Close Brothers Group Plc · LSE:CBG
Close Brothers — FY2014 Earnings Presentation
38 slides from Close Brothers's earnings presentation, Sep 23, 2014
Slide 1: Preliminary Results FY 2014
Preliminary Results FY 2014 23 September 2014
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 3
Slide 4: Introduction: FY 2014 highlights
Introduction FY 2014 highlights • Excellent results – Adjusted operating profit1 up 20% to £201 million › All three divisions contributing to improved performance – Adjusted earnings per share2 up 25% to 104.1p • Strong capital and funding position – Common equity tier one capital ratio of 13.1% and
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 5
Slide 6: Adjusted operating profit
Adjusted operating profit Fifth consecutive year of adjusted operating profit growth Growth in AOP • 20% growth in AOP to £201 million £ million 210 • Banking AOP up 15% to £182 million 3 – Improved loan book growth and 6 200 bad debts 8 • Securities AOP of £34 million 190 – Winterflood AOP up 57% t
Slide 7: Summary income statement
Summary income statement Good growth in earnings and dividend Summary income statement • 13% increase in income % – Strong growth in Banking and £ million 2014 2013 change improved trading for Winterflood Adjusted operating income 659.2 582.9 13% • Expenses up 14% Adjusted operating expenses (414.5)
Slide 8: Balance sheet assets
Balance sheet assets High quality balance sheet assets Total assets • Transparent and straightforward £ million balance sheet 10,000 – Loan book and treasury assets now 85% total assets 8,000 7,700 6,831 558 • 13% asset growth to £7.7 billion 557 635 – Principally driven by 14% loan 6,000 596 1,217
Slide 9: Funding
Funding Focus on diversity and maturity with limited interest rate exposure Diverse funding sources Prudent maturity profile £ million £ million, at 31 July 2014 8,000 8,000 7,128 7,128 6,268 6,000 6,000 5,290 3,428 4,514 4,000 4,015 4,000 3,1372 Matched 2,000 1,696 2,000 3,700 1,416 2,153 837 918 0
Slide 10: Capital
Capital Strong capital position maintained Capital ratio1 31 July 31 July % % £ million 2014 2013 change 16 Common equity tier 1 capital 711 688 3% Total regulatory capital 780 759 3% 12 Risk weighted assets 5,446 5,185 5% 8 Core tier 1 CET1 13.3% 13.1% 4 • Strong capital position 0 – CET1 ratio of
Slide 11: Banking: Another strong result
Banking Another strong result • Income up 13% to £447 million % – Driven by good loan book growth £ million 2014 20131 change across portfolio Adjusted operating income 446.7 396.2 13% Adjusted operating expenses (221.0) (187.2) 18% • Expenses of £221 million, up 18% – Principally volume driven Impa
Slide 12: Banking: Good loan book growth
Banking Good loan book growth Loan book size by business unit • 14% loan book growth £ million 6,000 • Retail increased 10% 5,290 +14% – Strong demand in motor finance from existing dealerships 5,000 4,646 1,150 +29% • Commercial increased 11% 894 4,000 – Good new business volumes across asset finan
Slide 13: Banking: Maintained strong overall returns
Banking Maintained strong overall returns Performance ratios • Net interest margin of 8.6% – Slight decline as lower cost of 10% funding offset by reduction in fees 9% 8.8% 8.6% 8% • Continued improvement in bad debt ratio to 0.9% 7% – Strong underwriting process and 6% favourable lending environmen
Slide 14: Securities: Improved trading conditions
Securities Improved trading conditions % • AOP up 30% to £34 million £ million 2014 2013 change – Reflects 57% increase in Adjusted operating income 127.4 106.3 20% Winterflood’s profit to £27 million Adjusted operating expenses (93.9) (80.6) 17% AOP 33.5 25.7 30% • Improved trading conditions and i
Slide 15: Securities: Improved trading in smaller cap stocks at Winterflood
Securities Improved trading in smaller cap stocks at Winterflood Winterflood’s income and expenses Key figures £ million 2014 2013 120 Average bargains per day 56k 47k Income per bargain £6.81 £6.33 100 Loss days 4 8 80 • Benefited from increased retail investor risk 60 appetite, particularly in AIM
Slide 16: Asset Management
Asset Management Good performance that builds on prior year momentum % • Income up 8% to £84 million £ million 2014 2013 change – Reflects growth in advice and Adjusted operating income 84.4 78.1 8% investment management Adjusted operating expenses (74.5) (74.1) 1% AOP 9.9 4.0 148% • Expenses of £75
Slide 17: Asset Management: Overall AuM increased with improved mix
Asset Management Overall AuM increased with improved mix AuM • 7% increase in total AuM £ million – Reflects high quality proposition and breadth of distribution 11,000 • Net inflows of £0.4 billion 10,000 (874) – 5% opening AuM 1,312 187 • Gross inflows of £1.3 billion, up 9% 9,000 – Strong demand
Slide 18: Asset Management: Income drivers
Asset Management Income drivers – AuM and revenue margin Assets under Management • 12% growth in managed AuM £ billion £9.7bn to £6.9 billion 10 £9.1bn – Strong 3rd party IFA sales and good inflows into bespoke 8 4.5 Total 4.0 Managed 6 • Advised AuM up 2% to £5.2 billion £6.9bn – Driven by positive
Slide 19: 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 19
Slide 20: Executing a well defined strategy
