Close Brothers Group Plc · LSE:CBG
Close Brothers — Q2 2025 Earnings Presentation
40 slides from Close Brothers's earnings presentation, Mar 18, 2025
Slide 1: Close Brothers Group plc Half Year Results 2025
Close Brothers Group plc Half Year Results 2025 18 March 2025 Close Brothers Group plc Half Year Results 2025
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Close Brothers Group plc (the “Company”) solely for information purposes and does not constitute, and should not be construed as, an offer to sell or issue securities or otherwise constitute an invitation or inducement to any person to purchase, unde
Slide 3: Agenda
Agenda 01 Introduction and CEO Priorities 02 Financial Update 03 Business Update and Conclusion 04 Appendices Close Brothers Group plc Half Year Results 2025 3
Slide 4: Introduction and CEO Priorities
01 Introduction and CEO Priorities Mike Morgan, Group chief executive Strictly Confidential Close Brothers Group plc Half Year Results 2025 4
Slide 5: Focused on resilience and long-term growth
Focused on resilience and long-term growth Customer focus and Core business strength Cost savings underwriting discipline Robust underlying profit in Banking. Continued to support Now expecting to deliver total Results impacted by provision in customers, maintaining a strong annualised savings of c.
Slide 6: Building on our strong foundations
Building on our strong foundations The distinctive strengths Disciplined and long-term approach, Supported by our of our banking model with a strong historical track record customer-centric approach 92% Asset Finance CSAT1 Disciplined underwriting and pricing through the cycle Deep expertise Quality
Slide 7: Making strategic choices for the long term
Making strategic choices for the long term Sharpening our focus on our ongoing business Simplify Evaluating lending mix and portfolios to maximise returns Review initiated to drive a step-change in operational efficiency and cost reduction Strong and Optimise sustainable Focus on simplification and
Slide 8: Delivering on our capital actions
Delivering on our capital actions Well placed to navigate the current Approximately £360 million of CET1 capital generated or preserved as a result of management actions, as of 31 January 20251 environment with confidence + c.£100m FY 24 dividend cancellation Pro-forma CET1 capital ratio of 13.4% as
Slide 9: Motor finance commissions update
Motor finance commissions update £165 million provision taken in H1 25 Indicative timeline FCA to confirm within six following a thorough assessment weeks of the Supreme Court's decision if it will be proposing a redress scheme Well placed to absorb the impact of Expected judgment the provision in r
Slide 10: Financial Update
02 Financial Update Fiona McCarthy, Group chief finance officer Strictly Confidential Close Brothers Group plc Half Year Results 2025 10
Slide 11: Overview of financial performance
Overview of financial performance Adjusted operating profit Operating loss before tax of Strong capital, funding (“AOP”) of £75 million; RoTE £103 million, mainly driven by and liquidity positions, with of 7.4% £165 million provision in relation pro-forma CET1 capital ratio to motor finance commissi
Slide 12: Provisioning assessment in relation to motor finance commissions
Provisioning assessment in relation to motor finance commissions Provision methodology overview £165 million provision in H1 25 relating to motor finance commissions Outcome of Supreme Court appeals Potential outcomes Significant uncertainty on outcomes from Outcome of FCA’s ongoing review of Suprem
Slide 13: Temporary impacts of motor finance commissions on costs
Temporary impacts of motor finance commissions on costs Group total operating expenses1 Estimated overall impact on Group total Temporary costs related to motor finance commissions operating expenses in FY 25 and allocation BAU costs Adjusting items related to motor finance commissions (incl. £165 m
Slide 14: Income statement – Excluding discontinued operations
Income statement – Excluding discontinued operations Change Robust income, with a marginal decline in Banking and lower £ million H1 2025 H1 2024 % Group (central functions) interest income Operating income 390.0 394.5 (1) Adjusted operating expenses (267.0) (264.7) 1 Adjusted operating expenses up
