Close Brothers Group plc · LSE:CBG
Close Brothers — FY2009 Earnings Presentation
36 slides from Close Brothers's earnings presentation, Sep 29, 2009
Slide 1: Close Brothers Group Preliminary results 2009
Close Brothers Group Preliminary results 2009 29 September 2009
Slide 2: Cautionary statement
Cautionary statement Regarding information in this presentation Certain statements included in 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
Slide 3: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Preben Prebensen, Group Chief Executive 4. Q&A Page 3
Slide 4: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Preben Prebensen, Group Chief Executive 4. Q&A Page 4
Slide 5: Financial highlights
Financial highlights Summary income statement, continuing operations(1) £ million, year to 31 July 2009 2008 % change Adjusted operating income 502.1 452.7 11% Adjusted operating expenses (328.5) (297.7) 10% Impairment losses on loans and advances (59.9) (27.5) 118% Adjusted operating profit 113.7 1
Slide 6: Financial highlights
Financial highlights Summary income statement, continuing operations (continued) £ million 2009 2008 % change Adjusted operating profit 113.7 127.5 (11%) Exceptional items and other adjustments of which: Exceptional expenses (6.0) (9.1) Impairment of goodwill (19.0) - Amortisation of intangibles on
Slide 7: Discontinued operations – Corporate Finance
Discontinued operations – Corporate Finance Sale completed in July 2009, net cash consideration £67 million £ million 2009 2008 % change Trading (loss) / profit after tax (2.0) 6.3 Non taxable gain on disposal 12.4 - Profit from discontinued operations 10.4 6.3 Minority interests (0.6) (1.6) Profit
Slide 8: Financial highlights: Summary balance sheet
Financial highlights Summary balance sheet £ million 31 July 2009 31 July 2008 Change Assets Cash and loans and advances to banks 198.2 309.3 (111.1) Settlement balances, long trading positions and loans to money brokers 728.9 656.8 72.1 Loans and advances to customers 2,364.9 2,232.2 132.7 (1) Non
Slide 9: Funding and liquidity
Funding and liquidity Remain soundly funded Funding position as at 31 July 2009 • Diversified funding model by raising longer term retail deposits for increased resilience and flexibility • Core corporate deposit base has proven its resilience in financial market turmoil • Wholesale facilities avera
Slide 10: Capital
Capital Strong capital position maintained £ million 31 July 2009 31 July 2008 Core tier 1 capital 581.9 547.2 Total regulatory capital 651.6 613.6 Risk weighted assets (notional)(1) 3,936.8 3,804.0 Core tier 1 capital ratio 14.8% 14.4% Total capital ratio 16.6% 16.1% Note: (1) Notional risk weighte
Slide 11: Banking
Banking Key figures £ million 2009 2008 % change Adjusted operating income 235.5 207.1 14% Adjusted operating expenses (121.6) (105.1) 16%(1) Impairment losses on loans and advances (59.9) (27.5) 118% Adjusted operating profit 54.0 74.5 (28%) Closing loan book 2,365 2,232 6% Bad debt ratio 2.6% 1.3%
Slide 12: Banking income analysis
Banking Income analysis Adjusted operating income by type Key metrics 250 235.5 • Net interest and fees on loan book increased 225 19.3 207.1 20% to £216 million 200 - Average loan book increased 10% to £2,299 26.8 million (2008: £2,097 million) 175 - Maintained a strong net interest margin(1) of 15
Slide 13: Banking loan book analysis
Banking Loan book analysis 2,500 2,365 2,232 170 • 6% growth in loans and advances to customers to 210 £2.4 billion (2008: £2.2 billion) 2,000 444 - £80 million premium finance loan book acquired 414 in August 2008 1,500 487 - 2% organic growth 446 £ million • Good demand in asset, motor and propert
Slide 14: Banking bad debt analysis
Banking Bad debt analysis 10.0% 9.4% • Bad debt ratio of 2.6% (2008: 1.3%) 8.9% 9.0% 8.6% - Impact of difficult economic environment on 8.0% borrowers - Higher bad debts across the loan book 7.0% - Property remains a significant contributor 6.0% • Benefit from secured lending model, high quality 5.0
Slide 15: Asset Management
Asset Management Key figures £ million 2009 2008 % change Adjusted operating income 95.0 133.5 (29%) Adjusted operating expenses (83.0) (100.9) (18%) Adjusted operating profit 12.0 32.6 (63%) Closing FuM 6,839 8,195 (17%)(1) KFRs Operating margin(2) 13% 24% Expense / income ratio 87% 76% Compensatio
Slide 16: Asset Management income analysis
Asset Management Income analysis Adjusted operating income by type • Management fees reduced 32% to £54 million 150 - Average FuM 13% lower at £7.5 billion (2008: 133.5 £8.7 billion) 12.2 - Revenue margin(1) 72 bps (2008: 92 bps) 120 - Reflects changes in mix of FuM including deconsolidation of priv
Slide 17: Asset Management Funds under Management
Asset Management Funds under Management Movement in FuM FuM Private 9,000 £ million Clients Funds Total 1 August 2008 3,316 4,879 8,195 8,000 4,879 New funds raised 533 625 1,158 (708) 7,000 Redemptions, realisations and withdrawals (372) (806) (1,178) 3,490 (20) 6,000 Net new funds 161 (181) Market
Slide 18: Securities
Securities Key figures £ million 2009 2008 % change Adjusted operating income 167.8 110.0 53% Adjusted operating expenses (102.9) (71.3) 44% Adjusted operating profit 64.9 38.7 68% of which: Winterflood 47.3 23.5 101% (1) Seydler 1.5 8.0 (81%) (2) Mako 16.1 7.2 124% KFRs Operating margin 32% 31% Exp
Slide 19: Securities income analysis
Securities Income analysis Adjusted operating income by business • Winterflood income increased 59% to £128 million 200 - Bargains / day up 54% to 42k (2008: 27k) 175 167.8 - Income / bargain broadly stable at £11.98 (2008: £11.58) 16.1 150 - 7 loss days out of 253 trading days (2008: 14 out 23.3 of
Slide 20: Outlook
Outlook 2010 financial year • In Banking division, see good demand for lending services but expect bad debts to remain high • In Asset Management, outlook for fund flows remains uncertain but we continue to invest in new business initiatives • In Securities, strong start to the year at Winterflood b
Slide 21: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Preben Prebensen, Group Chief Executive 4. Q&A Page 21
Slide 22: Strategic priorities
Business overview Strategic priorities • Focus activities around three core divisions - Banking, Asset Management and Securities - Sale of Corporate Finance division completed July 2009 • Strengthening capabilities and processes at the centre - Enhanced reporting, transparency and communications - N
Slide 23: Business overview: Banking
Business overview Banking • Strong and distinctive business model focused on specialist, secured, short term lending • Explore growth opportunities to extend existing model • New organisational structure to evaluate growth opportunities more effectively - Retail – intermediated lending (Motor and Pr
Slide 24: Business overview: Asset Management
Business overview Asset Management • Focus on three core areas of Private Clients, Funds and Banking and Administration • Ongoing process of strategy development and investment • Opportunities to grow Private Client business - Leverage brand and offering to mid-high net worth clients - Alignment to
Slide 25: Business overview: Securities
Business overview Securities • Three strong and distinct businesses - Winterflood – leading market-maker in the UK - Close Brothers Seydler – German floor specialist and designated sponsor - Mako – market-maker in exchange traded derivatives • Winterflood – Strong internal capabilities and consisten
Slide 26: Conclusion
Conclusion • A more focused organisation with three core business areas • Prioritise building on the strengths of each business • More capable at the group centre • Better position to look at growth opportunities Page 26
Slide 27: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business overview – Preben Prebensen, Group Chief Executive 4. Q&A Page 27
Slide 28: Close Brothers Group Preliminary results 2009
Close Brothers Group Preliminary results 2009 29 September 2009
Slide 29: Appendix
Appendix • Segmental analysis • Funding maturity profile • Banking division – loan book supplementary information • Banking division – new business units • Re-presentation of financial statements Page 29
Slide 30: Segmental analysis
Segmental analysis Summary income statement Asset Continuing £ million Banking Management Securities Group operations Year ended 31 July 2009 Adjusted operating income 235.5 95.0 167.8 3.8 502.1 Adjusted operating expenses (121.6) (83.0) (102.9) (21.0) (328.5) Impairment losses on loans and advances
Slide 31: Segmental analysis: balance sheet July 2009
Segmental analysis Summary balance sheet as at 31 July 2009 Asset £ million Banking Management Securities Group Total Cash and loans and advances to banks 27.9 145.3 24.3 0.7 198.2 Settlement balances, long trading positions and loans to money brokers - - 728.9 - 728.9 Loans and advances to customer
Slide 32: Segmental analysis: balance sheet July 2008
Segmental analysis Summary balance sheet as at 31 July 2008 Asset Corporate £ million Banking Management Finance Securities Group Total Cash and loans and advances to banks 42.0 226.8 16.3 23.6 0.6 309.3 Settlement balances, long trading positions and loans to money brokers - - - 656.8 - 656.8 Loans
Slide 33: Funding maturity profile
Funding maturity profile As at 31 July 2009 £ million Total <3 months 3-12 months 1-2 years 2-5 years >5 years Loans and overdrafts from banks(1) 1,314 - 200 1,004 110 - Promissory notes 21 - - - - 21 Subordinated loan capital 75 - - - - 75 Drawn facilities 1,410 - 200 1,004 110 96 Undrawn facilitie
Slide 34: Banking division loan book supplementary information
Banking division Loan book supplementary information Typical lending statistics by business Typical LTV % Average loan size(1) Typical loan maturity Asset finance 70-80% £18.6k 2-3 yrs Premium finance 90% £0.6k 10 mths Property finance 50-60% £857.7k 12-18 mths Motor finance 75% £4.1k 2-3 yrs Invoic
Slide 35: Banking division new business units
Banking division New business units Current loan book split (£ million) New loan book split (£ million) 2,500 2,500 2,365 2,365 487 Property 487 finance Property 2,000 2,000 170 Invoice finance 1,500 1,500 1 882 Commercial Asset 808 finance 1,000 1,000 Premium 456 finance 2 500 500 996 Retail Motor
Slide 36: Re-presentation of financial statements
Re-presentation of financial statements • On the face of the balance sheet, some line items have been combined to simplify presentation with full breakdown provided in the notes • In the income statement, certain fee and interest income and expense lines have also been re-presented. This does not af