Close Brothers Group Plc · LSE:CBG
Close Brothers — H1 2018 Earnings Presentation
30 slides from Close Brothers's earnings presentation, Mar 13, 2018
Slide 1: Half Year Results 2018
Half Year Results 2018 13 March 2018
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 across all business segments Good profit growth in the first half • 6% increase in AOP to £142 million • Strong RoE of 17% • 5% interim dividend growth to 21p Continued good performance in all three divisions • Profit growth in Banking with stable net interest margin an
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 Good profit growth in the first half • Good performance across all businesses with AOP +6% to £142.3 million • Earnings growth and strong returns, with AEPS +7% to 71.2p and ROE of 17.3% • Capital position remains strong, with CET1 ratio at 12.7% and leverage ratio at 10.7% • Pr
Slide 7: Segmental performance
Segmental performance Good performance across all business segments % £ million H1 2018 H1 2017 change Good profit growth in Banking with 128.5 122.7 5% Banking stable net interest margin and low impairments Retail 42.8 39.9 7% Flat profit in Property reflects provision Commercial 39.7 36.5 9% relea
Slide 8: Income statement
Income statement Higher income and continued investment % £ million H1 2018 H1 2017 change Growth in operating income, with higher income in all three divisions Operating income 405.5 378.3 7% Adjusted operating expenses (239.4) (226.8) 6% Impairments remain low and stable excluding provision releas
Slide 9: Simple and transparent balance sheet
Simple and transparent balance sheet Diverse funding and prudent liquidity Prudent funding maturity 10.0 £ billion 8.9 9.0 Prudent funding and liquidity 8.1 8.0 1.3 – Funding at 128% of loan book 7.0 2.8 6.0 3.4 – Average maturity of loan book funding 5.0 Average Average at 21 months maturity maturi
Slide 10: Capital
Capital Strong capital position Capital overview 31 July 2017 31 January 2018 Continued growth in CET1 capital base CET1 capital (£m) 991 1,032 3% growth in RWAs reflects loan book growth and mix RWAs (£m) 7,859 8,120 at period end CET1 capital ratio 12.6% 12.7% Total capital ratio 15.2% 15.2% CET1
Slide 11: Banking
Banking Profit growth and strong returns % £ million H1 2018 H1 2017 change Income growth reflects stable net Operating income 293.9 274.0 7% interest margin Adjusted operating expenses (141.6) (134.0) 6% Expenses increased to £142 million, reflecting higher staff cost and continued Impairment losse
Slide 12: Banking
Banking Loan book growth reflects diverse portfolio Loan book growth by segment (£ million) 1.7% loan book growth maintaining H1 18 6,998 disciplined approach to lending Property 6933.6 65 +4.0% Good growth in Property continued, with solid pipeline Invoice 6922.5 11 Commercial loan book increased,
Slide 13: Banking
Banking Stable and consistent performance across segments Bank H1 18 Retail Commercial Property 8.2% Strong and stable net interest 8.2% margin ranging from 7.8% - 8.8% 8.0% 7.7% Net 8.7% 8.8% 8.0% 8.0% 7.6% 7.8% 7.8% in H1 18 interest margin H1 17 H1 18 H1 17 H1 18 H1 17 H1 18 Overall credit perfor
Slide 14: Securities
Securities Continued strong trading performance % £ million H1 2018 H1 2017 change Higher trading income, particularly in Operating income 55.6 53.9 3% FTSE 350 and AIM Operating expenses (40.9) (39.5) 4% Expenses up to £41 million reflecting Operating profit 14.7 14.4 2% variable cost model Operati
Slide 15: Asset Management
Asset Management Profit growth supported by strong net inflows % £ million H1 2018 H1 2017 change 56.0 50.1 12% Higher advice and investment Operating income management income reflecting growth in Investment management 35.8 30.8 16% client assets Advice and other services 20.0 17.4 15% Other income
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 Consistently managing the business for the long-term Good H1 performance Managing for the long-term • Continued benign credit • Continue to focus on our customers and environment and supportive clients financial markets • Investment in people, infrastructure and • Loan book growth of 1.7% n
Slide 18: Banking track record
Banking track record Long history of profitable growth through the cycle £ billion £ million Moderation 2017 – H1 18 7%1 10 year Benign credit Banking key metrics H1 2018 average 240 7.0 2013 – 2016 RoE 20% 22% 8% - 14% 220 RoNLB 3.6% 3.4% 6.0 200 Bad debt ratio 0.7% 1.4% 180 Net interest margin 8.2
Slide 19: Retail
Retail Intermediated lending through Motor and Premium Finance Current dynamics Long-term focus • Growth in Premium Finance • Continuing multi-year reflecting new broker wins and investment in Premium Finance recent investment • Maintain price and underwriting • Small contraction in UK motor discipl
Slide 20: Commercial
Commercial Specialist, secured lending to SMEs through Asset and Invoice Finance Current dynamics Long-term focus • Modest growth in Asset Finance • Maximising opportunities in despite ongoing competition existing business areas • Invoice Finance seeing good • Novitas now fully integrated and growth
Slide 21: Property
Property Specialist residential development finance Current dynamics Long-term focus • Good loan book growth in • Solid pipeline of new business London, South East and the regions, reflecting continued • Strong structural demand for demand for residential property new build family homes development
Slide 22: Winterflood
Winterflood Maximising trading opportunities in favourable markets Operating profit (£ million) 30 • Another strong performance in H1 with 2% H2 growth in AOP to £14.7 million H1 – Consistently high trading activity across 14 20 FTSE 350 and AIM 13 15 12 • Maximising daily trading opportunities 10 1
Slide 23: Asset Management
Asset Management Strong performance in the period Adjusted operating profit (£ million) • Significant improvement in the period 21 supported by strong net inflows at 13% H2 18 H1 – All channels performing well 15 8.3 12 • £9.7 billion managed assets and £11.8 billion 12.7 6.0 total client assets 9 –
Slide 24: Conclusion
Conclusion Remain well positioned for the full year • Good performance in the first half, with contribution from all three divisions • Established business model continues to deliver • Long-term commitment to our clients, customers and proven business model • Well positioned to deliver a good result
Slide 25: 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 25
Slide 26: Interim Results H1 2018 Appendix
Interim Results H1 2018 Appendix 13 March 2018
Slide 27: IFRS 9
IFRS 9 Implementation in FY 2019 • IFRS9 applies to Close Brothers for the financial year ending 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 book and macroeconomi
Slide 28: New growth initiatives
New growth initiatives Long history of developing new products and entering adjacent markets Loan book (£ billion) 2017 2017 2016 2015 Asset Financing Technology Consumer Germany legal fees leasing 7.0 finance 2014 2008 2011 Renewable 6.0 Mid-ticket leasing Larger ticket energy Bridging / property i
Slide 29: Banking
Banking Loan book and lending statistics by business Loan book H1 18 loan Average loan Typical loan Number of at 31 January book Typical LTV1 size2 maturity3 customers 2018 (£m) growth Motor Finance 1,716 (2.6%) 75 – 85% £6.5k 2 – 4 years 264k Premium Finance 985 4.7% 90 – 95% £600 10 months 2.3m As
Slide 30: 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