Close Brothers’ banking division takes a hit amid pandemic
Close Brothers Group’s banking division has taken a hit due to the pandemic, as its loan book reflected lower new business volumes.
However, securities division Winterflood helped to offset some of the impact of coronavirus due to significantly higher trading, the group said in a scheduled pre-close trading update.
The figures
In the group’s banking division, the loan book fell 2.3 per cent to £7.47bn in the 11 months to 30 June 2020 reflecting lower new business volumes. However Close Brothers said client activity increased in June as lockdown restrictions eased.
Income was hit by a reduction in fee income due to lower activity levels and forbearance, with an annualised net interest margin of 7.6 per cent, a 0.3 per cent fall.
The asset management division generated net inflows of 10 per cent year-to-date with managed assets of £12.5bn. Total client assets increased from £13.3bn to £13.7bn at 30 June 2020.
Securities division Winterflood also delivered a strong performance, benefiting from significantly higher trading volumes due to the pandemic.
Why it’s interesting
Close Brothers’ banking division was hit by higher impairment charges but the easing of lockdown restrictions, including the re-opening of motor dealerships and construction sites, has helped activity pick up again. The group also said there had been a “good demand” for its Coronavirus Business Interruption Loan Scheme (CBILS) offering, particularly in the Asset Finance businesses.
The group said: “While early indications of a return to activity following the easing of lockdown restrictions are encouraging, the effects of Covid-19 on the UK economy remain highly uncertain.”
“Nevertheless, our proven business model and long track record of navigating a wide range of economic cycles leave us well placed to respond to the challenges and opportunities ahead”.
Shares opened 0.77 per cent lower.
What Close Brothers said
Chief executive Preben Prebensen said:
“Despite these challenging and unprecedented times, the group has again proven resilient and we are confident that we will end the financial year in a strong financial and operational position. Our colleagues have continued to respond admirably, enabling us to help our customers and clients during this period.”
“While early indications of a return to activity following the easing of lockdown restrictions are encouraging, it remains too early to know the full impact of Covid-19 on the UK economy. Nevertheless, our proven and prudent business model and long track record of navigating a wide range of economic cycles position us well to respond to the challenges and opportunities ahead and to continue supporting our colleagues, customers and clients over the long term.”