Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2012 Earnings Presentation
42 slides from Close Brothers's earnings presentation, Mar 13, 2012
Slide 1: Interim Results 2012
Interim Results 2012 13 March 2012
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 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 3
Slide 4: Introduction
Introduction First half 2012 highlights • Resilient performance overall – adjusted operating profit unchanged on prior year at £63 million • Banking had another strong performance with 27% increase in profit • Securities impacted by difficult trading conditions for Winterflood and Seydler • Asset Ma
Slide 5: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 5
Slide 6: Financial Highlights
Financial Highlights Resilient first half 2012 performance First half 2012 First half 2011 % £ million to 31 January to 31 January¹ change Adjusted operating income 261.8 275.0 (5)% Adjusted operating profit 63.2 63.4 - Adjusted EPS 31.9p 32.9p (3)% Dividend per share 14.0p 13.5p 4% Key Financial Ra
Slide 7: Income Statement
Income Statement Exceptional items and tax First half 2012 First half 2011 £ million to 31 January to 31 January¹ % change Exceptional items 5.9 (4.5) Of which: Partial disposal of Mako 5.9 - Restructuring costs2 - (4.5) Amortisation of intangible assets on acquisition (2.3) (0.6) Profit before tax
Slide 8: Performance by division
Performance by division Significant movement within the divisions Adjusted operating profit/(loss)¹ H1 2012 vs • Strong performance in Banking £ million H1 2011 – Very good loan book growth of 9% in the first half at strong margins 61.8 – Improvement in bad debt ratio to 1.7% Banking +27% 48.6 • Sec
Slide 9: Summary balance sheet
Summary balance sheet Maintained strong position whilst increasing efficiency • Total assets broadly stable overall Summary Balance Sheet at £6.2 billion 31 January 31 July – Strong growth in loan book of 9% £ million 2012 2011 Change to £3.8 billion Assets Treasury assets1 1,177 1,405 (228) – Reduc
Slide 10: Capital
Capital Strong capital position maintained Capital ratio 31 January 31 July % % Total £ million 2012 2011 change Total 16 14.9% 14.0% Core tier 1 capital 586 589 - Total regulatory capital 667 669 - 12 Core tier 1 Core tier 1 Core tier 1 capital ratio 12.3% 13.1% 8 13.1% 12.3% Leverage ratio1 9.4% 9
Slide 11: Funding
Funding Strong funding position with sufficient flexibility Funding position at 31 January 2012 • Total funding of £5.3 billion, 142% of £ million loan book 6,000 – Reduction of excess funding not 5,325 5,325 employed in loan book 5,000 – Short term funding reduced £0.3 billion Loan book 4,000 3,183
Slide 12: Treasury assets and liquidity
Treasury assets and liquidity Strong liquidity position maintained whilst maximising efficiency Loan book and treasury assets • Focus remains on funding loan book whilst £ million managing a prudent and efficient liquidity 5,000 position • Overall treasury assets reduced slightly to 4,000 £1.2 billi
Slide 13: Banking
Banking Strong financial performance First half 2012 First half 2011 £ million to 31 January to 31 January % change Net interest and fees on loan book 172.7 151.4 14% Treasury and other non-lending income 3.8 7.3 (48)% Adjusted operating income 176.5 158.7 11% Adjusted operating expenses (84.8) (72.
Slide 14: Banking
Banking Strong organic loan book growth across the portfolio Loan book size by business unit • Loan book increased 9% to £3.8 billion £ million 4,000 3,755 +9% • Retail increased 9% 3,435 – Continued strong growth in Motor finance, 3,500 +19% benefiting from good demand in core business 670 563 – Mo
Slide 15: Banking
Banking Key ratios consistent with historical ranges Performance ratios • Net interest margin remained strong at 9.6% 12% – Remains close to long-term high in H1 2011 10.0% 10% 9.7% 9.6% • Bad debt ratio improved to 1.7%, substantially lower than H1 2011 8% – Further improvement in Commercial 6% – R
Slide 16: Securities
Securities First half result reflects difficult market conditions First half 2012 First half 2011 £ million to 31 January to 31 January % change Adjusted operating income 51.6 86.7 (40)% Of which: Winterflood 37.6 69.1 (46)% Seydler 8.3 16.4 (49)% Mako 5.7 1.2 Adjusted operating expenses (38.4) (55.
