Close Brothers Group Plc · LSE:CBG
Close Brothers — FY2018 Earnings Presentation
30 slides from Close Brothers's earnings presentation, Sep 25, 2018
Slide 1: Preliminary Results Year to 31 July 2018
Preliminary Results Year to 31 July 2018 25 September 2018
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 3
Slide 4: Introduction
Introduction Good performance and significant strategic progress Good financial performance • 4% increase in AOP to £279 million • Strong RoE at 17.0% • 5% dividend growth to 63p All businesses performing well • Good loan book growth, maintaining margins and underwriting discipline in Banking • Anot
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 5
Slide 6: Financial highlights
Financial highlights Continued profit and dividend growth • AOP up 4% to £279 million, with good performance in all three divisions • AEPS growth of 5% to 140.2p • RoE remains strong at 17.0% • Dividend growth of 5% to 63.0p, in line with progressive dividend policy 6
Slide 7: Segmental performance
Segmental performance All segments performed well given market conditions Continuing operations1 % £ million 2018 2017 change 2% growth in Banking profit 251.8 247.4 2% Banking – Commercial up 5% and Property up 3%, with strong income and low bad Retail 81.1 82.8 debts (2%) – Partly offset by higher
Slide 8: Income statement
Income statement Higher income and continued investment Continuing operations1 % £ million 2018 2017 change Higher lending income in Banking Operating income 805.8 761.4 and strong performance in Asset 6% Management Adjusted operating expenses (480.5) (453.7) 6% Cost growth of 6% in line with income
Slide 9: Simple and transparent balance sheet
Simple and transparent balance sheet Diverse funding and prudent liquidity Prudent funding maturity 12.0 £ billion 9.6 Prudent funding and liquidity 10.0 8.7 1.3 – Funding at 132% of loan book 8.0 2.8 – Average maturity of loan book funding 3.6 6.0 Average Average at 23 months maturity maturity 14 m
Slide 10: Capital
Capital Maintained strong capital position Capital overview 31 July 2017 31 July 2018 9% growth in CET1 capital base CET1 capital (£m) 991 1,084 9% growth in RWAs reflects loan book growth and RWAs (£m) 7,859 8,548 mix at period end CET1 capital ratio 12.6% 12.7% Total capital ratio 15.2% 15.0% CET1
Slide 11: Banking
Banking Profit growth and strong returns Continuing operations1 % £ million 2018 2017 change Higher income in all three segments, Operating income 581.0 551.1 5% reflecting loan book growth Adjusted operating expenses (282.5) (264.7) 7% Expenses increased 7% to £283 million, Impairment losses (46.7)
Slide 12: Banking
Banking Loan book growth reflects diverse portfolio Loan book growth by segment (£ million) 6.6% underlying loan book growth 31 July reflecting strong customer proposition and 2018 7,298 diverse loan portfolio Property Property 7099.7 198 +12.2% Good growth in Property, with continued demand for res
Slide 13: Banking
Banking Good performance across all lending segments Retail Commercial Property 8.2% Strong net interest margin ranging Net 8.0% 7.5% from 7.5% - 8.4% reflecting interest 8.5% 8.4% 8.0% 7.9% 7.7% 7.7% 7.5% margin disciplined approach – Slight decline reflects mix and price competition 2017 2018 2017
Slide 14: Securities
Securities Continued strong performance % £ million 2018 2017 change Higher trading income benefiting from continued retail investor activity and Operating income 109.1 106.7 2% increased institutional volumes Operating expenses (81.0) (78.6) 3% Expenses up 3% to £81 million broadly Operating profit
Slide 15: Asset Management
Asset Management Good progress and growth in client assets % £ million 2018 2017 change Operating income 115.5 102.9 12% Higher income reflecting growth in client assets with strong inflows Investment management 75.2 63.7 18% Advice and other services 39.6 37.1 7% Other income 0.7 2.1 (67%) Growth i
Slide 16: 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 16