Slide 15: Adjusting items
Adjusting items £165.0 million provision in relation to motor Group finance commissions (£ million) Recognised £177.9 million of adjusting items • Covers estimated potential operational and legal costs and potential remediation for affected customers £8.4 million for operational and legal costs incu
Slide 16: Our Banking businesses
Our Banking businesses Banking Commercial Retail Property excl. Novitas excl. Novitas Change in income (1)% (3)% (2)% 6% Loan book (year-on-year growth) £9.8bn (-1%) £5.0bn (0%) £2.9bn (-5%) £1.9bn (+5%) Net interest margin 7.2% (H1 24: 7.5%) 6.3% (H1 24: 6.7%) 8.7% (H1 24: 8.7%) 7.1% (H1 24: 7.3%)
Slide 17: Loan book decline as we lend selectively
Loan book decline as we lend selectively Selectively lending to optimise Loan book movement by business1,2,3 RWAs (£ million) Loan book decreased 3% (2% excluding Retail excl. legacy Irish motor businesses in run-off) Commercial excl. Novitas finance business Property (2)% (5)% (1%) Key drivers: sel
Slide 18: Strong net interest margin at 7.3% (7.2% underlying)
Strong net interest margin at 7.3% (7.2% underlying) Expect the full-year net interest Net interest margin margin to be around 7%, slightly below the H1 exit rate of 7.1% Key drivers: • Competitive pressure on new business 7.1% margins Exit rate • Evolving loan book mix (growth in larger, 8.0% lower
Slide 19: Banking costs: progress on costs savings but more required
Banking costs: progress on costs savings but more required H1 25 Banking cost drivers FY 25 Banking cost drivers Banking adjusted operating expenses1 Banking adjusted operating expenses in the 2025 financial year expected to increase by c.1%1 (£ million) (£ million) 211.8 210.5 420.6 28% 31% -1% 20%
Slide 20: Focused on improving future cost efficiency in Banking
Focused on improving future cost efficiency in Banking People Potential 1 Technology Initiated in 2023, second phase ongoing 2 Suppliers & Property Initiated in 2024, ongoing 3 Initiated in 2024, ongoing 4 cost levers Areas of focus Areas of focus Areas of focus Committed to executing further cost •
Slide 21: Resilient credit performance
Resilient credit performance Stable bad debt ratio at 1.0% Long-term average bad debt ratio excluding Novitas2 £48 million of impairment charges driven by: • Ongoing provisions and coverage review across loan portfolios • Single name provisions in Property 2.6% • Impacts of macroeconomic forecast up
Slide 22: Winterflood’s performance impacted by unfavourable market conditions
Winterflood’s performance impacted by unfavourable market conditions Change Increased operating income, with growth in Winterflood Business Services (“WBS”) more £ million H1 2025 H1 2024 % than offsetting decline in trading income Operating income 34.6 34.2 1 Operating expenses (35.4) (36.9) (4) Lo
Slide 23: Strong balance sheet
Strong balance sheet Prudent approach Total funding Loan book3 Treasury assets Conservative funding strategy, borrowing long and lending short £12.7 billion £9.8 billion £2.4 billion Average maturity of funding Average maturity of the loan book Includes £1.9 billion in cash with Consciously maintain
Slide 24: Strong capital position
Strong capital position 31 Jan 2025 31 Jul 2024 c.150bps impact from motor finance commissions provision1 CET1 capital ratio (transitional)2 12.2% 12.8% CET1 capital ratio (transitional) pro-forma after CBAM disposal3 13.4% n/a Lower RWAs, primarily reflecting a Tier 1 capital ratio (transitional) 1
Slide 25: Business Update and Conclusion
03 Business Update and Conclusion Mike Morgan, Group chief executive Strictly Confidential Close Brothers Group plc Half Year Results 2025 25
Slide 26: Business update – Banking (Commercial)
Business update – Banking Lends to SMEs through our direct Commercial sales force and third-party distribution channels Backdrop: • Asset Finance: Competitive marketplace with borrower appetite varied across sectors and sentiment impacted by uncertain outlook • Invoice Finance: Some changes in our c
Slide 27: Business update – Banking (Retail)
Business update – Banking Provides finance to individuals and Retail businesses through a network of intermediaries Backdrop: • Motor Finance: Impacted by the temporary pause in new lending following the Hopcraft judgment; all of lending channels live from January 2025 • Premium Finance: Mature mark
Slide 28: Business update – Banking (Property)
Business update – Banking Provides short-term residential development Property finance for experienced professionals and offers refurbishment and bridging loans Backdrop: • Difficult market backdrop for SME developers: elevated interest rates, customer affordability challenged and limited housing de
Slide 29: Business update – Winterflood
Business update – Winterflood Further diversified revenue streams and growth initiatives • Diversification within market-making business • Winterflood Retail Access Platform (“WRAP”) enables retail investors to participate in capital market transactions; raised over £100 million from retail investor
Slide 30: Conclusion
Conclusion Committed to maintaining a strong capital position See attractive opportunities across our markets Actively evaluating our businesses to maximise returns Intensified focus on operational efficiency Experienced leadership, relentless commitment to customers Strictly confidential Close Brot
Slide 31: Appendices
04 Appendices Strictly Confidential Close Brothers Group plc Half Year Results 2025 31
Slide 32: Appendix 1: Summary of guidance
Appendix 1: Summary of guidance Previous guidance provided at FY 24 results – for FY 25 unless otherwise specified Updated guidance - for FY 25 unless otherwise specified Banking • Low single-digit percentage growth in the loan book • UPDATED: Resume selective loan book growth, subject to demand, wi
Slide 33: Appendix 2: Banking – Financial performance
Appendix 2: Banking – Financial performance Continuing Operations Change Income impacted by temporary UK motor £ million H1 2025 H1 2024 % lending pause and legacy book run-off Operating income 362.7 365.3 (1) Adjusted operating expenses (210.5) (211.8) (1) Net interest margin strong at 7.3% Impairm
Slide 34: Appendix 3: Discontinued Operations (Asset Management)
Appendix 3: Discontinued Operations1 (Asset Management) Completion of sale to Oaktree £ million H1 2025 H1 2024 Change% Operating income 82.4 76.3 8 Successfully completed on Adjusted operating expenses (77.6) (70.0) 11 28 February 2025 Impairment losses on financial assets (0.1) - n/a Estimated gai
Slide 35: Appendix 4: Lending model
Appendix 4: Lending model Prudent and disciplined approach to lending A proven and resilient lending model Core products and security1 Average loan size2,3 Typical loan maturity2,3 Long track record of disciplined and consistent Asset • Commercial asset financing, hire lending through the cycle purc
Slide 36: Appendix 5: Highly experienced leadership team
Appendix 5: Highly experienced leadership team Mike Morgan, Group Chief Executive1 Matt Roper, CEO Commercial Phil Hooper, CEO Property Mike•Morgan, Group Mike was chief executive appointed Chief Executive in Matt Roper, CEO Commercial Phil Hooper, CEO Property • Matt was appointed CEO • Phil joined
Slide 37: Appendix 5: Highly experienced leadership team (ctd.)
Appendix 5: Highly experienced leadership team (ctd.) Robert Sack, Group Chief Risk Sarah Peazer-Davies, General Nazrul Kazi, Group Head of Sarah Peazer-Davies, General Nazrul Kazi, Robert Sack, Group Chief Risk Officer Counsel Internal Audit Officer Counsel and and Company Company Secretary Secreta
Slide 38: Appendix 6: Model Fit Assessment Framework
Appendix 6: Model Fit Assessment Framework Protecting the key attributes of our model Close Brothers Group plc Half Year Results 2025 38
Slide 39: Appendix 7: Our responsibility
Appendix 7: Our responsibility1 Our responsibility remains fundamental to our purpose, strategy and culture Our car fleet Our inclusivity Our emissions Our alliances Now 41.6% 90% As a signatory to the NZBA2, we 53.6% battery electric with average reduction in Scope 1 and 2 emissions since 2019 (mar
Slide 40: Appendix 8: Our Responsibility
Appendix 8: Our Responsibility Our responsibility remains fundamental to our purpose, strategy and culture Sustainable objectives Our progress At 31 July 2024 Our ambitions Environmental • 42% reduction in Scope 1 and 2 emissions since • Operationally net zero by 2030 through our Scope Some of 20191