Close Brothers trading in line as it prepares for IFRS 9 impact

The FTSE 250 company said its banking division achieved solid loan book growth, while maintaining its disciplined approach to lending.

Its loan book grew 6.6% year-to-date to £7.3bn.

Commercial and property both delivered “good” growth, while the retail loan book remained broadly flat, the board said.

Bad debts remained low across all businesses, with no significant change to the bad debt ratio on the first half.

The company said its net interest margin remained “broadly consistent” with the last financial year at 8.0%, reflecting its continued pricing discipline.

Winterflood was said to have delivered a good performance, supported by continued high levels of trading activity throughout the period.

The firm’s asset management division also performed well, continuing to achieve “strong” net inflows.

Managed assets increased 14% to £10.2bn at 30 June, and total client assets grew 8% to £12.0bn.

“The group is well prepared for the transition to IFRS 9 on 1 August,” the board said in its statement.

“Based on the current profile of the loan book, we expect a fully loaded impact of 45 to 55 basis points on the common equity tier 1 ratio, reflecting the expected increase in bad debt provisions on the balance sheet.

“The impact in year one is expected to be immaterial under the EBA's transitional arrangements.”

Close Brothers said that estimate remained subject to the final refinement of models, and any changes in the loan book or macroeconomic outlook up to the date of implementation.

“We continue to expect a good result for the full year, in line with market expectations,” the board added.

Close Brothers was scheduled to release its results for the full year ending 31 July on 25 September.