Slide 17: Securities
Securities Performance by business Adjusted operating profit/(loss) by business • Winterflood adjusted operating profit down 66% in difficult market conditions First half First half % – Maintained market leading position 2012 2011 change Winterflood 8.4 25.0 (66)% • Seydler made small loss in the pe
Slide 18: Securities
Securities Winterflood – affected by volatile markets and reduced risk appetite Key figures Key financial highlights Bargains per Income per First half First half % day (000) bargain (£) 2012 2011 change 50 12 Adjusted operating income 37.6 69.1 (46)% Adjusted operating expenses (29.2) (44.1) (34)%
Slide 19: Asset Management
Asset Management Financial performance reflects current phase of investment First half 2012 First half 2011 £ million to 31 January to 31 January¹ % change Management fees on AuM 31.7 26.8 18% Other income 2.2 2.9 (24)% Adjusted operating income 33.9 29.7 14% Adjusted operating expenses (36.5) (35.7
Slide 20: Asset Management
Asset Management Performance overview and drivers AuM and Revenue margin1 • Overall AuM down £1.0 billion to £8.6 billion AuM (£bn) Margin (bps) 10.0 9.6 80 • Private Clients AuM increased 6% to £6.9 billion, now 80% of total AuM 9.0 8.6 8.2 70 – Acquisitions of £330 million 8.0 3.1 1.7 – Modestly p
Slide 21: Outlook
Outlook Well positioned for 2012 financial year • In Banking continue to see good growth opportunities and expect further strong performance in H2 • Securities businesses remain well positioned – seen early signs of improved trading conditions since period end • Asset Management in final stages of r
Slide 22: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 22
Slide 23: Business update
Business update Overview • Impact of market conditions on group is mixed – Banking growing strongly but Securities in cyclical downturn • Maintaining our established and resilient business models – Banking and Securities have long track record in a range of market conditions – Building a high qualit
Slide 24: Business update
Business update Banking • Market conditions remain favourable and confident of further growth prospects – 3rd consecutive year of strong growth – Loan book up 16% per annum since July 2008 – Credit supply remains limited and competition remains low • Investing in infrastructure and management inform
Slide 25: Business update
Business update Banking – maintained resilient, profitable business model over time • All key ratios consistent with historical levels • Overall shape of loan book unchanged since – Credit quality maintained or improved July 2008 – Overall strong returns 100% 93% 90% First half 10 year 2012 average
Slide 26: Business update
Business update Securities • Difficult trading conditions with significant market dislocation – Increased volatility, particularly August and September – Low retail volumes in September to December • Winterflood affected by reduced retail investor risk appetite – AIM retail volumes down over 60% Sep
Slide 27: Business update
Business update Winterflood – maintained strong market position and capacity • Maintained leading market share and number 1 rank in market-making to UK retail brokers1 through market turmoil • Committed to maintaining capacity and leading position in UK market-making for retail brokers – Over 100 sk
Slide 28: Business update
Business update Asset Management – significant progress on transformation • Exited non-core businesses including private equity, property, UK offshore and Cayman Islands • Built scale and reach through acquisitions – 4 acquisitions brought £2.9 billion AuM, 88 advisers and 3 geographical hubs • Subs
Slide 29: Business update
Business update Asset Management – well positioned to take advantage of market opportunities • Significant market opportunity – Target market of 1.6 million people and £650 billion investible assets – Changes in demographics, regulation and technology creates opportunities • Business model, technolo
Slide 30: Business update
Business update Conclusion • Strong business models support resilient performance • Remain focused on capturing growth and maintaining model in Banking • Securities maintained capacity and market position – well positioned for a recovery • Final stages of restructuring in Asset Management Strictly p
Slide 31: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 31
Slide 32: Interim Results 2012
Interim Results 2012 13 March 2012
Slide 33: Appendix
Appendix Page 34 Segmental analysis 37 Funding maturity profile 38 Banking 40 Winterflood 41 Asset Management Strictly private and confidential 33
Slide 34: Segmental analysis
Segmental analysis Summary income statement Asset Continuing Discontinued £ million Banking Securities Management Group operations operations3 Total First half 2012 to 31 January Adjusted operating income/(expense) 176.5 51.6 33.9 (0.2) 261.8 - 261.8 Administrative expenses (77.5) (37.3) (36.2) (8.6
Slide 35: Segmental analysis
Segmental analysis Summary balance sheet at 31 January 2012 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 573.7 16.5 13.2 1.8 605.2 Settlement balances, long trading positions and - 649.1 - - 649.1 loans to money brokers Loans and advances to customer
Slide 36: Segmental analysis
Segmental analysis Summary balance sheet at 31 July 2011 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 668.4 24.7 15.1 1.1 709.3 Settlement balances, long trading positions and - 706.9 - - 706.9 loans to money brokers Loans and advances to customers 3
Slide 37: Funding maturity profile
Funding maturity profile Prudent funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Loans and overdrafts from banks1 345 22 19 304 - - Debt securities in issue 798 350 - 250 - 198 Subordinated loan capital 75 - - - - 75 Drawn facilities 1,218 372 19 554 - 273 Undrawn
Slide 38: Banking
Banking Loan book and lending statistics by business 31 January 31 July 2012 2011 % Loan book £ million £ million change Retail 1,609.1 1,481.5 9% Motor finance 968.2 870.8 11% Premium finance 640.9 610.7 5% Commercial 1,475.8 1,390.7 6% Asset finance 1,198.5 1,079.2 11% Invoice finance 277.3 311.5
Slide 39: Banking
Banking Sustainable growth throughout the cycle Loan book at 31 July, £ billion AOP, £ million 3.5 120 3.0 100 Credit 2.5 crunch 80 Easy credit 2.0 60 1.5 Bear Market 40 1.0 20 0.5 Recession 0.0 0 Loan book Adjusted Operating Profit ("AOP") Strictly private and confidential 39
Slide 40: Winterflood
Winterflood Consistently profitable over time £ million 60 50 49 5 year average (41) 47 40 43 10 year average (35) 40 38 39 35 30 20 24 24 17 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Adjusted operating profit 5 year average 10 year average Loss 23 15 5 5 4 1 14 7 4 1 days Strictly priv
Slide 41: Asset Management
Asset Management Significant growth in Private Client assets in line with strategy Assets under Management £ million Private Clients Institutional Total 1 August 2011 6,509 3,049 9,558 New funds raised 366 131 467 Redemptions, realisations and withdrawals (155) (1,351) (1,506) Net new funds 181 (1,2
Slide 42: Asset Management
Asset Management Proposition for Private Clients • Holistic financial planning • Multi-asset class • 120 advisers in 11 UK • In-house and open architecture offices • Range of Discretionary Funds (in- • High service levels – face house, multi-manager and to face, telephone and passive) online • SMAs