Close Brothers Group plc · LSE:CBG
Close Brothers — H1 2014 Earnings Presentation
33 slides from Close Brothers's earnings presentation, Mar 11, 2014
Slide 1: 2014 Interim Results
2014 Interim Results 11 March 2014
Slide 2: Disclaimer
Disclaimer Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the group’s operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, unc
Slide 3: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 3
Slide 4: Introduction: First half 2014 highlights
Introduction First half 2014 highlights • Strong group performance – Adjusted operating profit1 up 21% to £97 million – All three divisions contributing to improved performance – Adjusted earnings per share2 of 50.4p, up 19% • Strong capital position – Common equity tier one capital ratio of 13.2% •
Slide 5: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 5
Slide 6: AOP bridge
AOP bridge Strong group performance in the first half Growth in AOP • Strong group result with AOP up £ million 21% to £97 million – Increased contribution from all 100 2 (3) 3 divisions 6 • Good loan book growth and lower bad debts in Banking 90 – AOP up 14% to £90 million 11 • Improved trading con
Slide 7: Summary income statement
Summary income statement Strong growth in profit • 14% rise in income to £322 million H1 H1 % – Good loan book growth in Banking £ million 2014 20131 change – Improved investor risk appetite in Securities Adjusted operating income 322.0 283.0 14% Adjusted operating expenses (202.1) (176.7) 14% • Exp
Slide 8: Balance sheet assets
Balance sheet assets Simple and transparent balance sheet Total assets • Loan book and treasury assets £ million over 80% of total assets 8,000 7,136 7,000 6,831 579 8% • 5% loan book growth to £4.9 billion 557 8% 6,000 596 776 11% – Consistent risk profile 9% › Short-term, around 90% secured 1,032
Slide 9: Funding
Funding Diverse range of funding sources with prudent maturity profile Diverse sources of funding Prudent maturity profile £ million £ million, at 31 January 2014 7,000 7,000 6,417 6,268 6,417 6,000 6,000 4,856 5,000 5,000 2,993 4,015 4,149 4,000 4,000 2,8402 3,000 3,000 2,000 2,000 1,416 1,403 3,42
Slide 10: Capital
Capital Group capital remains strong Capital ratio1 31 January 31 July % % Total Total £ million 2014 2013 change 16 14.6% 14.6% 1.3% 1.4% CET1 capital1 668 688 (3)% 12 Total regulatory capital 738 759 (3)% Core tier 1 CET1 8 13.3% 13.2% Risk weighted assets 5,062 5,185 (2)% 4 • Reporting for the fi
Slide 11: Banking
Banking Good performance in the first half • Income up 11% to £218 million H1 H1 % – Good loan book growth £ million 2014 20131 change Net interest and fees on 208.6 189.3 10% loan book2 • Expenses of £106 million, up 15% Treasury & other 9.2 6.4 44% – Continued investment in our Adjusted operating
Slide 12: Banking: loan book growth
Banking Good loan book growth continues Loan book size by business unit • Good loan book growth of 5% in the first half £ million – Up 11% in the last 12 months 5,000 4,856 +5% – Slightly moderated from prior year 4,646 894 951 +6% • Retail increased 5% 4,000 – Good demand in motor finance despite i
Slide 13: Banking: performance ratios
Banking Distinctive model drives consistently strong returns Performance ratios • Net interest margin of 8.8% – Business mix broadly unchanged 10% 8.9% 8.8% 9% • Bad debt ratio of 1.0% 8% – Reduction principally in Property 7% and asset finance 6% 5% • Return on net loan book increased 3.7% 3.8% to
Slide 14: Securities
Securities Improved market sentiment for retail investors H1 H1 % • AOP up 58% driven by increased £ million 2014 2013 change profitability in Winterflood Adjusted operating income 63.5 47.9 33% Adjusted operating expenses (46.9) (37.4) 25% AOP 16.6 10.5 58% • Winterflood AOP up 81% to £13 RoE1 25%
Slide 15: Securities: improved performance
Securities Improved performance in the first half Winterflood’s income and expenses Key figures £ million H1 2014 H2 2013 H1 2013 50 Average bargains per day 52k 52k 42k Income per bargain £7.19 £6.15 £6.52 45 Loss days 1 7 1 40 35 • Better trading conditions particularly in AIM 30 25 • Consistent p
Slide 16: Asset Management
Asset Management Performance continues to improve H1 H1 % £ million 2014 2013 change • Good income growth of 9% to £41 million Adjusted operating income 40.5 37.2 9% – Principally in investment Adjusted operating expenses (37.3) (36.1) 3% management as assets increased AOP 3.2 1.1 RoE 16% 4% • Modes
Slide 17: Asset Management: sales momentum
Asset Management Good sales momentum across our distribution channels AuM • Total AuM increased 2% to £9.3 £ million billion 10,000 (398) 25 • Positive net flows of £0.2 billion 588 – Annualised growth rate of 4%1 9,000 • Gross inflows up to £0.6 billion 8,000 – Good growth from advisers and lead ge
