Arbuthnot Banking - Interim Results
RNS Number : 5676T
Arbuthnot Banking Group PLC
21 July 2015
 

 

ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")

Results for the six months to 30 June 2015

"Profitable Growth"

 

Arbuthnot Banking Group is pleased to announce a half yearly profit before tax of £15.7m, an increase of 65% compared to the same period last year.

 

Both banks have continued to grow well and invest for the future.

 

Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited and Secure Trust Bank PLC.

 

FINANCIAL HIGHLIGHTS

·      Profit before tax an increase of 65% to £15.7m (H1 2014: £9.5m)

·      Underlying profit before tax an increase of 30% to £17.1m (H1 2014: £13.2m)

·      Customer loans £1.4bn (H1 2014: £842m)

·      Customer deposits £1.6bn (H1 2014: £1.1bn)

·      Interim dividend per share 12p (H1 2014: 11p)

 

OPERATIONAL HIGHLIGHTS

 

Private Banking - Arbuthnot Latham

·      Profit before tax an increase of 111% to £3.7m (H1 2014: £1.7m)

·      Customer loans £584m (H1 2014: £394m)

·      Customer deposits £770m (H1 2014: £589m)

·      Assets Under Management £701m (H1 2014: £566m)

 

Retail Banking - Secure Trust Bank

·      Profit before tax an increase of 40% to £16.1m (H1 2014: £11.5m)

·      Customer loans £852m (H1 2014: £448m)

·      Customer deposits £835m (H1 2014: £477m)

 

Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said: "The Group has continued its profitable growth and as a result the Board has decided to increase the interim dividend. Both banks have detected an improvement in customer sentiment following the decisive result of the general election."

 

The interim results and presentation are available at http://www.arbuthnotgroup.com.

 

Secure Trust Bank PLC is today releasing its interim statement and it should be read in conjunction with these results.

 

Footnote - Underlying Profit before tax, adjusted for Secure Trust Bank share option scheme costs of £0.3m and acquisition accounting adjustments of £1m and Arbuthnot Latham transformation project costs of £0.2m.

 

ENQUIRIES:
 

Arbuthnot Banking Group                                                                                                      020 7012 2400

Sir Henry Angest, Chairman and Chief Executive                                                                       

Andrew Salmon, Group Chief Operating Officer

James Cobb, Group Finance Director

David Marshall, Director of Communications

 

Canaccord Genuity Ltd (Nominated Advisor)                                                                         020 7665 4500

Sunil Duggal                                                                                                                           

Philippa Underwood

 

Numis Securities Ltd (Broker)                                                                                                020 7260 1000
Chris Wilkinson                                                                                                                      

Mark Lander

 

Bell Pottinger (Financial PR)                                                                                                 020 3772 2563

Ben Woodford                                                                                                                        

Zoe Pocock

 

Chairman's Statement

 

Arbuthnot Banking Group PLC

I am pleased to report that Arbuthnot Banking Group has continued its profitable growth throughout the first half of 2015. The Group has recorded a profit before tax of £15.7m (H1 2014: £9.5m), which is an increase of 65% compared to the same period last year. Customer loan balances continue to grow and now stand at £1.4bn and customer deposits have exceeded £1.5bn for the first time.

 

As a result of the growth in profits the Board has decided to increase the interim dividend by 1p to 12p which will be paid on 2 October 2015 to shareholders on the register at 4 September 2015.

 

Private banking subsidiary - Arbuthnot Latham & Co., Limited

Arbuthnot Latham has reported a profit before tax for the half year of £3.7m (H1 2014: £1.7m), an increase of nearly 111%. This is a result of the bank's investment by hiring additional private bankers over the past two years, which has now led to a substantial increase in new clients opening accounts.

 

In addition to recruitment in London, the bank has also developed in its other markets. The South West regional office in Exeter has agreed a lease and will move into its new offices in the second half of 2015. The North West regional office in Manchester has completed further recruitment of both private bankers and a wealth planner. The Dubai office will break even in July 2015, as expected, just two years after opening for business.

