Close Brothers has said “unfavourable market conditions” will hit its asset management and market-making divisions in the first quarter of the 2024 financial year, with the merchant banking group planning to hire more staff and make acquisitions to drive growth.
The group noted that its banking business has seen strong margins and a stable credit performance, with its loan book growing three per cent in the three months to 31 October and 7.5 per cent year-on-year to £9.8bn.
Close Brothers reiterated its expectation that banking costs would be between eight and 10 per cent for 2024.
Shares in the FTSE 250-listed bank have sunk 29 per cent this year after it revealed in January that it was setting aside funds for bad loans in Novitas, the legal finance specialist it acquired in 2017.
The group said in a quarterly update on Thursday that its asset management sector saw a £200m fall in managed assets from the previous quarter to £16.2bn, with total assets down £300m to £17bn, reflecting “unfavourable market movements”.
Close Brothers announced that it would increase hiring and “in-fill acquisitions” to drive growth in its asset management division.
Winterflood was hit by “a further weakening of investor appetite and market uncertainty”, the group said, resulting in an operating loss of £2.5m.
The group’s common equity Tier 1 ratio, which measures a bank’s financial strength, was 12.7 per cent as of 31 October, down from 13.3 per cent on 31 July.
“Performance in the first quarter of 2024 reflected continued momentum in banking, whilst our market-facing businesses were impacted by unfavourable market conditions,” said chief executive Adrian Sainsbury.
“By maintaining our pricing discipline, active management of costs and consistent approach to lending through the cycle, we are able to support our customers and clients through these uncertain times.”