Close Brothers Executing a well defined strategy • Strong top line growth – AOP CAGR of 15% p.a. since FY 2010 AOP 201 (£m) 131 167 117 134 2010 2011 2012 2013 2014 • Resilience to downside risk – Diverse income streams maximise profitability in all conditions Loan book 4.6 5.3 – Disciplined approac
Slide 21: Modern Merchant Banking
Modern Merchant Banking Reinforcing our credentials around our core competencies Competitive advantage Expertise Leadership in specialist markets Service Relationships Superior profitability 21
Slide 22: Modern Merchant Banking: Prioritising investment
Modern Merchant Banking Prioritising investment to build our competitive advantage Strategic priority Competitive advantage • Long-term customer relationships People • Provide a trusted, reliable service • Experts in pricing and managing risk • Offer straightforward and transparent • Simple structur
Slide 23: Banking: Customer focused lending to SMEs and individuals
Banking Customer focused lending to SMEs and individuals in all market conditions Strong financial returns Relationship driven High quality loan book through the cycle Local presence Small ticket Lending in all market conditions since 1985 Flexible, tailored approach Short-term Strong NIM •10 year a
Slide 24: Banking: Environment remains supportive of growth
Banking Environment remains supportive of growth We will stick to our lending model Loan book growth £ billion • Pursue existing opportunities 6 4% – Competitive landscape remains fragmented › Cyclical return of competition in some sectors 5 › Offset by improved demand in Property and motor finance
Slide 25: Winterflood: Increased profitability
Winterflood Increased profitability as trading conditions improve AOP £ million 60 50 10 year ave: 40 £34 million 30 40 47 49 20 43 39 35 24 27 10 17 16 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Loss 5 4 1 14 7 4 1 13 8 4 days 25
Slide 26: Winterflood: Well positioned for cyclical recovery
Winterflood Well positioned for a stronger cyclical recovery UK Retail trading volumes1 • Focused on maintaining market leading position 70k – Maximise existing revenue opportunities – Guaranteed best execution › Provide client led solutions 60k › Supported by proprietary IT technology 50k • New ini
Slide 27: Asset Management: Propositions across life stages
Asset Management Propositions to help clients achieve their financial goals at every stage in life Personal Wealth Asset preservation Asset drawdown & inheritance Asset growth Integrated Wealth Management • Financial Planning • Investment Management • Online portal Early career Mature career Retirem
Slide 28: Asset Management: Multiple opportunities to grow
Asset Management Multiple opportunities to grow the business • Enhanced client service and processes Existing clients • Maximise existing relationships • Improved business development capability New clients AuM growth • Develop relationships with IFAs • Selective portfolio manager recruitment Acquir
Slide 29: Outlook
Outlook We see growth opportunities in all of our businesses • We are well placed to deliver for our customers and our shareholders – In Banking we see continued growth opportunities in our core markets – Winterflood is well positioned but will always be sensitive to market conditions – Asset Manage
Slide 30: 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 30
Slide 31: Preliminary Results FY 2014
Preliminary Results FY 2014 23 September 2014
Slide 32: Appendix
Appendix Page 33 Segmental analysis 36 Funding maturity profile 37 Banking 32
Slide 33: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset £ million Banking Securities Management Group Total Full year to 31 July 2014 Adjusted operating income 446.7 127.4 84.4 0.7 659.2 Administrative expenses (194.7) (92.5) (73.1) (24.4) (384.7) Depreciation and amortisation (26.3) (1.4) (1.4) (0.7) (29
Slide 34: Segmental analysis: Summary balance sheet July 2014
Segmental analysis Summary balance sheet at 31 July 2014 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 1,225.1 16.2 17.5 0.4 1,259.2 Settlement balances, long trading positions and - 634.8 - - 634.8 loans to money brokers Loans and advances to custome
Slide 35: Segmental analysis: Summary balance sheet July 2013
Segmental analysis Summary balance sheet at 31 July 2013 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 984.4 24.8 15.3 0.7 1,025.2 Settlement balances, long trading positions and - 595.5 - - 595.5 loans to money brokers Loans and advances to customers
Slide 36: Funding maturity profile
Funding maturity profile Prudent funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Debt securities in issue 849 1 349 228 271 - Subordinated loan capital 77 2 - - - 75 Drawn facilities1 926 3 349 228 271 75 Undrawn facilities 265 - 115 150 - - Senior unsecured bonds
Slide 37: Banking: Loan book and lending statistics by business
Banking Loan book and lending statistics by business 31 July 31 July % Loan book, £ million 2014 2013 change Retail 2,092.8 1,906.0 10% Motor finance 1,458.9 1,278.3 14% Premium finance 633.9 627.7 1% Commercial 2,047.2 1,845.7 11% Asset finance 1,656.0 1,482.3 12% Invoice finance 391.2 363.4 8% Pro
Slide 38: Close Brothers Group plc contact details
Close Brothers Group plc 10 Crown Place London EC2A 4FT 020 7655 3100 enquiries@closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com