Close Brothers Group plc · LSE:CBG
Close Brothers — FY2020 Earnings Presentation
38 slides from Close Brothers's earnings presentation, Sep 22, 2020
Slide 1: Close Brothers Group plc Annual Results 2020
Close Brothers Group plc Annual Results 2020 22 September 2020
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 02 Financial update Mike Morgan, Finance Director 03 Business update Adrian Sainsbury, Chief Executive 04 Q&A Modern Merchant Banking 3
Slide 4: Overview
Overview Resilient performance in FY20 in a challenging environment Resilient financial and High quality loan book Very strong performance operational performance is predominantly secured of Winterflood and reflecting the disciplined and prudently continued good application of our underwritten momen
Slide 5: Our Purpose
Our Purpose Supporting our customers, clients and partners is integral to our Purpose Our Purpose To help the people and business of Britain thrive over the long term. Our Responsibility Our Strategy To help address the social, To provide exceptional economic and environmental service to our custome
Slide 6: A proven and resilient model
A proven and resilient model Supporting long track record of growth and profitability Fundamental strengths of the model Our track record Disciplined underwriting and pricing Long-term • Predominantly secured loan book with prudent LTVs growth • Prudent, expertise based underwriting • Consistently s
Slide 7: Taking the model forward
Taking the model forward We are confident we will emerge in a strong position Our responsibility • The group remained open for business throughout the Covid-19 crisis • Long history of supporting individuals and SMEs across the UK through a range of market conditions • Safety and wellbeing of collea
Slide 8: Agenda
Agenda 01 Introduction Adrian Sainsbury, Chief Executive 02 Financial update Mike Morgan, Finance Director 03 Business update Adrian Sainsbury, Chief Executive 04 Q&A Modern Merchant Banking 8
Slide 9: Financial Overview
Financial Overview Financial performance impacted by higher impairment charges and lower activity levels Adjusted EPS 74.5p Resilient performance reflecting disciplined Return on opening equity1 8.0% application of our business model in a CET1 capital ratio 14.1% challenging environment • The impact
Slide 10: Income statement
Income statement Income growth, continued investment and increase in impairment charges Continuing operations1 % £ million 2020 2019 change • Income growth reflected strong Adjusted operating income 866.1 816.4 6 performance in Asset Management and Winterflood, partially offset by the Banking divisi
Slide 11: Divisional performance
Divisional performance Diversity continues to support a resilient performance % £ million 2020 2019 change Banking Banking 99.2 253.7 (61) • Commercial, Retail and Property impacted by higher impairments • Lower activity levels, although seen an Commercial 4.8 86.5 (94) increase since the easing of
Slide 12: Strong and transparent balance sheet
Strong and transparent balance sheet Diverse funding with increased deposits potential and prudent liquidity Prudent approach to funding Diverse funding base • Prudent level of funding, covering loan book by 135% 14% • Maintained the principle to “borrow long, lend short” Equity • Maintained prudent
Slide 13: Capital
Capital Strong capital position provides significant flexibility for growth Capital overview1 • Strong CET1 capital ratio, significantly above 31 July 2020 31 July 2019 minimum regulatory requirements CET1 capital ratio 14.1% 13.0% • Increased CET1 capital driven by retained profit with Total capita
Slide 14: Banking
Banking Performance reflected the impact of Covid-19 on impairment charges and income Continuing operations1 % £ million 2020 2019 change • Reduction in income driven by lower Adjusted operating income 586.0 602.6 (3) activity and forbearance • Impact of lower activity levels Adjusted operating expe
Slide 15: Banking: prudent assessment and appropriately provisioned
Banking Prudent assessment and appropriately provisioned Expert judgement applied IFRS 9 Staging allocation • Application of our models overlaid with expert judgement to determine: Stage 1 Stage 2 Stage 3 Total – Appropriate allocation between stages Gross loans 5,906.6 1,574.2 374.6 7,855.4 – Cover
Slide 16: Banking: broadly stable loan book
Banking Broadly stable loan book reflecting increase in activity in June and July Loan book movement by segment (£ million)1 Diversification and specialism Commercial +2% provide resilience • Strong performance in Asset Finance, with Retail good new business levels supported by the +1% Property (164
Slide 17: Banking: net interest margin
Banking Net interest margin: focus on pricing and underwriting discipline Specialist, relationship driven FY20 Monthly NIM trend1 model supports a strong NIM • Consistently strong NIM compared to sector average Partial recovery in June & July - 8.2% lockdow n easing benefitted fee and • Prioritise p
Slide 18: Banking: strict control of costs
Banking Strict control of costs while investing in the business Movement in costs (£ million) Continued investment offset by lower variable compensation Investment costs1 2.9 • Investing through the cycle remains a key strategic (10.7) priority, with a number of ongoing investment programmes deliver
Slide 19: Investing for the future
Investing for the future Investing to protect, improve and extend our business 01 Protecting our business Strategic investment programmes • Business resilience • Strengthened funding and liquidity Motor transformation Protect IRB Protect • Regulatory compliance Multi-year investment Transition to IR
