Close Brothers Group plc · LSE:CBG
Close Brothers — FY2021 Earnings Presentation
35 slides from Close Brothers's earnings presentation, Sep 28, 2021
Slide 1: Close Brothers Group plc Preliminary Results 2021
Close Brothers Group plc Preliminary Results 2021 28 September
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 01 Introduction Adrian Sainsbury, Chief Executive Officer 02 Financial update Mike Morgan, Finance Director 03 Business update Adrian Sainsbury, Chief Executive Officer 04 Q&A 3
Slide 4: Introduction
Introduction 01 Adrian Sainsbury Chief Executive Officer
Slide 5: Overview
Overview Strong financial performance in evolving market conditions Income and pre-provision profit Banking delivered 10.9% loan Strong underlying credit both up 10%, with an 88% book growth, with a strong net performance across Commercial, increase in AOP1 and an ROE2 interest margin of 7.7% Retail
Slide 6: Overview
Overview Maintained support for colleagues and customers while making the most of opportunities Agile response to Covid-19 Supported our people with a constant focus on their wellbeing and support for our people Strong results from recent Employee Opinion Survey and customers Over 130,000 Covid-19 r
Slide 7: Financial update
Financial update 02 Mike Morgan Group Finance Director
Slide 8: Financial highlights
Financial highlights Group AOP1 £270.7m Group AOP pre provisions1 £360.5m Adjusted EPS1 140.4p Strong financial performance Return on opening equity2 14.5% CET1 capital ratio 15.8% Dividend per share3 60.0p Loan book growth 10.9% Disciplined underwriting and pricing Net interest margin 7.7% Bad debt
Slide 9: Income statement
Income statement Income growth across all divisions, continued investment and significantly lower impairment charges % £ million 2021 2020 change • Income growth across all divisions Operating income 952.6 866.1 10 • Cost increase in line with income, driven by continued investment across the busine
Slide 10: Income statement
Income statement Exceptional and other adjusting items % £ million 2021 2020 change • Operating profit includes the impact of exceptional and adjusting items Adjusted operating profit 270.7 144.0 88 - Impairment of goodwill and intangible assets Amortisation and impairment of on acquisition as a res
Slide 11: Divisional performance
Divisional performance Diversification continues to support strong overall performance % £ million 2021 2020 change Banking • Strong income growth and lower impairment charges, Banking 212.5 99.2 114 partially offset by the cost of continued investment • Significantly higher profits across Commercia
Slide 12: Strong balance sheet
Strong balance sheet Well placed to continue funding and supporting loan book growth Total funding Average maturity of loan book Prudent approach funding at 24 months £11.1 billion • Conservative approach to funding, focused on diversity of sources and prudent maturity profile Loan book Average matu
Slide 13: Capital
Capital Strong capital position provides significant flexibility for growth Capital overview1 • Strong CET1 capital ratio, significantly above minimum regulatory 31 July 2021 31 July 2020 requirements CET1 capital ratio 15.8% 14.1% • Increased CET1 capital reflecting higher profits, benefit from Tot
Slide 14: Banking
Banking Income growth and a significant reduction in impairment charges % £ million 2021 2020 change • Increase in income driven by strong new business volumes Operating income 631.7 586.0 8 • Strong net interest margin reflecting continued pricing discipline Adjusted operating expenses (329.1) (303
Slide 15: Banking
Banking c.£0.8 billion increase in loan book in the year; growth remains an output of our business model Loan book movement by business Loan book split (£ million)1 Retail +4.9% Property (13.4%) Commercial 18% +30.2% (35) 175 +10.9% 34% (232) 243 12% 677 8,445 23% 13% 7,617 Asset Finance Invoice & S
Slide 16: Banking
Banking Strong net interest margin reflects our pricing discipline and lower cost of funds Net interest margin Specialist, relationship driven model supports net interest margin • Consistently strong NIM compared to sector average 7.9% • Prioritise pricing, not volume growth 7.7% 7.5% Strong NIM at
Slide 17: Banking
Banking Disciplined control of costs while investing in the business Movement in costs1,2 (£ million) Business as usual (BAU) costs3 • Disciplined control of BAU costs to create investment capacity +3% • BAU costs increased to £255.1 million primarily reflecting higher performance-related compensati
Slide 18: Banking
Banking Appropriate level of provision reflecting improved but still uncertain outlook Expert judgement applied IFRS 9 Staging allocation Application of our models overlaid with expert judgement to determine: • Appropriate allocation between stages At 31 July 2021 • Provision coverage at the individ
Slide 19: Asset Management
