Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2022 Earnings Presentation
36 slides from Close Brothers's earnings presentation, Mar 15, 2022
Slide 1: Half Year Results 2022
Close Brothers Group plc Half Year Results 2022 15 March 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, Finance Director 03 Business update Adrian Sainsbury, Chief Executive Officer 04 Q&A 3
Slide 4: Introduction
Introduction 01 Adrian Sainsbury Chief Executive Officer
Slide 5: Overview
Overview Interim dividend returning to the pre-pandemic level Good performance, with 12% income growth and Positive momentum in stable income and strong strong underlying credit Asset Management, RoE1 of 12.2% performance across our with 8% net inflows Banking businesses Reduced trading opportunitie
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 Keeping it safe • Maintained a strong balance sheet and high quality loan book Maintaining and enhancing the key • Disciplined application of prudent underwriting and p
Slide 7: Financial update
Financial update 02 Mike Morgan Group Finance Director
Slide 8: H1 2022 Financial highlights
H1 2022 Financial highlights Group AOP1,2 £129.8m Group AOP pre provisions2 £178.1m Strong underlying financial performance Adjusted EPS2 64.0p Return on opening equity3 12.2% CET1 capital ratio 15.1% Dividend per share4 22.0p YoY loan book growth 8.2% Disciplined underwriting and Annualised net int
Slide 9: Income statement
Income statement Broadly stable income and costs with lower impairment charges % £ million H1 2022 H1 2021 change • Income broadly stable, with strong growth in Banking and CBAM offsetting a reduction in Winterflood Operating income 471.6 474.0 (1) • Costs flat as increased investment in Banking and
Slide 10: Divisional performance
Divisional performance Strong income growth in Banking and positive momentum in CBAM offset by a reduction in Winterflood % Banking £ million H1 2022 H1 2021 change • 12% income growth more than offset the cost of continued Banking 120.2 95.1 26 investment • Lower impairment charges reflecting provi
Slide 11: 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 funding at 23 months £11.3 billion • Conservative approach to funding and liquidity, focused on diversity of sources and prudent maturity profile Loan boo
Slide 12: Capital
Capital Strong capital position Highly capital generative business and Capital overview significant headroom over requirements 31 January 2022 31 July 20211 CET1 capital ratio (transitional) 15.1% 15.8% CET1 position vs minimum requirements1,2 Total capital ratio (transitional) 17.3% 18.3% Leverage
Slide 13: Banking
Banking Strong income growth and reduction in impairment charges % £ million H1 2022 H1 2021 change • 12% growth in income reflected loan book growth at an Operating income 345.7 309.0 12 increased margin Adjusted operating expenses (177.2) (161.0) 10 • Net interest margin of 7.9% as we remained foc
Slide 14: Banking: loan book growth
Banking Disciplined loan book growth at strong margins; growth remains an output of our business model Loan book movement by business Loan book split (£ million)1 17% Retail +1.8% Property Commercial 34% (3.4%) +4.0% +1.9% (25) 12% 77 (51) 41 120 23% 14% 8,606 8,445 Asset Finance 2 Invoice & Special
Slide 15: Banking: net interest margin
Banking Net interest margin reflects our pricing discipline and lower cost of funds Net interest margin Specialist, relationship driven model supports net interest margin • Consistently strong NIM compared to sector average 7.9% 7.8% • Prioritise pricing, not volume growth 7.7% NIM at 7.9% (H1 2021:
Slide 16: Banking: cost control
Banking Disciplined control of costs while investing in the business Movement in costs1,2 (£ million) Business as usual (BAU) costs3 • Disciplined control over BAU costs to create investment +4% capacity £4.7m • BAU costs increased to £136.0 million reflecting increased performance-driven compensati
Slide 17: Banking: credit performance
Banking Strong underlying credit performance across our businesses Long-term bad debt ratio Strong underlying credit performance across our 2.3% businesses 10-year average bad debt ratio1: 1.0% • Bad debt ratio of 1.1% primarily reflected the impact of updated 1.5% . loss rate assumptions for Novita
Slide 18: Asset Management
Asset Management Continued positive momentum % • 14% growth in income driven by favourable market £ million H1 2022 H1 2021 change conditions and increased investment management income Operating income 76.6 67.1 14 • Rise in expenses primarily reflected higher staff costs and Investment management 5
Slide 19: Winterflood
Winterflood Reduced trading opportunities following the exceptional highs experienced in the Covid-19 period % £ million H1 2022 H1 2021 change • Markets and investor sentiment impacted by uncertainty in the external environment Operating income 49.5 98.0 (49) • Reduction in income reflected moderat