 

The bank has shown good growth, with customer loans increasing to £584m (H1 2014: £394m), deposits up by 31% to £770m (H1 2014: £589m) and assets under management growing to £701m (H1 2014: £566m).

 

Included in customer loans is £101m of the residential mortgage portfolio that was purchased in December 2014. As planned at the time of acquisition, the bank successfully transferred ownership of the loans into its own name in June and at the same time entered into a servicing agreement with Exact Mortgages.

 

As the momentum within the business has grown, the bank has embarked on three significant investment initiatives to support its future growth. Firstly, the bank has begun a transformational upgrade of its operations. The programme includes paperless workflow, standardised customer interaction and the implementation of a new banking platform. The work is expected to be completed by the end of 2016.  Secondly, Arbuthnot Latham has agreed heads of terms to secure 10,000 square feet of additional office space in the City on a short term lease to be occupied in the second half of 2015. Finally, the bank is embarking on its expansion into Commercial Banking. Initially, the focus will be on providing business banking services to its entrepreneurial private banking clients. Recruitment for the new business stream is already underway with several new bankers expected to join in the remaining months of 2015. This proposition is not expected to launch until 2016.

 

Retail banking subsidiary - Secure Trust Bank PLC

The retail bank has reported a record level of first half profits at £16.1m (H1 2014: £11.5m), which represents an increase of 40% on the prior year.

 

The business has continued to implement its strategic plan following the significant capital raising it carried out in 2014.  As a result it has seen continued positive trends in its customer lending balances, which overall have grown by 90% compared to the prior year period to stand at £852m (H1 2014: £448m).

 

Of the more established Consumer Finance businesses, Motor Finance and Retail Finance have performed well. The Motor Finance book has increased to £152m from £128m a year ago, an increase of 19%. The Retail Finance lending has grown to £163m from £91m driven by good lending volumes generated from the sport and leisure and cycle businesses.

 

The SME Lending growth has exceeded expectations, largely due to the Real Estate and Asset Finance products. The Real Estate Finance loan balances have increased to £266m from £13m at 30 June 2014, which was shortly after we had started this line of business. The Asset Finance portfolio has risen to £30m and invoice finance now stands at £16m, both of which commenced business within the last year and are now fully established.

 

The growth in the portfolios continues to be controlled according to our strict lending criteria, with impairments at levels well below our expectations at the time the loans were originated.

 

Secure Trust Bank remains funded from the retail deposit markets. During the first six months of 2015 the bank continued to see a good flow of deposits and has grown the customer deposit balances to £835m (H1 2014: £ 477m), an increase of 75%.

 

Outlook

The economic environment remains favourable, which should allow both banks to continue their growth. With a business friendly government in office for the next five years, we expect the banks will maintain their momentum and continue their long term investment plans. As ever, we remain vigilant as to the political and economic events that are developing in Europe, and elsewhere.

Consolidated Statement of Comprehensive Income

 

 

 

 

Six months ended 30 June

Six months ended 30 June

 

 

 

2015

2014

 

Note

 

£000

£000

Interest income

 

 

77,374

50,909

Interest expense

 

 

(12,925)

(9,844)

Net interest income

 

 

64,449

41,065

Fee and commission income

 

 

16,373

18,240

Fee and commission expense

 

 

(1,815)

(2,123)

Net fee and commission income

 

 

14,558

16,117

Operating income

 

 

79,007

57,182

Net impairment loss on financial assets

 

 

(11,926)

(7,502)

Operating expenses

 

 

(51,345)

(40,155)

Profit before income tax

 

 

15,736

9,525

Income tax expense

 

 

(3,038)

(2,862)

Profit for the period

 

 

12,698

6,663

 

 

 

 

 

Revaluation reserve

 

 

 

 

 - Amount transferred to profit and loss

 

 

 -  

(2)

Cash flow hedging reserve

 

 

 

 

 - Effective portion of changes in fair value

 

 

 -  

378

Other comprehensive income for the period, net of income tax

 

 

 -  

376

Total comprehensive income for the period

 

 

12,698

7,039

 

 

 

