Close Brothers – Making Hay

Published on
  • Close Brothers Group plc (LON:CBG)’s the specialist lending, asset management and market-making group issued a scheduled trading update this morning.

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  • The group's lending book is growing at a steadily increasing pace, asset management volumes are up and the surge in retail trading volumes in the stock market is driving very strong profit growth at Close Brothers’ Winterflood market-making business.
  • Bad debts are if anything improving from relatively low levels and the group remains strongly capitalised with the Tier 1 ratio improving to 15.5%.
  • The news was broadly as expected, and the shares dipped a fraction of a percent in early trading.

Commenting on the results, Steve Clayton, fund manager at HL Select said:

Close Brothers' Earnings Strength

We hold Close Brothers on both our UK funds because of its predictably robust earnings strength that has led to one of the best dividend track records in the market. Close Brothers were the first UK bank to resume payments after the regulator told lenders to conserve capital during the pandemic. Today’s statement bodes well for the full year pay-out.

Retail trading volumes are strong and Winterflood are making hay of it, with their earnings for the last six months expected to be ahead of the previous twelve. The bank’s lending book is benefiting from strong demand under the Government CBILS pandemic support scheme and encouragingly, bad debts are showing no signs of picking up, even as we near the end of some of the Government’s exceptional support measures.

Close are doing what they do best, raising lending volumes at the start of an economic recovery when pricing is typically at the most favourable point, from a lender’s perspective. With extremely high levels of capital the group will be able to lend wherever it sees the right level of risk and reward. The rest of the business is doing fine and whilst Winterflood must slow down at some point, Asset Management is well placed to pick up the baton. We remain very happy holders of Close Brothers, a business we see as one of the UK’s strongest and best placed financial operators.

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