Close Brothers Group plc · LSE:CBG
Close Brothers — FY2017 Earnings Presentation
33 slides from Close Brothers's earnings presentation, Sep 26, 2017
Slide 1: Preliminary Results Year to 31 July 2017
Preliminary Results Year to 31 July 2017 26 September 2017
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
Introduction Good performance in the 2017 financial year Good financial performance • 13% increase in AOP to £265 million • 5% dividend growth to 60p All businesses performing well • Maintained strong margins and underwriting discipline in Banking • Strong year for Winterflood with high retail tradi
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: Financial highlights
Financial highlights Continued profit and dividend growth • AOP up 13% to £265 million, with higher profit in all three divisions • AEPS growth of 3% to 131.7p notwithstanding the bank corporation tax surcharge • RoE remains strong at 17.9% • Dividend growth of 5% to 60p, in line with progressive di
Slide 7: Segmental performance
Segmental performance All segments performed well given market conditions % £ million 2017 2016 change 9% growth in Banking profit reflects 243.5 223.0 9% Banking income growth and low impairments Retail Finance 78.9 79.1 (0%) Commercial Finance 72.6 69.6 4% Strong growth in Property Finance Propert
Slide 8: Income statement
Income statement Higher income and continued investment % £ million 2017 2016 change Higher lending income and improved trading at Winterflood Operating income 765.6 687.4 11% Adjusted operating expenses (460.6) (415.9) 11% Cost increase due to planned investment in Banking and higher Impairment los
Slide 9: Simple and transparent balance sheet
Simple and transparent balance sheet Diverse funding and prudent liquidity Prudent funding maturity 10.0 £ billion High quality loan book is diverse, 9.0 8.8 predominantly secured and short term with 7.9 1.2 average maturity of 14 months 8.0 7.0 – £1.0 billion of treasury assets 2.8 6.0 3.5 predomin
Slide 10: Capital
Capital Prudent capital position supported by strong profitability Capital overview Strong profitability supports growing CET1 31 July 2016 31 July 2017 capital base CET1 capital (£m) 901 991 Significant increase in RWAs of 18% to £7.9bn RWAs (£m) 6,683 7,859 – Increase in risk weighting of Property
Slide 11: Banking
Banking Profit growth and strong returns % £ million 2017 2016 change Higher income in all three segments, Operating income 555.3 511.2 9% reflecting loan book growth Adjusted operating expenses (271.6) (250.3) 9% Expenses increased 9% to £272 million, (40.2) (37.9) 6% reflecting cost control whilst
Slide 12: Banking
Banking Diverse loan book provides resilience through the cycle Loan book size by segment £ million 8,000 7% loan book growth maintaining disciplined approach to lending 6,885 +7% 7,000 6,432 Continued good demand for specialist 6,000 1,629 +12% residential development finance and regional 1,457 gro
Slide 13: Banking
Banking Good performance across all lending segments Retail Commercial Property Finance Finance Finance 8.6% 8.2% Strong net interest margin ranging Net 8.5% 8.0% 7.7% from 7.7% - 8.5% despite competition interest 7.6% margin in Retail and Commercial Finance 2016 2017 2016 2017 2016 2017 Bad debt ra
Slide 14: Securities
Securities Strong performance in favourable market conditions % £ million 2017 2016 change Higher trading income benefiting from increased retail investor activity Operating income 106.7 82.31 30% Expenses up 24% to £79 million Operating expenses (78.6) (63.3) 24% reflecting higher variable costs an
Slide 15: Asset Management
Asset Management Good progress in the year % £ million 2017 2016 change Operating income 102.9 92.3 11% Higher income reflecting increasing client assets Investment management 63.7 57.4 11% Advice and other services 37.1 32.1 16% Other income 2.1 2.8 (25%) Growth in expenses driven by Adjusted opera
Slide 16: 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 16
Slide 17: Overview
Overview Established business model for the long-term 1 2 Build leading Generate strong positions in and sustainable specialist markets returns Expertise Our people are experts in their fields Relationships Service Building long-term Allowing us to provide relationships with clients excellent servic
Slide 18: Our strategy