 

 

Profit attributable to:

 

 

 

 

Equity holders of the Company

 

 

6,507

3,873

Non-controlling interests

 

 

6,191

2,790

 

 

 

12,698

6,663

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Equity holders of the Company

 

 

6,507

4,249

Non-controlling interests

 

 

6,191

2,790

 

 

 

12,698

7,039

 

 

 

 

 

Earnings per share for profit attributable to the equity holders of the Company during the period

 

 

 

 

(expressed in pence per share):

 

 

 

 

 - basic

3

 

42.6

25.3

 - diluted

3

 

42.4

25.3

Consolidated Statement of Financial Position

 

 

 

 

At 30 June

 

 

 

2015

2014

 

 

 

£000

£000

ASSETS

 

 

 

 

Cash

 

 

224,678

172,402

Loans and advances to banks

 

 

35,865

98,474

Debt securities held-to-maturity

 

 

98,143

49,980

Derivative financial instruments

 

 

1,634

101

Loans and advances to customers

 

 

1,436,381

841,602

Other assets

 

 

17,269

18,573

Financial investments

 

 

1,108

1,622

Deferred tax asset

 

 

1,770

3,080

Investment in associate

 

 

943

943

Intangible assets

 

 

11,100

12,235

Property, plant and equipment

 

 

13,475

5,617

Total assets

 

 

1,842,366

1,204,629

EQUITY AND LIABILITIES

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

Share capital

 

 

153

153

Retained earnings

 

 

118,822

69,739

Other reserves

 

 

(1,263)

(1,091)

Non-controlling interests

 

 

61,716

20,777

Total equity

 

 

179,428

89,578

LIABILITIES

 

 

 

 

Deposits from banks

 

 

10,871

1,619

Deposits from customers

 

 

1,604,929

1,065,678

Current tax liability

 

 

5,487

1,145

Other liabilities

 

 

31,256

33,123

Deferred tax liability

 

 

1,720

Debt securities in issue

 

 

10,395

11,766

Total liabilities

 

 

1,662,938

1,115,051

Total equity and liabilities

 

 

1,842,366

1,204,629 

Consolidated Statement of Changes in Equity

 

 

Attributable to equity holders of the Group

 

 

 

Share capital

Revaluation reserve

Capital redemption reserve

Available-for-sale reserve

Cash flow hedging reserve

Treasury shares

Retained earnings

Non-controlling interests

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

Balance at 1 January 2015

153

98

20

(250)

 -  

(1,131)

114,641

60,038

173,569

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

 

 

Profit for the six months ended 30 June 2015

 -  

 -  

 -  

 -  

 -  

 -  

6,507

6,191

12,698

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of income tax

 

 

 

 

 

 

 

 

 

Revaluation reserve

 

 

 

 

 

 

 

 

 

Cash flow hedging reserve

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 -  

 -  

 -  

 -  

 -  

 -  

6,507

6,191

12,698

 

 

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

Equity settled share based payment transactions

 -  

 -  

 -  

 -  

 -  

 -  

56

36

92

Final dividend relating to 2014

 -  

 -  

 -  

 -  

 -  

 -  

(2,382)

(4,549)

(6,931)

Total contributions by and distributions to owners

 -  

 -  

 -  

 -  

 -  

 -  

(2,326)

(4,513)

(6,839)

Balance at 30 June 2015

153

98

20

(250)

 -  

(1,131)

118,822

61,716

179,428

 

Attributable to equity holders of the Group

 

 

 

Share capital

Revaluation reserve

Capital redemption reserve

Available-for-sale reserve

Cash flow hedging reserve

Treasury shares

Retained earnings

Non-controlling interests

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

Balance at 1 January 2014

153

191

20

(169)

(378)

(1,131)

67,901

20,327

86,914

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

 

 

Profit for the six months ended 30 June 2014

 -  

 -  

 -  

 -  

 -  

 -  

3,873

2,790

6,663

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of income tax

 

 

 

 

 

 

 

 

 

Cash flow hedging reserve

 

 

 

 

 

 

 

 

 

