Close Brothers Group plc · LSE:CBG
Close Brothers — FY2012 Earnings Presentation
41 slides from Close Brothers's earnings presentation, Sep 25, 2012
Slide 1: Preliminary Results 2012
Preliminary Results 2012 25 September 2012
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 Strictly private and confidential 3
Slide 4: Introduction: FY 2012 highlights
Introduction FY 2012 highlights • Solid overall performance in the current market environment – adjusted operating profit up 2% to £134 million • Banking achieved another strong performance with 20% loan book growth and 27% increase in adjusted operating profit • Securities maintained a strong posit
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 Strictly private and confidential 5
Slide 6: Financial Highlights
Financial Highlights Solid performance in 2012 financial year £ million 2012 2011¹ % change Adjusted operating income 531.7 548.5 (3)% Adjusted operating profit 134.2 131.2 2% Adjusted EPS 67.3p 64.8p 4% Dividend per share 41.5p 40.0p 4% Return on opening equity 12.5% 13.1% Financial Ratios Operatin
Slide 7: Income Statement
Income Statement Exceptional items and tax £ million 2012 2011¹ % change Exceptional items 5.6 (46.9) Of which: Disposal of Mako2 5.6 (36.0) Restructuring costs in Asset Management - (15.4) Investment gains - 4.5 Goodwill impairment - (3.7) Amortisation of intangible assets on acquisition (4.9) (2.1
Slide 8: Performance by division
Performance by division Significant movement within the divisions in current market environment Adjusted operating profit/(loss)¹ £ million • Another strong performance in Banking with 27% growth in profit 135.0 – 20% loan book growth Banking 106.3 – Continued strong NIM and lower bad debt • Securit
Slide 9: Summary balance sheet
Summary balance sheet Managing resources prudently with a focus on quality and efficiency • Total assets increased 4% to £6.4 Summary Balance Sheet billion 31 July 31 July – Loan book up 20% to £4.1 £ million 2012 2011 Change billion, 65% of balance sheet Assets Treasury assets1 1,060 1,405 (345) –
Slide 10: Funding
Funding Strong funding position with continued focus on diversity and maturity Funding position at 31 July 2012 • Total funding up to £5.9 billion, £ million 142% of loan book 6,000 5,859 5,859 • Maintained access to diverse 5,000 funding sources 3,448 Loan book – Raised £0.5 billion securitisation
Slide 11: Treasury assets and liquidity
Treasury assets and liquidity Maintaining high quality liquidity while optimising efficiency Treasury assets £ million • Maintained strong and high quality liquidity 1,000 position 1,405 1,060 – High quality liquid assets, Bank of England deposits and gilts, stable at £0.8 billion 800 – Comfortably
Slide 12: Capital
Capital Strong capital position maintained Capital ratio 31 July 31 July % % Total £ million 2012 2011 change Total 16 14.9% 14.5% Core tier 1 capital ratio 12.8% 13.1% Leverage ratio1 9.7% 9.5% 12 Core tier 1 Core tier 1 Core tier 1 capital 621 589 5% 8 13.1% 12.8% Total regulatory capital 703 669
Slide 13: Banking
Banking Strong financial performance £ million 2012 2011 % change Net interest and fees on loan book 354.0 312.3 13% Treasury and other non-lending income 7.5 13.7 (45)% Adjusted operating income 361.5 326.0 11% Adjusted operating expenses (168.9) (154.5) 9% Impairment losses on loans and advances (
Slide 14: Banking: Strong growth in favourable conditions
Banking Strong growth in favourable conditions Loan book size by business unit • Strong loan book growth of 20% overall in a £ million continued favourable market environment 4,126 +20% 4,000 • Retail increased 15% 782 +39% – Motor finance benefiting from continued 3,435 3,500 strong demand and wide
Slide 15: Banking: Performance ratios remain favourable
Banking Performance ratios remain favourable Performance ratios • Return on net loan book increased to 3.6% 12% – Reflects consistent, prudent lending criteria 9.7% 9.8% 10% 9.4% • Strong net interest margin maintained at 9.4% 8% – Modest reduction on strong prior year 6% • Bad debt ratio improved t
