: trading activity and volumes
Winterflood Market wide slowdown in trading activity and change in mix of volumes Operating income (£ million) • Operating income decreased 48% to £95.2 million, primarily driven by a market wide slowdown in trading activity and a 30 132 136 145 124 124 change in the mix of trading volumes, exacerba
Slide 18: Strong balance sheet
Strong balance sheet Well placed to continue funding and supporting loan book growth Total funding Average maturity of loan book Prudent approach £11.6 billion funding at 21 months • Conservative approach to funding, focused on diversity of sources and prudent maturity profile Loan book Average matu
Slide 19: Capital
Capital Strong capital position Movement in CET1 capital ratio over the year1,2 Capital overview 31 July 20221 31 July 2021 CET1 capital ratio (transitional) 14.6% 15.8% Total capital ratio (transitional) 16.6% 18.3% Regulatory impacts Leverage ratio3 12.0% 11.8% (0.45)% (0.30)% CET1 capital (£m) 1,
Slide 20: Capital management framework
Capital management framework Prudent management of financial resources is a core part of our business model CET1 capital ratio target range Deploying capital to deliver disciplined growth Considering further optimisation of capital structure, including the issuance of debt capital market securities
Slide 21: Business update
Business update 03 Adrian Sainsbury Chief Executive Officer
Slide 22: A proven and resilient model
A proven and resilient model Well positioned to continue delivering on our long-term track record of growth and profitability Our distinctive strengths Long-term growth Strong returns through the cycle Loan book1 (£ billion) Return on opening equity Disciplined underwriting 10.0 25% and pricing thro
Slide 23: Protect: Keeping our model safe
Protect: Keeping our model safe PROTECT Tangible benefits of our through-the-cycle approach to investing Maximising and future-proofing our income generation capabilities Motor Finance Asset Finance CBAM technology Customer transformation transformation projects deposit platform • Partnership with A
Slide 24: Grow: delivering disciplined growth
Grow: delivering disciplined growth GROW Maximising opportunities in existing and adjacent markets Further review of potential growth opportunities, with a strong pipeline of identified target areas that are aligned with our Model Fit Assessment Framework Financing the UK’s Incremental Capitalising
Slide 25: Sustain: Our Responsibility
Sustain: Our Responsibility S U S TAI N Our responsibility is fundamental to our purpose, strategy and culture Environment Society Governance Some of our Sustainable Reducing our impact Ensuring we are a diverse Setting high standards of partners and objectives on the environment and and inclusive e
Slide 26: Banking update – Commercial
Banking update – Commercial Well positioned to deliver disciplined growth 2022 performance Delivering disciplined growth Spotlight: Green lending Asset Finance Our Commercial businesses provide finance to Asset Finance G R O W a wide array of green and transition assets • Strong new business volumes
Slide 27: Banking update – Retail
Banking update – Retail Well positioned to deliver disciplined growth 2022 performance Delivering disciplined growth Spotlight: Motor Finance Motor Finance Transformation Motor Finance G R O W Real-time data and insights • High new business levels reflected continued demand and strong prices in • Ex
Slide 28: Banking update – Property
Banking update – Property Well positioned to deliver disciplined growth 2022 performance Delivering disciplined growth Spotlight: Sustainable Property Finance developments • Undrawn pipeline of commitments G R O W Significant expertise in providing development • UK property market remained buoyant,
Slide 29: Winterflood: Continued WBS growth drives income diversification
Winterflood GROW Continued WBS growth drives income diversification Winterflood Business Services WBS AuA WBS Income (£ billion) (£ million) • Providing outsourced dealing and custody services for asset managers and platforms 7.2 • Distinct platform and offering, leveraging 6.2 expertise, capabiliti
Slide 30: CBAM business update
CBAM business update 04 Eddy Reynolds CBAM Chief Executive Officer
Slide 31: Asset Management: long track record of growth
Asset Management GROW Well placed to continue to build on a long track record of growth Net inflow rates and closing managed assets (% and £ billion) Target net inflows Closing managed assets (£bn) Net inflow rate (%) of 6% - 10% 14% 12% 15.6 15.3 18.0 16.0 12% 11.7 12.6 14.0 10% 9% 10.4 12.0 Acquis
Slide 32: Asset Management: continued growth
Asset Management GROW Well placed to continue to build on a long track record of growth • Continue to invest in new hires as we see success from our Model well aligned with the long-term portfolio manager hires accounting for c.35% of net inflows in FY22 trends in the wealth management space • Our t
Slide 33: Wrap-up
Wrap-up 05 Adrian Sainsbury Chief Executive Officer
Slide 34: Outlook
Outlook Well placed to continue to support customers and colleagues Delivered a solid performance this year and we start FY23 against a highly uncertain external environment Alert to the impact of rising inflation and interest rates on our customers and wider financial market conditions Remain well
Slide 35: Q&A
Q&A €.) Close Brothers Modern Merchant Banking
Slide 36: Close Brothers Group plc contact details
Close Brothers Group plc 10 Crown Place London EC2A 4FT www.closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES