Close Brothers Group plc · LSE:CBG
Close Brothers — FY2016 Earnings Presentation
30 slides from Close Brothers's earnings presentation, Sep 27, 2016
Slide 1: Preliminary Results FY 2016
Preliminary Results FY 2016 27 September 2016
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 a more challenging year • Good performance demonstrates strength of business model despite competition and financial market headwinds – Achieved £234 million AOP and 19% RoE – 7% increase in dividend per share to 57.0p • Strong loan book growth while maintaining disc
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 strong returns and dividend growth % • AOP up 4% to £234 million £ million 2016 2015 change – Continued profit growth in Banking 223.0 208.7 7% Banking – Securities and Asset Securities 19.0 24.6 (23%) Management resilient in difficult market conditions Asset Managemen
Slide 7: Income statement
Income statement Earnings growth and ongoing investment % • Income +2% to £687 million £ million 2016 2015 change – Increased income from lending businesses Operating income 687.4 672.8 2% Adjusted operating expenses (415.9) (406.0) 2% • 2% increase in expenses balancing investment with cost control
Slide 8: 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 9.0 8.7 9.0 8.2 1.3 Deposits 2 1.0 6.0 6.0 4.9 1 Secured Other assets Treasury assets 3.0 6.4 Loan book 3.0 Unsecured 1.3 0.9 1.1 Equity 0.0 0.0 31 July 2
Slide 9: Prudent capital position
Prudent capital position Strong CET1 maintains flexibility Group CET1 ratio 31 July 31 July % 15% £ million 2016 2015 change Common equity tier 1 capital 901 813 11% Total regulatory capital 925 848 9% 10% Risk weighted assets 6,683 5,932 13% 13.7% 13.5% Total capital ratio 13.8% 14.3% 5% 31 July 20
Slide 10: Banking
Banking Delivering strong returns % • Income up 6% to £511 million £ million 2016 2015 change – Growth across all lending areas Operating income 511.2 481.9 6% • £250 million expenses up 8% Adjusted operating expenses (250.3) (231.3) 8% – Increased cost control in H2 while maintaining investment Imp
Slide 11: Banking: Strong growth whilst maintaining discipline
Banking Strong growth whilst maintaining discipline Loan book size by business unit • 12% loan book growth to £6.4 billion £ million – Solid demand across our businesses and good growth in new initiatives 7,000 6,432 +12% • Retail increased 11% 6,000 5,738 – Increasing demand in motor finance offset
Slide 12: Securities
Securities Traded successfully in challenging market conditions % • Demonstrates strength of the £ million 2016 2015 change business model in a range of Operating income1 82.3 94.6 (13%) conditions – Maintained leading market Operating expenses (63.3) (70.0) (10%) position Operating profit1 19.0 24.
Slide 13: Asset Management
Asset Management Performance impacted by lower markets % • Performance impacted by lower £ million 2016 2015 change market levels Operating income 92.3 95.6 (3%) – AOP of £12.3 million (2015: £12.7 Investment management 57.4 54.1 6% million) excluding corporate and private equity1 Advice and other s
Slide 14: 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 14
Slide 15: Overview: Established business model for the long term
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 Building long-term Service relationships with clients Allowing us to provide and intermed
Slide 16: Overview: Consistent strategy continues to deliver
Overview Consistent strategy continues to deliver • All businesses responded well to their Loan particular conditions book 5.7 6.4 4.1 4.6 5.3 – Banking continued to grow with disciplined (£bn) returns 2012 2013 2014 2015 2016 – Winterflood traded successfully – Asset Management delivered positive f
Slide 17: Banking: Distinctive business model built for resilience
Banking Distinctive business model built for resilience Strong financial returns Relationship driven Prudent and consistent through the cycle Local presence in niche Small ticket, markets short-term, predominantly secured Strong NIM, low bad debt, strong returns Flexible, Consistent underwriting tai
Slide 18: 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 2016 2013 – 2016 220 RoE 22% 26% +8% - 14% 6.0 RoNLB 3.4% 3.6% 200 Bad debt ratio 1.4% 0.6% 180 5.0 Net interest margin 9.0% 8.2% 160 Loan book growth 13% 12% Credi
Slide 19: Retail Finance loan book +11% to £2.5 billion
Banking Retail Finance loan book +11% to £2.5 billion DIFFERENTIATED CONTINUED PROPOSITION DEVELOPMENT • Intermediated lending to • Active competition in motor small businesses and finance individuals • Growth in second hand car • Strong relationships with market 7,000 motor dealers and 1,700 insura
Slide 20: Commercial Finance loan book +13% to £2.5 billion
Banking Commercial Finance loan book +13% to £2.5 billion DIFFERENTIATED CONTINUED PROPOSITION DEVELOPMENT • Direct relationship with • Competition in broker channel 20,000 small businesses • Solid new business in • Nationwide presence with 300 specialist direct lending direct sales people • Growth
Slide 21: Property Finance loan book +12% to £1.5 billion
Banking Property Finance loan book +12% to £1.5 billion DIFFERENTIATED CONTINUED PROPOSITION DEVELOPMENT • Specialist residential • Continued growth property development opportunities with consistent underwriting • No BTL, commercial or residential mortgages • Strong profitability with low • Long tr
Slide 22: Winterflood
Winterflood Performing successfully in turbulent markets Tough trading conditions Traded Difficult first half successfully China and commodity prices Trading expertise Improved second half Continuously Political and economic profitable uncertainty Resilient, proprietary technology UK retail trading
Slide 23: Asset Management: Commitment to business model
Asset Management Commitment to business model Strategic priorities unchanged Integrated • Drive growth both organically and through £9.9 proposition small acquisitions billion – 6% organic net inflows TCA Client assets • Business and product development Advised – Intelligent Retirement only >100 Adv
Slide 24: Conclusion
Conclusion Well positioned longer term • Well placed to deliver in a range of market conditions – Supported by our established business model, long track record and strong balance sheet • Continued focus on discipline of the lending model – Confident in continued growth at strong returns – Ongoing i
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: Appendix
Preliminary Results FY 2016 Appendix
Slide 27: New growth initiatives
New growth initiatives Long history of developing new products and entering adjacent markets Loan book, £ billion 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
Slide 28: Loan book and lending statistics by business
Banking Loan book and lending statistics by business Loan book 2016 loan Average loan Typical loan Number of at 31 July Typical LTV1 book growth size2 maturity3 customers 2016 (£m) Motor finance 1,740.5 8.8% 75 – 85% £6k 2 – 4 years 300k Premium finance 770.5 15.7% 90% £500 10 months 2.0m Asset fina
Slide 29: Re-presentation of key ratios
Re-presentation of key ratios As announced 13 September 2016 Close Brothers Group As Re – The definition of our net interest margin 2015, £ million reported presented has been adjusted to take into account operating lease depreciation and Operating income 689.5 (1) 672.8 operating lease assets on th
Slide 30: Close Brothers Group plc contact details
Close Brothers Group plc 10 Crown Place London EC2A 4FT 020 7655 3100 enquiries@closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com