Close Brothers confident over full year despite slower start

Merchant banking group Close Brothers said it remains confident in the outlook for the year despite a slower start and challenging market conditions in the first quarter.

The company said its banking division continued to deliver solid growth, with the loan book up 2.8% in the period from 1 August to the end of October to £5.9bn from £5.7bn at the end of July, reflecting growth in all lending businesses.

However, the net interest margin reduced modestly on the previous year due to ongoing price competition in some of the group’s markets, although this was broadly offset by a continued improvement in the bad debt ratio. Overall returns remain strong, but slightly lower than last year.

Trading at Winterflood, the group’s securities business, has been affected by difficult market conditions since the start of the financial year. Although volumes were broadly unchanged, falling equity markets and volatile trading conditions, particularly in August and September, resulted in lower profitability compared to the same period last year.

Asset Management continued to achieve solid net inflows, although client assets reduced overall due to negative market movements in the period. At 31 October, total client assets were £10.6bn, compared with £10.8bn at the end of July.

Despite the slower start, Close Brothers said it remains confident of delivering “a satisfactory outcome” for the year.

The group sees continued opportunities for growth in the banking division, whilst maintaining its prudent risk profile and focus on returns.

It added that Winterflood is well positioned but remains sensitive to market conditions, while the asset management business should see continued net inflows.