Slide 18: Asset Management: components of AuM
Asset Management Components of AuM • Total managed assets up 5% to £6.5 Assets under Management billion £ billion – Good inflows and consistent fund 10 performance £9.1bn £9.3bn 8 • Total advised assets stable at £5.0 4.0 4.2 billion Total 6 Managed – Modest outflows and migrations to £6.5bn managed
Slide 19: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 19
Slide 20: Business update: strategic priorities
Business update Clear strategic priorities and strong competitive positioning Close Brothers Key performance indicators • Strong capital position 13% 13% Strong financial 13% • Prudent funding model: position – Borrow long, lend short FY 2012 FY 2013 H1 2014 Common equity tier 1 capital1 • Serving n
Slide 21: Banking: sustainable loan book growth
Business update Banking – Sustainable loan book growth in all market conditions Increasing credit supply Loan book growth £ billion • However, still well below pre-crisis levels • Competitive landscape still fragmented 5 • Overall lending environment remains supportive of growth 4 Continued loan boo
Slide 22: Banking: continued strong performance
Business update Banking – Continued strong performance Key drivers for profit growth Continued loan book growth Strong net interest margin Improved bad debt ratio 9.6% 8.9% 8.8% 4.9 1.7% 4.4 3.8 1.2% 1.0% H1 2012 H1 2013 H1 2014 H1 2012 H1 2013 H1 2014 H1 2012 H1 2013 H1 2014 £ billion % % H1 2014 r
Slide 23: Winterflood: improving retail investor risk appetite
Business update Winterflood – Improving retail investor risk appetite Increased primary market activity Recovering retail trading volumes1 IPOs Daily average 350 70k 300 60k 250 200 50k 150 100 40k 50 0 30k CY CY CY CY CY CY CY CY CY FY FY FY FY FY FY FY FY FY H1 05 06 07 08 09 10 11 12 13 05 06 07
Slide 24: Winterflood: well positioned going forward
Business update Winterflood – Well positioned going forward • Consistently profitable through cycle Winterflood AOP £ million – Low number of loss days reflects skill of our market makers 60 • Maintained market leading position 50 – Continuing to invest in our proprietary technology 40 21 10 year av
Slide 25: Asset Management: scalable business model
Business update Asset Management - Scalable, vertically integrated business model with multiple distribution channels Wealth management proposition Platform custody & Advice Investment Management administration Close Bespoke Self- Personal Corporate Discretionary Model investment directed Advice Adv
Slide 26: Asset Management: path to profit growth
Business update Asset Management - Clear path to profit growth Inflows Capability Margins • £9.3 billion AuM • None of our • Strong cost discipline distribution channels and increased • Net inflows across has reached maturity operating leverage distribution channels • Leveraging • Improving efficien
Slide 27: Outlook
Outlook Business model, strong performance and financial position ensure that we are well placed going forward • We are confident in our strategy • We see good opportunities for growth and will continue to deliver strong returns for our shareholders – In Banking we expect to continue to deliver good
Slide 28: Agenda
Agenda 1. Introduction – Preben Prebensen, Group Chief Executive 2. Financial review – Jonathan Howell, Group Finance Director 3. Business update – Preben Prebensen, Group Chief Executive 4. Q&A Strictly private and confidential 28
Slide 29: 2014 Interim Results
2014 Interim Results 11 March 2014
Slide 30: Appendix
Appendix Page 31 Segmental analysis 32 Funding maturity profile 33 Banking Strictly private and confidential 30
Slide 31: Segmental analysis
Segmental analysis Summary income statement Asset £ million Banking Securities Management Group Total H1 2014 Adjusted operating income 217.8 63.5 40.5 0.2 322.0 Administrative expenses (93.4) (46.0) (36.6) (12.0) (188.0) Depreciation and amortisation (12.1) (0.9) (0.7) (0.4) (14.1) Impairment losse
Slide 32: Funding maturity profile
Funding maturity profile Prudent funding maturity 3-12 £ million Total <3 months months 1-2 years 2-5 years >5 years Loans and overdrafts from banks 5 5 - - - - Debt securities in issue 851 1 - 850 - - Subordinated loan capital 77 2 - - - 75 Drawn facilities1 933 8 - 850 - 75 Undrawn facilities 265
Slide 33: Banking: loan book and lending statistics
Banking Loan book and lending statistics by business 31 January 31 July 2014 2013 % Loan book £ million £ million change Retail 1,996.5 1,906.0 5% Motor finance 1,341.3 1,278.3 5% Premium finance 655.2 627.7 4% Commercial 1,908.4 1,845.7 3% Asset finance 1,569.5 1,482.3 6% Invoice finance 338.9 363.