Slide 16: Securities
Securities Performance reflects difficult market conditions throughout the year £ million 2012 2011 % change Adjusted operating income 101.4 158.7 (36)% Of which: Winterflood 73.2 124.5 (41)% Seydler 21.0 31.6 (34)% Mako 7.2 2.6 177% Adjusted operating expenses (76.9) (103.9) (26)% Adjusted operatin
Slide 17: Securities: Performance by business
Securities Performance by business Adjusted operating profit by business • Winterflood’s performance substantially lower £ million reflecting low retail risk appetite and client trading activity 60 54.8 – AOP of £16 million at 10 year low 2.6 50 9.0 • Seydler’s profit down to £1 million with low tra
Slide 18: Winterflood – affected by low retail investor risk appetite
Securities Winterflood – affected by low retail investor risk appetite Income and expenses Key figures £ million 2012 2011 140 Average bargains per day 47k 48k Income per bargain £6.18 £10.39 120 Loss days 13 1 100 • Income substantially impacted by reduced client trading activity, particularly in A
Slide 19: Asset Management
Asset Management Small loss in the year reflecting final stages of restructuring £ million 2012 2011 % change Income on AuM 68.5 58.4 17% Advice and other services¹ 30.6 17.5 75% Investment management 37.9 40.9 (7)% Other income² 1.1 5.4 (80)% Adjusted operating income 69.6 63.8 9% Adjusted operatin
Slide 20: Asset Management: Increased focus on private clients
Asset Management Increased focus on private clients AuM • Total AuM reduced to £8.3 billion as £ million exiting institutional Exiting Growth in • Reduction in institutional assets 9,558 institutional private clients 10,000 – Redemption of client assets and closure of non core funds – Sale of OLIM’s
Slide 21: Income drivers – AuM and revenue margin
Asset Management Income drivers – AuM and revenue margin AuM at 31 July 2012 (£ billion) • Total AuM £8.3 billion at 31 July 2012 10 – £4.6 billion advised AuM2 8.3 › Includes £1.7 billion (36%) invested in Close 8 Brothers products 1.7 Managed 3.6 only – £5.3 billion managed AuM 6 5.3 0.0 4 1.7 Bot
Slide 22: 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 Strictly private and confidential 22
Slide 23: Business update: Overview
Business update Overview • Delivering on strategic priorities – Captured growth in Banking while maintaining distinctive model – Maintained leading market position in difficult environment for Securities – Substantially completed restructuring in Asset Management • Prudent management of financial re
Slide 24: Banking: Strategic priorities
Business update Banking Strategic priorities • Capture sustainable growth while maintaining distinctive, specialist lending model • Expanding our client franchise – Building strong relationships with clients and intermediaries • Maintaining a consistent approach to lending and credit quality – Credi
Slide 25: Banking – Maintaining our consistent approach to credit
Business update Banking – Maintaining our consistent approach to credit, loan book quality, and core lending principles Key Credit Attributes at 31 July 2012 • Unchanged, conservative credit appetite – High proportion of secured lending Prudent LTV – Diversity of lending by asset and customer – Low
Slide 26: Banking – Delivering consistent and strong returns through the cycle
Business update Banking – Delivering consistent and strong returns through the cycle • Three year loan book CAGR 20% – 10 year CAGR 11% • Key ratios remain in line with 10 year average Loan book, £ billion 25% 5 22% 10 year ave RoE 19% 20% 4 15% 3 10% 10 year ave NIM 9.2% 9.4% 2 5% 10 year ave RoNLB
Slide 27: Securities: Strategic priorities
Business update Securities Strategic priorities • Continued focus on strategic priorities – Maximise revenue in all market conditions – Manage costs and maximise profitability – Maintain leading market positions • Winterflood focus on managing core market-making business in difficult markets – Selec
Slide 28: Winterflood – significant market dislocation impacting trading