Slide 20: Winterflood: moderation in retail trading activity
Winterflood Moderation in retail trading activity and change in mix of volumes Monthly operating income (£ million) 30 160 • Reduced trading opportunities in recent months reflected 132 136 moderation in retail trading activity and change in 124 124 140 25 117 116112 111 107102 120 mix of trading vo
Slide 21: Business update
Business update 03 Adrian Sainsbury Chief Executive Office
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 track record Our distinctive strengths Long-term growth Strong returns through the cycle Loan book (£ billion) Return on opening equity Disciplined underwriting 9.0 25% a
Slide 23: Protect: Keeping our model safe
Protect: Keeping our model safe PROTECT Maintaining and enhancing the key strengths of our business model Maintained a strong balance sheet and high quality loan book Motor Finance Asset Finance Asset Management Disciplined application transformation transformation technology projects of prudent Imp
Slide 24: Grow: Delivering disciplined growth
Grow: Delivering disciplined growth GROW Continued confidence in short and medium term growth outlook Well positioned to retain market position Ongoing review to and deliver disciplined growth identify new Long-term growth ● Continued demand for asset financing alongside growth prospects Expert, gro
Slide 25: Sustain: Our Responsibility
Sustain: Our Responsibility S U S TAI N Acting responsibly is fundamental to our purpose, strategy and culture Our sustainable objectives • High group-wide engagement scores, with an overall score of 91%1 Promoting an inclusive culture in everything we • Supporting the ambition of the Paris Agreemen
Slide 26: Banking update – Commercial
Banking update – Commercial Continued good demand across our SME businesses Asset Finance Invoice & Speciality Finance Benefiting from continued demand Well positioned as economy recovers • Good new business volumes across our businesses, particularly • Strong sales volumes, higher SME customer numb
Slide 27: Banking update – Retail
Banking update – Retail Maximising market opportunities Motor Finance Premium Finance Maximising opportunities in the second-hand car market Well positioned as restrictions ease • Strong new business levels continued into H1 22 reflecting ongoing • Covid-19 restrictions continued to impact customer
Slide 28: Banking update – Property
Banking update – Property Well positioned to capture residential construction demand Repayments, drawdowns and undrawn pipeline Property Finance (£ million) Well positioned to capture residential 1200 construction demand 1000 800 • High repayments as the UK property market remained 600 buoyant with
Slide 29: Asset Management
Asset Management Growth in managed assets and continued investment to support CBAM’s long-term growth potential Net inflow rates • Strong annualised net inflows at 8% reflecting higher investment- (%) only inflows, including good inflows from our recent portfolio manager hires and our financial advi
Slide 30: Winterflood
Winterflood Continued WBS growth drives income diversification WBS Assets under Administration Composition of Winterflood’s income (AuA in £ billion) H1 21 H1 22 Trading income Corporate fee income - 6.2 6.8 investment trusts £49.5m WBS 3.7 4.1 £98.0m 2.0 2.4 Other 0.1 0.3 0.7 1.0 1.2 FY12 FY13 FY14
Slide 31: Outlook
Outlook Proven and resilient model and strong balance sheet leave us well placed Mindful of the highly uncertain external environment and its impact on our customers and wider financial market conditions We remain well placed to continue delivering on our long track record of profitability and disci
Slide 32: Q&A
04 Q&A €.) Close Brothers Modern Merchant Banking
Slide 33: Appendix
Appendix f.¥ Close Brothers Modern Merchant Banking
Slide 34: Our responsibility
Our responsibility Acting sustainably is fundamental to our purpose, strategy and culture Our Priorities Our Progress Our Targets Link to UN SDGs4 Ensuring we are a diverse 32% female senior managers 36% female senior managers3 as at 31 July 2021 by 2025 and inclusive employer 14% of our managers to
Slide 35: Banking: loans and advances to customers and provisions by stage
Banking: loans and advances to customers and provisions by stage Appropriate level of provision reflecting improved but still uncertain outlook IFRS 9 Staging Allocation At 31 January 2022 At 31 July 2021 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Gross loans (£m) 7,663.9 837.3 408.
Slide 36: LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES
Close Brothers Group plc 10 Crown Place London EC2A 4FT www.closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES