Close Brothers Group plc · LSE:CBG
Close Brothers — H1 2017 Earnings Presentation
32 slides from Close Brothers's earnings presentation, Mar 14, 2017
Slide 1: Half Year Results 2017
Half Year Results 2017 14 March 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 Strong performance across all business segments • Strong first half performance, with profit up in all business segments • Good performance in Banking with strong margins and low bad debt – Profits increased in Retail, Commercial and Property Finance – Slower loan book growth as we main
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 Strong first half performance • Strong performance across all business segments with AOP +21% to £134.2 million • Continued growth in earnings and strong returns, with AEPS +9% to 66.6p and RoE of 18.0% • Good capital position with CET1 ratio at 12.6% and total capital ratio at
Slide 7: Financial highlights
Financial highlights Increased profitability across all segments • Strong profit growth in Banking, % £ million H1 2017 H1 2016 change across all three business segments – Retail Finance continued to grow Banking 122.7 108.4 13% with focus on disciplined lending – Growth in Commercial Finance Retail
Slide 8: Income statement
Income statement Earnings growth and ongoing investment % • Income +14% to £378 million £ million H1 2017 H1 2016 change – Increased income from lending businesses and Winterflood Operating income 378.3 331.6 14% Adjusted operating expenses (226.8) (203.7) 11% • 11% increase in expenses reflects con
Slide 9: Simple and transparent balance sheet
Simple and transparent balance sheet Continued good access to funding markets High quality asset base Diverse funding sources £ billion £ billion 10 9.1 10 8.7 1.3 8 8 1.3 1 Deposits 3 6 Other assets 6 4.9 2 Secured Treasury assets 4 4 Unsecured Loan book 6.5 1.4 Equity 2 2 1.3 1.1 0 0 31 January 20
Slide 10: Capital Overview
Capital Overview Good capital position supporting our growth CET1 ratio 31 January 31 July % £ million 2017 2016 change Regulatory Common equity tier 1 capital 938.8 901.4 4% Minimum 13.5% Total regulatory capital 1,142.7 925.4 23% 12.6% 7.0% 2 Risk weighted assets 7,456.0 6,682.5 12% 31 July 2016 3
Slide 11: Banking
Banking Strong first half result % • Income up 10% to £274.0 million £ million H1 2017 H1 2016 change – Growth across all lending areas Operating income 274.0 248.7 10% – NIM broadly stable at 8.2% Adjusted operating expenses (134.0) (123.6) 8% • £134.0 million expenses up 8% Impairment losses (17.3
Slide 12: Banking
Banking Maintaining disciplined approach Loan book size by segment • 1.7% loan book growth maintaining disciplined £ million approach to lending 7,000 6,432 6,544 +1.7% • Retail Finance increased 2.4% 6,000 – UK motor finance market remains 1,457 1,505 +3.3% competitive – Continued expansion into Ir
Slide 13: Banking
Banking Good performance across all lending segments NIM Bad Debt Ratio E/I Ratio • Key ratios strong and broadly consistent across lending segments Finance • Strong net interest margin ranging Retail 8.7% 8.7% 0.9% from 7.8% - 8.7% 0.7% 53% 53% – Marginal reduction in Commercial Finance due to comp
Slide 14: Securities
Securities Significant increase in trading activity • Significant improvement in trading % performance benefiting from £ million H1 2017 H1 2016 change increased trading by retail Operating income 53.9 35.21 53% investors Operating expenses (39.5) (28.4) 39% • £53.9 million income, up 53% Operating
Slide 15: Asset Management
Asset Management Good progress supported by favourable market environment % • Good progress in the period £ million H1 2017 H1 2016 change – Underlying AOP up 26% to £7.2 Operating income 50.1 47.0 7% million Investment management 30.8 28.2 9% • Managed assets stable at £7.9 billion Advice and other
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 our and sustainable specialist markets Expertise returns Our people are experts in their fields Relationships Service Building long-term Allowing us to provide relationships with clients excellent se
Slide 18: Banking Division