Business update Winterflood – significant market dislocation impacting trading performance • Performance affected by very difficult market environment – Significant levels of economic uncertainty – Decline in retail investor risk appetite – retail market volumes overall down 25% YoY1 – Reduction in
Slide 29: Winterflood – Consistently profitable over time
Business update Winterflood – Consistently profitable over time £ million 60 50 49 47 40 43 40 10 year average (35) 38 39 35 30 20 24 24 17 16 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Adjusted operating profit 10 year average Loss 23 15 5 5 4 1 14 7 4 1 13 days Strictly private an
Slide 30: Asset Management
Business update Asset Management • Significant strategic transformation over last 3 years, with focus on private client market – Disposed of non-core businesses – Acquired 4 private client businesses – Launched new client propositions – Deployed new technology platform – Strengthened distribution an
Slide 31: Asset Management – Restructuring substantially completed in FY 2012
Business update Asset Management – Restructuring substantially completed in FY 2012 • Rolled out new client propositions and platform – Advice proposition live since November 2011 – New technology platform supporting advised and self directed clients • Completed range of investment management produc
Slide 32: Asset Management – Next steps and clear path to profitability
Business update Asset Management – Next steps and clear path to profitability Measure FY 2012 FY 2013-15 Drivers • Sales of new integrated proposition to existing 100 bps Revenue margin 77 bps advised clients by FY 2015 • Increasing sales to new clients over time Revenue • Organic growth through Acc
Slide 33: Outlook
Outlook Well positioned for 2013 financial year • External market environment uncertain but confident in our businesses • In Banking continue to see prospects for loan book and profit growth • In Securities, low market activity continues but Winterflood remains well positioned • Asset Management sub
Slide 34: 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 Strictly private and confidential 34
Slide 35: Preliminary Results 2012
Preliminary Results 2012 25 September 2012
Slide 36: Appendix
Appendix Page 37 Segmental analysis 40 Funding maturity profile 41 Banking Strictly private and confidential 36
Slide 37: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset Continuing Discontinued £ million Banking Securities Management Group operations operations3 Total Full year 2012 to 31 July Adjusted operating income/(expense) 361.5 101.4 69.6 (0.8) 531.7 - 531.7 Administrative expenses (153.4) (74.7) (73.0) (19.4)
Slide 38: Segmental analysis: Summary balance sheet at July 2012
Segmental analysis Summary balance sheet at 31 July 2012 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 789.7 14.8 11.9 0.4 816.8 Settlement balances, long trading positions and - 598.5 - - 598.5 loans to money brokers Loans and advances to customers 4
Slide 39: Segmental analysis: Summary balance sheet at July 2011
Segmental analysis Summary balance sheet at 31 July 2011 Asset £ million Banking Securities Management Group Total Cash and loans and advances to banks 668.4 24.7 15.1 1.1 709.3 Settlement balances, long trading positions and - 706.9 - - 706.9 loans to money brokers Loans and advances to customers 3
Slide 40: Funding maturity profile
Funding maturity profile Prudent funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Loans and overdrafts from banks1 192 - 176 16 - - Debt securities in issue 1,040 7 350 485 198 - Subordinated loan capital 77 2 - - - 75 Drawn facilities 1,309 9 526 501 198 75 Undraw
Slide 41: Banking: Loan book and lending statistics by business
Banking Loan book and lending statistics by business 31 July 31 July 2012 2011 % Loan book £ million £ million change Retail 1,707.8 1,481.5 15% Motor finance 1,086.8 870.8 25% Premium finance 621.0 610.7 2% Commercial 1,635.9 1,390.7 18% Asset finance 1,327.2 1,079.2 23% Invoice finance 308.7 311.5