Close Brothers Group plc · LSE:CBG
Close Brothers — H1 2021 Earnings Presentation
40 slides from Close Brothers's earnings presentation, Mar 16, 2021
Slide 1: Close Brothers Group plc Half Year Results 2021
16 March 2021 Close Brothers Group plc Half Year Results 2021
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 Strong financial and operational performance in the current environment Income growth across all Banking delivered 4.4% Very strong performance divisions and 2% increase growth in loan book, while in Winterflood and solid in AOP, with an ROE of maintaining a net interest net inflows in Asse
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: Our strategy
Our strategy Strategic priorities PROTECT GROW S U S TA I N Keeping it safe Delivering disciplined growth Doing it responsibly Maintaining and Maximising opportunities Securing the enhancing the in existing and new long-term future of key strengths markets; loan book growth our business, of our busi
Slide 7: 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 7
Slide 8: Financial Overview
Financial Overview Strong performance in the current environment Group AOP £128.5m • Group Adjusted Operating Profit (AOP) of £128.5 million reflecting higher profits in Winterflood and strong new Group AOP pre provisions £181.3m business volumes in Banking Adjusted EPS • Group AOP pre provisions up
Slide 9: Income statement
Income statement Income growth, continued investment and year on year increase in impairment charges % £ million H1 2021 H1 2020 change • Income growth across all divisions, with particularly strong trading income in Operating income 474.0 420.0 13 Winterflood • Higher variable costs in Winterflood
Slide 10: Divisional performance
Divisional performance Diversification continues to support overall performance % £ million H1 2021 H1 2020 change Banking Banking • Strong new business levels across the 95.1 115.4 (18) lending businesses • Modest income growth offset by higher Commercial 27.4 38.5 (29) impairments and continued in
Slide 11: Strong balance sheet
Strong balance sheet Increased funding and liquidity whilst maintaining diverse funding base and prudent approach Prudent approach Diverse funding base • Increased funding and liquidity to allow flexibility in light of Covid-19 and enable the group to maximise 13% opportunities Equity • Prudent leve
Slide 12: Capital
Capital Strong capital position provides significant flexibility for growth Capital overview 1 • Strong CET1 capital ratio, significantly above minimum 31 January 2021 31 July 2020 regulatory requirements CET1 capital ratio 15.3% 14.1% • Increased CET1 capital driven by higher profits and benefit To
Slide 13: Banking
Banking Modest income growth offset by investment and impairment charges % £ million H1 2021 H1 2020 change • Modest increase in income reflecting Operating income 309.0 306.4 1 high new business volumes and loan book growth Adjusted operating expenses (161.0) (154.3) 4 • Strong net interest margin
Slide 14: Banking: loan book growth
Banking Loan book growth remains an output of our business model Loan book movement by segment (£ million)1 Diverse and specialist loan book Retail +0.3% • Strong growth in Asset Finance, driven by demand Commercial Property for loans under CBILS +15.1% (7.7%) • Increase in Invoice Finance reflects
Slide 15: Banking: strong net interest margin
Banking Strong net interest margin reflects our pricing discipline Monthly underlying NIM trend2 Specialist, relationship driven model supports a strong NIM Monthly NIM broadly stable Monthly NIM stabilises at c.7.5% 8.2% pre Covid-19 • Consistently strong NIM compared to sector post initial Covid-1
Slide 16: Banking: disciplined control of costs
Banking Disciplined control of costs while investing in the business Movement in costs1 (£ million) Business as Usual (BAU) costs2 • Disciplined control of BAU costs to create investment capacity +4% • H1 21 BAU costs broadly in line with H1 20 at £129.2 million despite the increase in variable comp
Slide 17: Banking: appropriate level of provision
Banking Appropriate level of provision reflecting highly uncertain external environment Expert judgement applied IFRS 9 Staging allocation • Application of our models overlaid with expert judgement to determine: At 31 January 2021 – Appropriate allocation between stages Stage 1 Stage 2 Stage 3 Total
Slide 18: Banking: continued support of customers
Banking Continued support of our customers and clients through this challenging period Forborne book performance remains encouraging Commercial Retail Property • Covid-19 forbearance represents • Covid-19 forbearance represents 6% • Covid-19 forbearance represents 13% of 20% of the Commercial loan b
Slide 19: Asset Management
Asset Management Continued growth in a challenging operating environment % £ million H1 2021 H1 2020 change • Increased income driven by higher Operating income 67.1 65.7 2 investment management income from Investment management 49.3 46.2 7 strong growth in managed assets Advice and other services 1
Slide 20: Winterflood
Winterflood Very strong trading performance and substantial increase in operating profit % £ million H1 2021 H1 2020 change • Higher income reflecting very strong Operating income 98.0 47.9 105 trading performance and heightened market activity since the Covid-19 outbreak Operating expenses (63.9) (
