Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2010 Earnings Presentation
39 slides from Close Brothers's earnings presentation, Mar 16, 2010
Slide 1: Close Brothers Group Interim results 2010
Close Brothers Group Interim results 2010 16 March 2010
Slide 2: Cautionary statement
Cautionary statement Regarding information in this presentation 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, for
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 Page 3
Slide 4: Introduction: First half highlights
Introduction First half highlights • Good first half performance – adjusted operating profit £62.5 million (2009: £64.9 million) • Strong result in Banking benefiting from current favourable conditions and consistent approach to lending • Continued good performance from Securities, particularly Wint
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 Page 5
Slide 6: Financial highlights: Summary income statement
Financial highlights Summary income statement, continuing operations(1) First half 2010 First half 2009 Full year 2009 £ million to 31 January to 31 January % change to 31 July Adjusted operating income(2) 261.8 249.1 5% 502.1 Adjusted operating expenses(3) (168.7) (160.8) 5% (328.5) Impairment loss
Slide 7: Financial highlights: Summary income statement (continued)
Financial highlights Summary income statement, continuing operations (continued) First half 2010 First half 2009 Full year 2009 £ million to 31 January to 31 January % change to 31 July Adjusted operating profit 62.5 64.9 (4)% 113.7 (1) Exceptional items and other adjustments (0.2) (23.4) (99)% (25.
Slide 8: Financial highlights: Performance by division
Financial highlights Performance by division Adjusted operating profit (continuing operations) • Strong performance in Banking – Successfully taken advantage of favourable First half First half Full year business conditions £ million 2010 2009 % change 2009 – Continuing good demand for specialist Ad
Slide 9: Financial highlights: Summary balance sheet
Financial highlights Summary balance sheet 31 January 31 July £ million 2010 2009 Change Assets Cash and loans and advances to banks 445.8 198.2 247.6 (1) Settlement balances, long trading positions and loans to money brokers 782.0 728.9 53.1 Loans and advances to customers 2,577.7 2,364.9 212.8 Non
Slide 10: Funding and liquidity
Funding and liquidity Maintained strong and diversified funding position Funding position at 31 January 2010 • Total funding of £5.4 billion, no significant change 6,000 from prior year end 5,423 – 18 month average facility maturity exceeds 11 month average loan book maturity 5,000 – Facilities main
Slide 11: Capital
Capital Strong capital position maintained 31 January 31 July • RWAs increased £143 million (4%) as a result of £ million 2010 2009 loan book growth Core tier 1 capital 590.7 581.9 • Overall core tier 1 capital ratio broadly stable at 14.5% Total regulatory capital 661.5 651.6 • Strong capital posit
Slide 12: Banking: Key figures
Banking Key figures First half 2010 First half 2009 Full year 2009 £ million to 31 January to 31 January % change to 31 July Adjusted operating income 128.3 115.4 11% 235.5 Adjusted operating expenses (61.2) (60.0) 2% (121.6) Impairment losses on loans and advances (30.6) (23.4) 31% (59.9) Adjusted
Slide 13: Banking: Income analysis
Banking Income analysis Adjusted operating income by type Key metrics 140 128.3 +11% First half First half % Full year 2010 2009 change 2009 8.9 -32% 120 115.4 Average loan 2,471 2,270 9% 2,299 book (£ million) 13.1 Net interest 9.7% 9.0% 9.4% 100 margin(1) 80 • Growth in net interest and fees on lo
Slide 14: Banking: Loan book analysis
Banking Loan book analysis Loan book size by business unit • £213 million or 9% growth in loans and advances 3,000 to customers to £2.6 billion (31 July 2009: £2.4 2,578 +9% billion) 2,500 2,365 – 5% organic growth 498 +2% –4% due to acquisition of £94 million invoice 487 financing loan book in Janu
Slide 15: Banking: Bad debt analysis
Banking Bad debt analysis Margin and bad debt analysis • H1 2010 bad debt ratio increased to 2.5% (H1 10.0% 9.7% 9.7% 2009: 2.1%) 9.0% 9.0% • Bad debt ratio reduced from H2 2009 level of 8.0% 3.1% reflecting stable economic environment – principally driven by shorter-term Retail 7.0% businesses 6.0%
Slide 16: Asset Management: Key figures
Asset Management Key figures First half 2010 First half 2009 Full year 2009 £ million to 31 January to 31 January % change to 31 July Adjusted operating income 43.5 49.9 (13)% 95.0 Adjusted operating expenses (40.8) (43.3) (6)% (83.0) Adjusted operating profit 2.7 6.6 (59)% 12.0 Closing FuM 7,289 6,
Slide 17: Asset Management: Income analysis
Asset Management Income analysis Adjusted operating income by type Key metrics First half First half Full year 55 2010 2009 Change 2009 49.9 Average FuM 7,064 7,533 (6)% 7,517 43.5 -13% (£ million) 45 2.1 Revenue 72bps 78bps (6bps) 72bps 20.7 margin(1) 35 15.9 -23% • 13% reduction in management fees
Slide 18: Asset Management: Resilient net new funds in Private Client business
Asset Management Resilient net new funds in Private Client business Movement in Funds under Management £ million Private Clients Funds Total 1 August 2009 3,349 3,490 6,839 New funds raised 264 246 510 Redemptions, realisations and withdrawals (173) (347) (520) Net new funds 91 (101) (10) Market mov
Slide 19: Securities: Key figures
Securities Key figures First half 2010 First half 2009 Full year 2009 £ million to 31 January to 31 January % change to 31 July Adjusted operating income 89.6 80.8 11% 167.8 Adjusted operating expenses (55.6) (47.6) 17% (102.9) Adjusted operating profit 34.0 33.2 2% 64.9 of which: Winterflood 27.6 1
Slide 20: Securities: Income analysis
