LONDON (ShareCast) - The failure of Arbuthnot Banking Group (ABG) to secure regulatory approval by the end of the year for its sale of Arbuthnot Securities Limited (ASL) mean it will have to swallow ASL's trading losses.

The banking and financial services group, which agreed to sell ASL to Westhouse Holdings back in November, said its upcoming results will therefore include around £8m trading losses for the year, and £3.5m of provisions in respect of the costs of an ASL employee share scheme.

On the bright side, the results will exclude the final loss on the sale of ASL.

ABG expects profits before tax for the continuing operations in 2011 to be around £5.0m. ASL's results for the year will be reported as discontinued operations.

The other big event for ABG in November was the flotation of its subsidiary, Secure Trust Bank (STB), in which it maintains a substantial minority holding.

The firm expects to record a gain of around £16.5m on the sale of the shares in Secure Trust Bank, but it has run into problems with its proposed consumer finance joint-venture with STB, and plans for collaboration have now been canned.

"Despite exhaustive efforts we have been unable to agree a structure which meets the regulatory requirements and falls within our risk appetite; consequently the joint venture will not be proceeding as expected. As a result anticipated income associated with the joint venture has not been received and some extra costs associated with carrying excess deposits have been incurred," the company statement explained.

Despite the ongoing difficulties of the economic and business environment, the firm insisted 2011 has been a successful year for Arbuthnot Banking, with the group's capital position further strengthened by the flotation of STB.

The share price fell 4.41% to 325p by 14:27.

NR

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