Slide 21: 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 21
Slide 22: 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 23: Our strategy
Our strategy Strategic priorities PROTECT GROW S U S TA I N Keeping it safe Delivering disciplined growth Doing it responsibly Maintaining and Maximising opportunities Securing the enhancing the in existing and new long-term future of key strengths markets; loan book growth our business, of our busi
Slide 24: Protect: keeping it safe
Protect: keeping it safe Maintaining and enhancing the key strengths of our business model PROTECT A proven and resilient business model that continues to deliver Prudence • Maintaining a strong funding, liquidity and capital position • Predominantly secured loan book and strong credit quality Consi
Slide 25: Grow: delivering disciplined growth
Grow: delivering disciplined growth Maximising the opportunities available and taking the business model forward GROW Taking the business model forward Leaning into the current … while assessing incremental environment growth opportunities in existing and new markets … to maximise the opportunities
Slide 26: Banking: our long history of lending
Banking Our long history of lending GROW Moderation Covid-19 2017 – 2019 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 2000 – 2003 +4% p.a Financial crisis 2.0 +22% p.a Dot com 1.0 bubbl
Slide 27: Sustain: doing it responsibly
Sustain: doing it responsibly Securing the long-term future of our business, customers and the world we operate in S U S TAI N Evolving our business to sustain it for the long term Our customers • Recognising and responding to changes in customer behaviour • Improving digital capabilities and custom
Slide 28: Banking update – Commercial
Banking update – Commercial Maximising current opportunities Asset Finance Approvals under the CBILS, CLBILS and BBLS1,2 Capitalising on strong demand under CBILS (As at 31 January 2021) Volume Value (£ milion) Credit drawdown 3,418 730 • Growth in Asset Finance reflects strong new business volumes
Slide 29: Banking update – Retail
Banking update – Retail Leaning into current opportunities Motor Finance New business volumes Maximising opportunities in the second hand (as a % of monthly YTD average to March 2020) car market Motor Finance • Strong new business volumes reflecting pent up demand and an increasing use of finance in
Slide 30: Banking update – Property
Banking update – Property Leaning into current opportunities Property Undrawn pipeline (£ million) Well positioned to capture strong residential construction demand • Lower drawdowns and higher repayments driven by delays in development completions due to Covid-19 and strong unit sales 1,005 • Refle
Slide 31: Asset Management
Asset Management Continued demand, with long term growth opportunity Annualised net inflow rates (%) • Solid demand for integrated wealth and investment management services, maintaining excellent 12% client service in a challenging operating environment 9% 9% 9% • Vertically integrated, multi-channe
Slide 32: Winterflood
Winterflood Very strong trading performance benefiting from heightened market activity • Substantial increase in operating profit demonstrates Operating profit (£ million) ability of the business to lean into significant market activity H1 H2 Average daily bargains (thousands) • No loss days in the
Slide 33: Summary and outlook
Summary and outlook Well positioned to continue supporting our colleagues, customers and clients over the long term Strong performance in the first half of 2021 with income growth across all divisions, pre provision profit up 12% and strong ROE of 13.2% Remain focused on maintaining the discipline o
Slide 34: 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 34
Slide 35: Appendix
Appendix 2) Close Brothers Modern Merchant Banking
Slide 36: Investing to take the business model forward
Investing to take the business model forward Strategic investment programmes to protect, grow and sustain our business Strategic investment programmes PROTECT GROW SUSTAIN Protect Motor Finance transformation Multi-year investment programme to improve the service proposition, enhance operational eff
Slide 37: 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.20% c.20% of our people c.4% c.5% Over 90% of book is secured or has c.6% c.23% some form of
Slide 38: Our responsibility
Our responsibility Acting sustainably is fundamental to our purpose, strategy and culture We recognise that to help the people and businesses of Britain thrive over the long Maintaining momentum term, we also have a responsibility to help address the social, economic and environmental challenges fac
Slide 39: UK government support for businesses during Covid-19
UK government support for businesses during Covid-19 Overview of current UK government business lending schemes (ending 31 March 2021) Government scheme1 Key features Close Brothers offering • Helps small and medium-sized businesses access loans and other kinds of • Asset finance, invoice finance an
Slide 40: LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES
Close Brothers Group plc 10 Crown Place London EC2A 4FT LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com