Close Brothers Group Plc · LSE:CBG
Close Brothers — FY2019 Earnings Presentation
31 slides from Close Brothers's earnings presentation, Sep 24, 2019
Slide 1: Preliminary Results Year to 31 July 2019
Preliminary Results Year to 31 July 2019 24 September 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: Key Messages
Key Messages Solid FY 2019 results in challenging markets Solid financial performance with strong returns and profitability • Group AOP of £270.5 million, down 3% • Strong RoE at 15.7% and CET1 ratio of 13.0% • 5% dividend growth to 66.0p Specialism and diversity continue to protect our business • C
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: Financial Highlights
Financial Highlights Solid operating performance supporting strong returns Adjusted EPS1 136.7p • Adjusted EPS reduced 2% reflecting lower profit in the period Return on opening equity 15.7% • Generated strong return on opening equity CET1 capital ratio 13.0% • Strong CET1 capital ratio Leverage rat
Slide 7: Segmental performance
Segmental performance Diverse businesses drive overall solid performance £ million 2019 2018 change 253.7 251.8 1% • Strong loan book growth and NIM across Banking Asset Finance and Invoice and Speciality Finance and continued low bad debt Commercial 86.5 76.1 14% • Loan book growth offset by ongoin
Slide 8: Income statement
Income statement Higher income and continued investment Continuing operations1 £ million 2019 2018 change Adjusted operating income 816.4 805.8 1% • Income growth driven by Banking, partly offset by lower trading income in Winterflood Adjusted operating expenses (497.4) (480.5) 4% • Higher investmen
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 20 months £9.9 billion 14% Unsecured funding 35% 15% Loan book • Average maturity of the loan £9.9 bn Term funding scheme book at
Slide 10: Capital
Capital Maintain significant headroom to capital requirements Capital overview1 1 August 2018 31 July 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 ra
Slide 11: Banking
Banking Profit growth alongside ongoing investment Continuing operations1 £ million 2019 2018 change Adjusted operating income 602.6 581.0 4% • Good loan book growth at strong margins across the businesses Adjusted operating expenses (300.5) (282.5) 6% • Higher costs reflect increase in investment,
Slide 12: Banking
Banking Good loan book growth while maintaining pricing and underwriting discipline Loan book growth by segment (£ million)1 5.7% loan book growth while prioritising 31 July margins and credit quality FY19 7,650 2019 • Strong growth in Commercial, with 6% growth Asset 7531.4 118 in Asset Finance and
Slide 13: Commercial
Banking Performance reflects diversity of business portfolio Net interest Bad Expense / % of loan margin1 debt1 income book • Commercial NIM increased to 8.1% due to Commercial 39% growth in higher margin products 8.1% 0.8% 56% • Marginal increase in bad debt ratio but 2018 7.9% 2018 0.6% 2018 59% r
Slide 14: Asset Management
Asset Management Strong net inflows in challenging markets £ million 2019 2018 change Operating income 120.4 115.5 4% • Increased income driven by higher Investment management 81.7 75.2 9% investment management income from continued growth in managed assets Advice and other services 37.2 39.6 (6%) O
Slide 15: Securities
Securities Continued solid trading profitability in difficult market conditions £ million 2019 2018 change Operating income 93.4 109.1 (14%) • Reduced income reflecting subdued trading volumes Operating expenses (73.4) (81.0) (9%) Operating profit 20.0 28.1 (29%) • Operating expenses decreased refle
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: Delivering on our purpose
Delivering on our purpose Continuing to add value for all our stakeholders Modern Merchant Banking 17
Slide 18: Our approach
Our approach Consistent strategy focused on the long term Loan book growth 1 Specialism and diversity support resilient performance 13% 14% 12% 8% 7% 7% 6% • Specialist, expert knowledge with focus on strong relationships • Stable margins and consistent loan book growth FY 13 FY 14 FY 15 FY 16 FY 17
Slide 19: Specialism and diversity support resilience and growth
Specialism and diversity support resilience and growth Three divisions, three specialist lending segments, multiple business lines Industrial Specialist Asset Asset Finance Transport Commercial Equipment Finance ASSET Manufacturing Core Leasing Wheeled MANAGEMENT Loan book: £1.9bn Commercial Assets
Slide 20: Banking: resilience and growth
Banking: resilience and growth Long history of lending through the cycle Moderation 2017 – 2019 6% - 7% Banking key metrics FY 2019 Benign credit 7.0 2013 – 2016 RoE 17.5% 8% - 14% RoNLB 3.3% 6.0 Bad debt ratio 0.6% Net interest margin 7.9% Loan book (£ billion) 5.0 Expense / income ratio 50% Credit
Slide 21: Banking: strong and stable NIM
Banking: strong and stable NIM Diversity and stability over the long term Novitas Brewery Rentals Commercial 8.1% Transport NIM Core Invoice Finance Loan book (£ billion) and NIM (%) Green Energy 9,000 8.8% 8.6% 8.6% Vehicle Hire 8.2% 8.1% 8.0% 7.9% 9.0% 8,000 7.0% 7,000 6,000 5.0% 5,000 3.0% Person
Slide 22: Banking: credit resilience
Banking: credit resilience Core product security and lending overview by business Average Typical Core products and security1 loan loan A proven and resilient lending model size2 maturity3 Long track record of • Hire purchase, finance and disciplined and consistent operating leases 3–5 Asset Finance
Slide 23: Banking: investing for the future
Banking: investing for the future Premium Transformation project £30m+ Investment Programme Substantial Benefits Delivered • Investment initiated in 2016 financial year • 34% increase in loan book since 2016 financial year, now over £1 billion • New resilient and scalable customer contact centre • 2
Slide 24: Banking: investing for the future
Banking: investing for the future Strategic investment initiatives Strategic initiative Tangible benefits / outcomes • Increased funding flexibility New Deposit • Lower cost of funding Platform • Access to greater distribution, including fast growing online channel • Launching additional retail savi
Slide 25: Asset Management
Asset Management Significant long-term growth potential • Continued strong net inflows at 9% Total managed assets (£bn) and net inflow rates ‒ Good business levels from all channels and recent 14 14% hires 12% 12 12% ‒ Positive market movements in the second half 11.7 10% 10 9% 10% 9% 10.4 • Ongoing
Slide 26: Winterflood
Winterflood Established leader in market making Operating profit • AOP at £20.0 million reflects significant reduction in 30 H1 H2 Bargains per day 80 investor activity and trading volumes 65 68 70 25 60 56 56 60 • Bargains (thousands) Good progress on expanding relationships with 52 14 13 Operating
Slide 27: Outlook
Outlook Well positioned to support customers and clients Maintaining the discipline of our business model • Banking is committed to maintaining our model discipline, supporting customers throughout the economic cycle • Asset Management is focused on continued growth in client assets, through new bus
Slide 28: 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 28
Slide 29: Appendix: Basis of presentation
Appendix Basis of presentation Results are presented both on a statutory and an adjusted basis to aid comparability between periods. Adjusted measures are presented on a basis consistent with prior periods and exclude amortisation of intangible assets on acquisition, to present the performance of th
Slide 30: Appendix: year average loan book growth
Appendix 10 year average loan book growth Modern Merchant Banking 30
Slide 31: Close Brothers Group plc
Close Brothers Group plc 10 Crown Place London EC2A 4FT LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com