Overview Five specialist segments Group Segments Group Segments Niche Markets Specialist Products Retail Finance £39.9m • Intermediated finance through motor dealers and Banking Division 1 AOP insurance brokers Commercial Specialist • Secured lending to SME Finance £36.5m AOP Lending market Property
Slide 19: Performance overview
Performance overview Consistent strategy continues to deliver • All business segments benefited from Loan book 6.0 6.5 favourable conditions in the first half 4.4 4.9 5.5 (£bn) – Banking segments performed well despite ongoing competition H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 – Strong performance
Slide 20: Retail Finance
Retail Finance Loan book increase of 2.4% to £2.6 billion Continued Development Specialist Service • Continued competitive • Intermediated lending through motor environment in core motor and premium finance • Growth remains strong in Ireland Relationships Expertise Differentiated • New broker wins a
Slide 21: Commercial Finance
Commercial Finance Loan book remained stable at £2.5 billion with 9% profit growth Continued Development Specialist Service • Continued competition in • Lending through asset and invoice broker channel finance • Strong growth in specialist lending areas such as green Relationships Expertise energy D
Slide 22: Property Finance
Property Finance Strong performance with loan book growing 3.3% to £1.5 billion Continued Development Specialist Service • Specialist residential development finance • Strong profitability with low • No BTL, commercial or residential impairments mortgages Expertise • Continued growth opportunities R
Slide 23: Winterflood
Winterflood Significant improvement in trading Favourable market conditions Adjusted operating profit £ million • AOP up 112% to £14.4 million in first half 30 – Increase in retail investor risk appetite and better market sentiment 25 – Market retail volumes1 increased 63% YoY 20 13 15 • Benefit fro
Slide 24: Asset Management
Asset Management Continued improvement in performance Commitment to strategy is delivering Adjusted operating profit • Good progress in the period supported by £ million 20 favourable market environment 18 – Underlying profit up 26% to £7.2 million 16 14 – £7.9 billion managed assets and £10.2 12 12
Slide 25: Conclusion
Conclusion Well positioned longer term • Our service driven model and execution of strategy underpins long track record of profitability throughout the cycle – Delivering both an attractive proposition for our clients, and long-term value to our shareholders • Overall, we have achieved a strong perf
Slide 26: 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 26
Slide 27: Appendix
Half Year Results 2017 Appendix 14 March 2017
Slide 28: Appendix: Overview of IFRS 9
Appendix: Overview of IFRS 9 Well positioned for implementation in FY 2019 • IFRS 9 rewrites the accounting rules for impairment, classification and measurement of financial instruments and hedge accounting – Where impairment will have the widest implications for Close Brothers • Under current treat
Slide 29: Proven track record
Proven track record Long history of profitable growth through the cycle £ billion £ million 7.0 240 Banking key metrics 10 year average First half 2017 Benign credit 220 RoE 22% 23% 2013 – 2016 6.0 +8% - 14% RoNLB 3.4% 3.7% 200 Bad debt ratio 1.4% 0.5% 180 5.0 Net interest margin 9.0% 8.2% 160 Loan
Slide 30: New growth initiatives
New growth initiatives Long history of developing new products and entering adjacent markets 2014 2015 2016 Renewable Consumer Technology 7.0 energy finance leasing 2008 2011 2007 Mid-ticket leasing Larger 6.0 Bridging / property Brewery rentals ticket 2012 refurbishment invoice Ireland 2005 2009 5.
Slide 31: Banking: loan book and lending statistics by business
Banking Loan book and lending statistics by business Loan book H1 17 loan Average loan Typical loan Number of at 31 January book Typical LTV1 size2 maturity3 customers 2017 (£m) growth Motor finance 1,719.0 0.8% 75 – 85% £6k 2 – 4 years 270k Premium finance 851.8 5.7% 90% £500 10 months 2.1m Asset f
Slide 32: 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