Securities Income analysis Adjusted operating income by business Key metrics First half First half % Full year 100 2010 2009 change 2009 89.6 +11% Winterflood 45k 38k 20% 42k 3.4 -73% bargains per day 80.8 80 13.2 +1% Winterflood £12.80 £11.46 12% £11.98 12.7 income per bargain 13.1 • Winterflood st
Slide 21: Outlook: 2010 financial year
Outlook 2010 financial year • Strong and well positioned businesses which are well placed for future growth opportunities – In Banking, expect continued solid performance however bad debts sensitive to economic environment – In Asset Management, current overall level of performance likely to continu
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 Page 22
Slide 23: Business update: Strategic priorities
Business update Strategic priorities • Focus activities around three divisions - Banking, Asset Management and Securities • Build on strong, established franchises in each division – Invest in core competencies of specialised lending, market-making and private client wealth management – Identify org
Slide 24: Business update: Banking
Business update Banking Strong and distinctive business model focused on specialist, secured, short term lending Retail Commercial Property Premium finance Asset finance Property finance including Motor finance Invoice finance Commercial Acceptances Channel Islands • Intermediated lending to over •
Slide 25: Business update: Banking opportunities
Business update Banking Favourable current environment Growth opportunities • Continued demand for division’s specialist lending • Leverage established platform • Some businesses increasing market share • Extension of product lines into adjacent areas • Remain committed to lending through challengin
Slide 26: Business update: Asset Management
Business update Asset Management • Division repositioning many of its businesses with Strategic development model clear plan for growth – Ongoing process of strategy development and Private Client investment in Private Clients, Funds and Funds/ Banking and Administration Direct IFA Institutional • P
Slide 27: Business update: Securities
Business update Securities Securities division has interesting businesses with similar characteristics • Strong leadership and experienced people • Technology is a source of strength and competitive advantage • Risk management remains the key focus • Succeeded in challenging financial markets • Comm
Slide 28: Business update: Securities
Business update Securities • Winterflood – Capture additional US order flow in UK equities • 3rd party developed US retail platform for global equities with WINS chosen as small/mid-cap partner • Entered into arrangement with US broker-dealer • Niche outsourcing execution opportunities – Expand inst
Slide 29: Conclusion
Conclusion • Robust, well positioned businesses with clear strategy • In Banking – taking advantage of current favourable environment to pursue growth and upgrade quality of business • In Securities – expand Winterflood’s access to client flows and focus on core competencies of businesses • Asset Ma
Slide 30: 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 Page 30
Slide 31: Close Brothers Group Interim results 2010
Close Brothers Group Interim results 2010 16 March 2010
Slide 32: Appendix
Appendix Page 33 Segmental analysis 36 Banking loan book split 37 Banking lending statistics 38 Funding maturity profile 39 Re-presentation of financial statements Page 32
Slide 33: Segmental analysis: Summary income statement
Segmental analysis Summary income statement Asset Continuing Discontinued £ million Banking Management Securities Group operations operations Total First half 2010 to 31 January Adjusted operating income 128.3 43.5 89.6 0.4 261.8 - 261.8 Adjusted operating expenses (61.2) (40.8) (55.6) (11.1) (168.7
Slide 34: Segmental analysis: Summary balance sheet at January 2010
Segmental analysis Summary balance sheet at 31 January 2010 Asset £ million Banking Management Securities Group Total Cash and loans and advances to banks 230.0 197.5 17.6 0.7 445.8 (1) Settlement balances, long trading positions and loans to money brokers - - 782.0 - 782.0 Loans and advances to cus
Slide 35: Segmental analysis: Summary balance sheet at July 2009
Segmental analysis Summary balance sheet at 31 July 2009 Asset £ million Banking Management Securities Group Total Cash and loans and advances to banks 27.9 145.3 24.3 0.7 198.2 (1) Settlement balances, long trading positions and loans to money brokers - - 728.9 - 728.9 Loans and advances to custome
Slide 36: Banking: Loan book split
Banking Loan book split 31 January 31 July £ million 2010 2009 Change % Premium finance 487 456 7% Motor finance 469 444 6% Close Finance Channel Islands 88 96 (9)% Retail 1,044 996 5% Invoice finance 254 170 49%(1) Asset finance 782 712 10% Commercial 1,036 882 17% Property 498 487 2% Total loans a
Slide 37: Banking: Typical lending statistics by business
Banking Typical lending statistics by business Typical LTV % at issue Average loan size(1) Typical loan maturity Asset Finance 70-80% £19.3k 2-3 yrs Premium Finance 90% £0.6k 10 mths Property Finance 50-60% £811.3k 12-18 mths Motor Finance 75% £4.2k 2-3 yrs Invoice Finance 80% £217.2k 2-3 mths Notes
Slide 38: Funding maturity profile
Funding maturity profile No significant maturities in the period £ million Total <3 months 3-12 months 1-2 years 2-5 years >5 years Loans and overdrafts from banks(1) 1,175 38 1,012 50 75 - Promissory notes 22 - - - - 22 Subordinated loan capital 75 - - - - 75 Drawn facilities 1,272 38 1,012 50 75 9
Slide 39: Re-presentation of H1 2009 financial statements
Re-presentation of H1 2009 financial statements • On the face of the balance sheet, some line items have been combined to simplify presentation with full breakdown provided in the notes • In the income statement, certain fee and interest income and expense lines have also been re-presented. This doe