Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2019 Earnings Presentation
29 slides from Close Brothers's earnings presentation, Mar 12, 2019
Slide 1: Half Year Results 2019
Half Year Results 2019 12 March 2019
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 – Mike Morgan, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Modern Merchant Banking 3
Slide 4: Introduction
Introduction Solid first half results Solid financial performance with strong returns • Group AOP of £139 million • Strong RoE at 16.1% and increase in CET1 ratio to 13.0% • 5% interim dividend growth to 22p All divisions demonstrating resilience in current market conditions • Continued loan book gr
Slide 5: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Mike Morgan, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Modern Merchant Banking 5
Slide 6: Key performance indicators
Key performance indicators Solid operating performance supporting strong returns Adjusted EPS1 69.8p • Adjusted EPS reduced 3% reflecting lower profit in the period Return on opening equity 16.1% • Generated strong return on opening equity CET1 capital ratio 13.0% • Maintained strong CET1 capital ra
Slide 7: Segmental performance
Segmental performance Diverse businesses drive overall solid performance £ million H1 2019 H1 2018 change 131.1 130.1 1% Banking • Higher profits from higher volumes and strong margins across both Asset Finance Commercial 47.3 39.7 19% and Invoice and Speciality Finance Retail 36.8 44.4 (17%) • Lowe
Slide 8: Income statement
Income statement Higher income and continued investment Continuing operations 1 £ million H1 2019 H1 20181 change Adjusted operating income 407.4 402.5 1% • Income growth driven by Banking Adjusted operating expenses (246.7) (235.8) 5% • Cost increase due to growth and investment in the Banking divi
Slide 9: Strong and transparent balance sheet
Strong and transparent balance sheet Diverse funding and prudent liquidity Diverse funding base £ billion Total funding • Average maturity of loan book Equity funding at 22 months 14% £9.5 billion Unsecured funding 36% 15% Loan book • Average maturity of the loan £9.5 bn Term funding scheme book at
Slide 10: Capital
Capital Maintain significant headroom to capital requirements Capital overview1 1 August 2018 31 January 2019 CET1 capital ratio 12.7% 13.0% • Increased CET1 capital ratio reflects continued profitability Total capital ratio 15.0% 15.2% and slower loan book growth at this stage in the cycle Leverage
Slide 11: Banking
Banking Profit growth alongside ongoing investment Continuing operations 1 £ million H1 2019 H1 2018 change Operating income 303.1 290.9 4% • Income growth principally driven by Commercial Adjusted operating expenses (150.1) (138.0) 9% • Higher costs reflect growth and investment ‒ Over half of the
Slide 12: Banking
Banking Diverse portfolio supports continued loan book growth Loan book growth by segment (£ million) 2% loan book growth maintaining disciplined 31 Jan 2019 7,385 approach to lending Asset 7303 82 • Strong growth in Commercial, with 5% growth in Asset Finance and 6% growth in Invoice and +5% Specia
Slide 13: Banking: Performance reflects diversity of business portfolio
Banking Performance reflects diversity of business portfolio Net interest Bad Expense / % of loan margin debt income book • Commercial NIM increased to 8.3% due to Commercial 39% growth in higher margin products 8.3% 0.5% 56% • Bad debt remains low with continued low 2018 8.0% 2018 0.4% 2018 59% arr
Slide 14: Asset Management
Asset Management Good net inflows in more challenging markets £ million H1 2019 H1 2018 change Operating income 58.5 56.0 4% • Higher income reflecting growth in managed assets in the prior year Investment management 39.6 35.8 11% Advice and other services 18.7 20.0 (7%) Other income 0.2 0.2 - Adjus
Slide 15: Securities
Securities Continued solid profitability in difficult market conditions £ million H1 2019 H1 2018 change Operating income 45.8 55.6 (18%) • Reduced income, reflecting lower trading volumes in difficult and volatile equity market Operating expenses (36.5) (40.9) (11%) • Reduction in expenses reflecti
Slide 16: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Mike Morgan, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Modern Merchant Banking 16
Slide 17: Overview
Overview Consistent strategy focused on the long term Loan book growth • Maintaining model discipline 13% 14% 12% 8% 7% 6% 6% ‒ Stable NIM, bad debts and moderating growth at current stage of the cycle 1 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 H1 19 • Continue to grow the business in line with our Adjus
Slide 18: Banking track record
Banking track record Long history of profitable growth through the cycle Moderation 2017 – H1 19 6%1 - 7% 10 year 7.0 Banking key metrics H1 2019 average Benign credit 2013 – 2016 RoE 18% 22% 8% - 14% 6.0 RoNLB 3.5% 3.4% Bad debt ratio 0.6% 1.3% 5.0 Net interest margin 8.1% 8.9% Loan book (£ billion
Slide 19: Banking
Banking Continued growth while maintaining model discipline Commercial Retail Property • Growth in Asset Finance • Disciplined lending in • Continued good demand for reflecting diversity and competitive Motor Finance market residential property development specialism finance • Premium Finance contin
Slide 20: Banking
Banking Disciplined application of our model Net interest margin 9.0% Specialist, expert knowledge 8.0% 7.0% 8.3% 8.3% 8.2% 8.1% 8.2% 8.0% 7.9% 6.0% 5.0% Strong relationships H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 Bad debt ratio 0.8% Quality of service 0.6% 0.7% 0.7% 0.4% 0.6% 0.6% 0.6% 0.6% 0.5%
Slide 21: Investing for the long-term
Investing for the long-term Strategic investment initiatives New deposit platform Motor transformation AIRB • New technology platform for • Multi-year investment • Multi-year investment to transfer customer deposits programme to improve dealer to the IRB approach and customer proposition – Formal ap
Slide 22: Asset Management
Asset Management Significant long-term potential Adjusted operating profit (£ million) • Driving continued organic growth via increase in front 25 office staff and attractive product offering H1 H2 20 • Continued strong net inflows at 7% (annualised) in H1 12 ‒ Despite uncertain and challenging mark
Slide 23: Winterflood
Winterflood Solid profitability in difficult trading conditions Operating profit • AOP at £9.3 million despite significant reduction in 30 H1 H2 Bargains per day 80 trading activity and daily volumes 68 70 25 65 60 56 60 Bargains (thousands) 52 • 14 Operating profit (£m) Remain focused on maximising
Slide 24: Outlook and conclusions
Outlook and conclusions Remain well positioned for the full year • Proven and resilient model allows us to continue to support our customers and deliver good returns to our shareholders in a wide range of market conditions • Banking remains well positioned, benefiting from the diversity of our busin
Slide 25: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Mike Morgan, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Modern Merchant Banking 25
Slide 26: Interim Results H1 2019 Appendix
Interim Results H1 2019 Appendix 12 March 2019
Slide 27: New growth initiatives
New growth initiatives Long history of extending the model in adjacent markets 1990s 2000s 2010s 7.0 • Asset finance broker business • Larger ticket invoice • Used print equipment 6.0 • Brewery rentals • Ireland • Premium personal lines • Mid-ticket leasing • Renewable energy Loan book (£ billion) 5
Slide 28: Loan book and lending statistics by business
Banking Loan book and lending statistics by business Loan book H1 19 loan at 31 Average loan Typical loan Number of book Typical LTV1 January size 2 maturity3 customers growth 2019 (£m) Asset Finance4 1,911 5% 85 – 90% £45k 3 – 5 years 27k Invoice and 973 6% 75% – 80% £400k 2 – 3 months 2.3k Special
Slide 29: LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES
Close Brothers Group plc 10 Crown Place London EC2A 4FT LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com