Slide 17: Strong, sustainable performance
Strong, sustainable performance Proven business model continues to deliver in current market conditions Solid business Strong growth in profit Commitment to proven, performance and dividends successful model • Continued strong NIM at • Continued strong return • We maintain our focus on 8.0%, and con
Slide 18: Application of the model
Application of the model Disciplined adherence to model criteria • Consistent, conservative Typical Typical FY18 Net Bad underwriting in sectors we know LTV1 loan underlying interest debt maturity2 loan book margin ratio and understand growth • Prudent LTVs and maturities Motor 3–4 80-85% (1.5%) acr
Slide 19: High quality, service led proposition
High quality, service led proposition Service, expertise and relationships are at the heart of our business model Personal Service For a diverse customer base • Service led proposition focusing • Distribution relationships with on SMEs, intermediaries and end customers c.7,000 motor dealers and 1,70
Slide 20: Engaged employees
Engaged employees Distinctive culture and collective sense of purpose Distinctive culture & collective sense of purpose • Formalised corporate purpose – “to help the people and businesses of Britain thrive over the long-term” • Distinctive culture, with prudence, integrity and teamwork added to our
Slide 21: Investing for the long-term
Investing for the long-term Maintaining our investment through the cycle to support our service and proposition Funding and capital Investing in our Disciplined approach efficiency businesses to investing • New deposit platform to be • Continuing multi-year • Focus on disciplined launched in 2019, p
Slide 22: Expanding to maximise our potential
Expanding to maximise our potential We constantly look to maximise existing and new market opportunities for our businesses Expanding within our existing markets and maximising opportunities • Expansion of Property into UK • Expansion of Asset Management regional markets, focusing on growth capacity
Slide 23: Conclusion
Conclusion Well positioned longer term • Good performance in 2018 financial year • Strongly committed to our proven business model – Protecting margins and underwriting discipline in Banking – Maximising daily profitability in Winterflood – Maintain growth traction in Asset Management • Well positio
Slide 24: Save the date
Save the date Asset Management division investor seminar We will be holding an investor seminar on the Asset Management division Time: Tuesday 4th of December 2018 From 4pm Location: Close Brothers Group 10 Crown Place London EC2A 4FT 24
Slide 25: 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 25
Slide 26: Preliminary Results FY 2018 Appendix
Preliminary Results FY 2018 Appendix 25 September 2018
Slide 27: Banking
Banking Long history of profitable growth through the cycle £ billion £ million Moderation 2017 – 2018 260 7% 7.0 Banking key metrics 10 year average FY 2018 240 RoE 22% 20% Benign credit 2013 - 2016 220 RoNLB 3.4% 3.5% 6.0 +8% - 14% 1.3% 0.6% 200 Bad debt ratio Net interest margin 8.9% 8.0% 180 5.0
Slide 28: Asset Management and Winterflood
Asset Management and Winterflood Maximising trading opportunities in favourable markets Asset Management Winterflood 25 Adjusted operating profit (£ million) 20 Operating profit (£ million) 30 15 23.1 10 17.8 17.4 14.4 20 5 9.9 28 28 0 26 25 FY14 FY15 FY16 FY17 FY18 10 19 Managed assets (£ billion)
Slide 29: Banking
Banking Loan book and lending statistics by business FY18 Loan book underlying Average loan Typical loan Number of at 31 July Typical LTV1 loan book size2 maturity3 customers 2018 (£m) growth Motor Finance 1,736 (1.5%) 80 – 85% £6k 3 – 4 years 260k Premium Finance 950 5.1% 90 – 95% £600 10 months 2.
Slide 30: Close Brothers Group plc
Close Brothers Group plc 10 Crown Place London EC2A 4FT 020 7655 3100 [email protected] LENDING │ DEPOSITS │ WEALTH MANAGEMENT │ SECURITIES www.closebrothers.com