Slide 20: Customer Deposit Platform case study
Investing for the future Customer Deposit Platform case study Significant investment programme Benefits • Investment initiated in 2017 financial year • New products introduced include a range of notice accounts for different customer types - suite of new • Platform launched in December 2018 and onli
Slide 21: Asset Management
Asset Management Good momentum during challenging market conditions % £ million 2020 2019 change • Increased income driven by higher Operating income 128.2 120.4 6 investment management income from Investment management 91.4 81.7 12 strong growth in managed assets Advice and other services 35.5 37.2
Slide 22: Winterflood
Winterflood Very strong trading performance and significant increase in operating profit % £ million 2020 2019 change • Higher income reflecting very strong Operating income 151.9 93.4 63 trading performance and significant increase in volumes since the Covid- 19 outbreak Operating expenses (103.8)
Slide 23: Agenda
Agenda 01 Introduction Adrian Sainsbury, Chief Executive 02 Financial update Mike Morgan, Finance Director 03 Business update Adrian Sainsbury, Chief Executive 04 Q&A Modern Merchant Banking 23
Slide 24: Group Overview
Group Overview Well placed to respond to opportunities Impact of Covid-19 on the Attractive vertically integrated Diversified business model Banking division from model in Asset Management and specialist expertise lockdown, forbearance and and resilient trading with market continues to support our i
Slide 25: Banking: long history of lending through the cycle
Banking Long history of lending through the cycle Moderation Covid-19 2017 – 2019 2020 8.0 3% - 7% 7.0 Benign credit 2013 – 2016 6.0 8% - 14% Loan book (£ billion) 5.0 Credit crunch 2009 – 2012 4.0 +20% p.a Easy credit 3.0 2004 – 2007 Bear market +4% p.a Financial 2000 – 2003 crisis 2.0 +22% p.a Dot
Slide 26: Banking: prudent and disciplined approach to lending
Banking Prudent and disciplined approach to lending A proven and resilient lending model Confident in the credit quality of our loan book Loan book is prudently underwritten and supported by the expertise c.18% c.21% of our people c.4% c.6% Over 90% of book is secured or has c.6% some form of struct
Slide 27: Banking Overview - Commercial
Banking Overview - Commercial Asset Finance Approvals under the CBILS, CLBILS and BBLS1 • Covid-19 had a significant impact in Asset Finance, (As at 31 July 2020) Volume Value (£m) with monthly volumes reaching their lowest levels in April Total credit approved 2,3 1430 353 and May Credit drawdown 9
Slide 28: Banking Overview - Retail
Banking Overview - Retail Motor New business volumes (as a % of monthly YTD average to March 2020) • Prior to Covid-19 the UK business generated good levels of incremental new business Motor Premium • Covid-19 saw car dealerships closed in April and May • Strong performance since June, with July del
Slide 29: Banking Overview - Property
Banking Overview - Property Property New business volumes (as a % of monthly YTD average to March 2020) • Covid-19 had a significant impact, with the temporary closure of building sites impacting monthly drawdowns • Since easing of lockdown restrictions in June and July, UK property construction mar
Slide 30: Asset Management
Asset Management Income diversity and long term growth opportunity • Continued good demand for integrated advice and Annualised net inflow rates (%) investment management services, maintaining excellent client service during challenging market conditions 12% • Vertically integrated, multi-channel mo
Slide 31: Winterflood
Winterflood Very strong trading performance highlights the expertise and experience of traders Operating profit (£ million) • Successful operational response and very strong trading performance in extremely challenging H1 H2 Bargains per day market conditions 82 60 90 Bargains (thousands) • Signific
Slide 32: Outlook
Outlook Resilient model leaves us well positioned in a challenging market environment The group has adapted well to this unprecedented environment, drawing upon our financial and operational resilience and the deep experience of our people Encouraging signs of increasing economic activity in June an
Slide 33: Agenda
Agenda 01 Introduction Adrian Sainsbury, Chief Executive 02 Financial update Mike Morgan, Finance Director 03 Business update Adrian Sainsbury, Chief Executive 04 Q&A Modern Merchant Banking 33
Slide 34: Appendix
Appendix 2) Close Brothers Modern Merchant Banking
Slide 35: Sustainability and responsibility
Sustainability and responsibility Fundamental to our purpose, strategy and culture We recognise that to help the people and businesses of Britain thrive over the long term, we also have a responsibility to help address the social, economic and environmental challenges facing our business, employees
Slide 36: ESG targets
ESG targets Measuring and reporting our progress Key performance Targets to measure Progress Focus area indicators our progress against targets Maintaining momentum Ensuring we are 33% female senior 30% female senior New and more stretching targets, a diverse and managers as at 31 managers by 2020 i
Slide 37: UK government support for businesses during Covid-19
UK government support for businesses during Covid-19 Overview of UK government business lending schemes Government scheme Key features Close Brothers offering • Helps small and medium-sized businesses access loans and other kinds of • Asset finance, invoice finance and term loans finance up to £5 mi
Slide 38: Close Brothers Group plc contact details
Close Brothers Group plc 10 Crown Place London EC2A 4FT LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com