Our strategy Maximising the potential of our business model EXTEND • New initiatives • Growth in existing markets IMPROVE • Operating efficiency • People • Technology • Customer experience PROTECT • Prudent underwriting and • Conservative funding, strong margins capital and liquidity 18
Slide 19: Banking
Banking Long history of profitable growth through the cycle £ billion £ million 7.0 240 Banking key metrics 10 year average FY 2017 Benign credit RoE 22% 23% 2013 - 2017 220 6.0 +7% - 14% RoNLB 3.4% 3.6% 200 Bad debt ratio 1.4% 0.6% 5.0 180 Net interest margin 8.9% 8.1% 160 Loan book growth 13% 7% C
Slide 20: Retail Finance
Retail Finance Intermediated lending through motor dealers and insurance brokers Specialist products Service, Expertise, Strategic and services Relationships developments • Point of sale finance for • Service led proposition • Maintain margins and credit second hand cars, targeting independent motor
Slide 21: Commercial Finance
Commercial Finance Specialist, secured lending to the SME market Specialist products Service, Expertise, Strategic and services Relationships developments • Asset finance, hire • Local distribution with over • Maintain margins and purchase and leasing 200 direct sales personnel credit quality in cor
Slide 22: Property Finance
Property Finance Specialist property development finance Specialist products Service, Expertise, Strategic and services Relationships developments • Short term residential • Lending to experienced, • Strong profitability with development finance to well established low impairments professional prope
Slide 23: Winterflood
Winterflood Strong performance in favourable market conditions Operating profit (£ million) • Largest UK market maker for retail brokers 30 80 dealing in c.15,000 securities AOP Retail volumes 1 77 70 • Strong performance driven by higher retail 28 investor trading activity 27 57 20 60 – 48% increas
Slide 24: Asset Management
Asset Management Strong inflows and growth in profit Managed assets and net flows (£ billion) • Further progress supported by favourable 10 12% market environment 10% 9% 9% – £8.9 billion managed assets and £11.2 9 8% 6% billion total client assets 8 4% 7 8.9 • Driving growth both organically and th
Slide 25: Conclusion
Conclusion Well positioned longer term • Good performance in 2017 financial year – Uncertain economic outlook longer term • Strongly committed to our established business model – Protecting margins and underwriting discipline in Banking – Maximising daily profitability in Winterflood – Disciplined g
Slide 26: Save the date
Save the date Banking division investor seminar We will be holding an investor seminar on the Banking division Time: Wednesday 22nd November 2017 9am – 12pm Location: Close Brothers Group 10 Crown Place London EC2A 4FT 26
Slide 27: 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 27
Slide 28: Preliminary Results FY 2017 Appendix
Preliminary Results FY 2017 Appendix 26 September 2017
Slide 29: Banking Division Overview
Overview Five specialist segments Group Segments Group Segments Niche Markets Specialist Products Retail Finance £78.9m • Intermediated finance Banking Division AOP through motor dealers and insurance brokers Commercial £72.6m Specialist • Secured lending to SME Finance AOP Lending market Property F
Slide 30: New growth initiatives
New growth initiatives Long history of developing new products and entering adjacent markets 2017 2016 Loan book (£ billion) Financing Technology 2015 legal fees 7.0 leasing Consumer 2011 finance 2008 Mid-ticket leasing Larger ticket 6.0 invoice 2014 Bridging / property Renewable refurbishment energ
Slide 31: IFRS 9
IFRS 9 Well positioned for implementation in FY 2019 • IFRS9 applies to Close Brothers for the financial year ended 31 July 2019 • Fundamental change in accounting for credit losses from “incurred” to “expected” basis – Use of models to estimate expected credit losses based on composition of loan bo
Slide 32: Banking
Banking Loan book and lending statistics by business Loan book FY17 loan Average loan Typical loan Number of at 31 July book Typical LTV1 size2 maturity3 customers 2017 (£m) growth Motor finance 1,762 3.3% 75 – 85% £6.5k 2 – 4 years 270k Premium finance 941 16.7% 91% £600 10 months 2.2m Asset financ
Slide 33: LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES
Close Brothers Group plc 10 Crown Place London EC2A 4FT 020 7655 3100 enquiries@closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com