 - Adjustment

 -  

(2)

 -  

 -  

 -  

 -  

2

 -  

 -  

 - Effective portion of changes in fair value

 -  

 -  

 -  

 -  

378

 -  

 -  

 -  

378

Total other comprehensive income

 -  

(2)

 -  

 -  

378

 -  

2

 -  

378

Total comprehensive income for the period

 -  

(2)

 -  

 -  

378

 -  

3,875

2,790

7,041

 

 

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

Equity settled share based payment transactions

 -  

 -  

 -  

 -  

 -  

 -  

196

86

282

Final dividend relating to 2013

 -  

 -  

 -  

 -  

 -  

 -  

(2,233)

(2,426)

(4,659)

Total contributions by and distributions to owners

 -  

 -  

 -  

 -  

 -  

 -  

(2,037)

(2,340)

(4,377)

Balance at 30 June 2014

153

189

20

(169)

 -  

(1,131)

69,739

20,777

89,578

 

Consolidated Statement of Cash Flows

 

 

 

 

Six months ended 30 June

Six months ended 30 June

 

 

 

2015

2014

 

 

 

£000

£000

Cash flows from operating activities

 

 

 

 

Interest received

 

 

73,555

53,775

Interest paid

 

 

(12,512)

(11,240)

Fees and commissions received

 

 

11,482

16,117

Cash payments to employees and suppliers

 

 

(49,020)

(54,804)

Taxation paid

 

 

(1,163)

(3,144)

Cash flows from operating profits before changes in operating assets and liabilities

 

 

22,342

704

Changes in operating assets and liabilities:

 

 

 

 

 - net decrease in derivative financial instruments

 

 

6

36

 - net increase in loans and advances to customers

 

 

(283,097)

(100,072)

 - net increase in other assets

 

 

(403)

(1,306)

 - net decrease in deposits from banks

 

 

(16,786)

(384)

 - net increase in amounts due to customers

 

 

410,644

107,887

 - net (decrease)/increase in other liabilities

 

 

(3,728)

2,106

Net cash inflow from operating activities

 

 

128,978

8,971

Cash flows from investing activities

 

 

 

 

Purchase of financial investments

 

 

(1,580)

 -  

Disposal of financial investments

 

 

1,602

 -  

Purchase of computer software

 

 

(1,200)

(765)

Purchase of property, plant and equipment

 

 

(1,648)

(306)

Proceeds from sale of property, plant and equipment

 

 

 -  

42

Purchases of debt securities

 

 

(152,243)

(37,766)

Proceeds from redemption of debt securities

 

 

145,783

7,252

Net cash outflow from investing activities

 

 

(9,286)

(31,543)

Cash flows from financing activities

 

 

 

 

Dividends paid

 

 

(6,931)

(4,659)

Net cash used in financing activities

 

 

(6,931)

(4,659)

Net increase/(decrease) in cash and cash equivalents

 

 

112,761

(27,231)

Cash and cash equivalents at 1 January

 

 

147,782

298,107

Cash and cash equivalents at 30 June

 

 

260,543

270,876

1.  Operating segments

The Group is organised into three main operating segments as disclosed below:

 

1) Retail banking - incorporating household cash management, personal lending and banking and insurance services.

2) UK Private banking - incorporating private banking and wealth management.

3) Group Centre - ABG Group Centre management.

 

Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis.  Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet.

 

 

Retail banking

UK Private banking

     Group Centre

Total

Six months ended 30 June 2015

£000

£000

£000

£000

Interest revenue

64,162

13,460

60

77,682

Inter-segment revenue

(159)

(89)

(60)

(308)

Interest revenue from external customers

64,003

13,371

 -  

77,374

Fee and commission income

9,482

6,891

 -  

16,373

Revenue from external customers

73,485

20,262

 -  

93,747

 

 

 

 

 

Interest expense

(9,769)

(3,162)

172

(12,759)

Subordinated loan note interest

 -  

 -  

(166)

(166)

Fee and commission expense

(1,635)

(180)

 -  

(1,815)

Add back inter-segment revenue

159

89

(248)