Asset Management Continued focus on maximising long-term growth potential % £ million 2021 2020 change • Increased income driven by growth in managed assets Operating income 139.4 128.2 9 • Increase in expenses primarily reflecting business hires in line Investment management 102.9 91.4 13 with grow
Slide 20: Winterflood
Winterflood Exceptionally strong trading performance, maximising trading opportunities in a dynamic market environment % £ million 2021 2020 change • Higher income reflecting exceptionally strong trading performance and elevated market activity, although Operating income 182.0 151.9 20 activity has
Slide 21: Business update
Business update 03 Adrian Sainsbury Chief Executive Office
Slide 22: The foundations of our long-term success
The foundations of our long-term success Our Purpose To help the people and businesses of Britain thrive over the long term. Our Responsibility To help address the social, Our Culture economic and environmental Combines expertise, service and challenges facing our business, relationships with teamwo
Slide 23: A proven and resilient model
A proven and resilient model Well positioned to continue delivering on our long-term track record of growth and profitability Our track record Our distinctive strengths Long-term growth Strong returns through the cycle Loan book (£ billion) Return on opening equity Disciplined underwriting 9.0 25% a
Slide 24: Protect: Keeping our model safe
Protect: Keeping our model safe PROTECT Maintaining and enhancing the key strengths of our business model Continued agile response to Covid-19, benefiting from Motor Finance Asset Finance Asset Management playbooks and transformation transformation technology projects simulations run in Improving th
Slide 25: Grow: delivering disciplined growth
Grow: delivering disciplined growth GROW Our long progressive history of lending through the cycle Net Loan Book trend Well positioned to retain market position (£ billion) FY21 and deliver disciplined growth +11% growth Covid-19 9.0 2020 -0.4% • Continued demand for asset financing Moderation 2017
Slide 26: Disciplined growth
Grow: Model Fit Assessment Framework GROW Continue to assess incremental opportunities in existing and new markets Constantly looking for opportunities in segments of the market where clients value our personal Long-term growth service and expertise prospects Expert, Strong track relationship Buildi
Slide 27: Sustain: Our Responsibility
Sustain: Our Responsibility S U S TAI N Acting responsibly is fundamental to our purpose, strategy and culture Our sustainable objectives Maintaining momentum Promoting an inclusive culture in everything we • High group wide engagement scores, with an overall score People do, and supporting new ways
Slide 28: Banking update – Commercial
Banking update – Commercial Maximising market opportunities Asset Finance Invoice & Speciality Finance Benefiting from continued strong demand Well positioned as economy recovers • Strong new business volumes, supported by demand for CBILS1 • Good new business levels, supported by demand under • Rec
Slide 29: Banking update – Retail
Banking update – Retail Maximising market opportunities Motor Finance Premium Finance Maximising opportunities in the second hand car market Well positioned as restrictions ease • High new business levels reflecting pent up demand and increasing use • Covid-19 restrictions impacted customer behaviou
Slide 30: Banking update – Property
Banking update – Property Maximising market opportunities Repayments, drawdowns and undrawn pipeline Property Finance (£ million) Well positioned to capture residential 1,600 1,400 construction demand 1,200 1,000 • High repayments reflect strong unit sales due to the 800 release of pent up demand, r
Slide 31: Asset Management
Asset Management Growth in managed assets and continued investment to support the long-term growth opportunity Net inflow rates • Continued demand as we maintained excellent client service (%) despite reduced face-to-face contact in the year Net inflow (%) 12% • Good net inflows at 7% reflecting goo
Slide 32: Winterflood
Winterflood Maximising trading opportunities in a dynamic market environment Operating profit • Delivered an exceptionally strong trading performance (£ million) 101 • Activity has slowed over the last few months 82 65 68 • Experienced traders delivered through continued market volatility, with 56 6
Slide 33: Outlook
Outlook Our proven and resilient model and strong balance sheet, combined with our deep experience in navigating a wide range of economic conditions, leaves us well placed • Improved economic outlook although the trajectory remains uncertain Attractive trends and growth opportunities • In Banking, w
Slide 34: Q&A
04 Q&A €.) Close Brothers Modern Merchant Banking
Slide 35: Close Brothers Group plc contact details
Close Brothers Group plc 10 Crown Place London EC2A 4FT www.closebrothers.com LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES