Close Brothers hails 'solid' start to the year
By Michele Maatouk
Date: Thursday 15 Nov 2018
(Sharecast News) - Close Brothers hailed a solid start to the year on Thursday and said it remains well positioned for the remainder of the financial year.
In an update for the first quarter, the FTSE 250 merchant banking group said its banking division continued to deliver growth at good returns, reflecting the diversity of its loan portfolio. The loan book rose 1.9% in the quarter to £7.4bn, mostly thanks to the commercial segment, with growth across asset, invoice and specialist finance areas.
The net interest margin was broadly in line with the 2018 financial year, reflecting the company's consistent pricing and service-led customer proposition. Impairment charges remained low, with continued strong credit performance across the lending businesses.
"Overall, our banking businesses remain well positioned, and we continue to invest in maximising their long-term potential while maintaining our prudent approach to lending," it said.
Trading at Close Brothers' market maker, Winterflood, remained resilient in the first quarter, against a backdrop of more challenging market conditions compared to the last financial year.
Meanwhile, the asset management arm achieved solid net inflows, although negative market movements resulted in a small drop in managed assets to £10.2bn at the end of October from £10.4bn at the end of July, while total client assets slipped to £11.9bn from £12.2bn.
Shore Capital analyst Gary Greenwood said: "Close Brothers' banking business remains a model of consistency, in our view, growing its loan book aggressively when competition is weak and margins are attractive and pulling back when the reverse is true (as is the case now).
"Winterflood remains a very effective operator but performance is subject to market volatility. Asset Management is now delivering good inflows but is also subject to market movements. Overall, we rate Close Brothers as a high quality stock, albeit with fair value at 1665p giving just 11% upside we retain a neutral stance (noting better value elsewhere)." The stock is rated at 'hold'.
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