 -  

Segment operating income

62,240

17,009

(242)

79,007

Impairment losses

(11,218)

(708)

 -  

(11,926)

Operating expenses

(34,873)

(12,640)

(3,832)

(51,345)

Segment profit / (loss) before tax

16,149

3,661

(4,074)

15,736

Income tax (expense) / income

(3,132)

 -  

94

(3,038)

Segment profit / (loss) after tax

13,017

3,661

(3,980)

12,698

 

 

 

 

 

Loans and advances to customers

852,291

584,090

 -  

1,436,381

Other assets

149,701

281,135

(24,851)

405,985

Segment total assets

1,001,992

865,225

(24,851)

1,842,366

Customer deposits

835,083

769,846

 -  

1,604,929

Other liabilities

38,555

52,495

(33,041)

58,009

Segment total liabilities

873,638

822,341

(33,041)

1,662,938

Other segment items:

 

 

 

 

Capital expenditure

(1,435)

(1,313)

 -  

(2,748)

Depreciation and amortisation

(799)

(587)

(5)

(1,391)

 

The "Group Centre" segment above includes the parent entity and all intercompany eliminations. Segment profit is shown prior to any intra-group eliminations. The UK private bank opened a branch in Dubai in 2013, which generated £807k (2014: £225k) fee income and had operating costs of £873k (2014: £745k). Other than the Dubai branch, all other operations of the Group are conducted wholly within the United Kingdom and therefore geographical information is not presented.

 

  

 

 

Retail banking

UK Private banking

Group Centre

Total

Six months ended 30 June 2014

£000

£000

£000

£000

Interest revenue

41,576

9,454

58

51,088

Inter-segment revenue

(31)

(87)

(61)

(179)

Interest revenue from external customers

41,545

9,367

(3)

50,909

Fee and commission income

11,227

7,013

 -  

18,240

Revenue from external customers

52,772

16,380

(3)

69,149

 

 

 

 

 

Interest expense

(7,213)

(2,460)

29

(9,644)

Subordinated loan note interest

 -  

 -  

(200)

(200)

Fee and commission expense

(1,825)

(298)

 -  

(2,123)

Add back inter-segment revenue

31

87

(118)

 -  

Segment operating income

43,765

13,709

(292)

57,182

Impairment losses

(6,352)

(1,150)

 -  

(7,502)

Operating expenses

(25,899)

(10,822)

(3,434)

(40,155)

Segment profit / (loss) before tax

11,514

1,737

(3,726)

9,525

Income tax (expense) / income

(3,057)

(88)

283

(2,862)

Segment profit / (loss) after tax

8,457

1,649

(3,443)

6,663

 

 

 

 

 

Loans and advances to customers

447,848

393,754

 -  

841,602

Other assets

122,576

290,903

(50,452)

363,027

Segment total assets

570,424

684,657

(50,452)

1,204,629

Customer deposits

476,783

588,895

 -  

1,065,678

Other liabilities

30,209

65,752

(46,588)

49,373

Segment total liabilities

506,992

654,647

(46,588)

1,115,051

Other segment items:

 

 

 

 

Capital expenditure

(625)

(445)

(1)

(1,071)

Depreciation and amortisation

(1,488)

(308)

(6)

(1,802)

2.  Underlying profit reconciliation

The profit before tax as reported in the operating segments can be reconciled to the underlying profit for the year as disclosed in the tables below.

 

Underlying profit reconciliation

Arbuthnot Latham & Co.

Secure Trust Bank

Arbuthnot Banking Group

Six months ended 30 June 2015

£000

£000

£000

Profit before tax

3,661

16,149

15,736

ELL & V12 fair value amortisation

 -  

950

950

STB acquisition costs

 -  

4

4

STB share options

 -  

271

271

AL transformation project

170

 -  

170

Underlying profit

3,831

17,374

17,131

 

 

 

 

Basic earnings per share (pence)

 

 

46.8

 

Underlying profit reconciliation

Arbuthnot Latham & Co.

Secure Trust Bank

Arbuthnot Banking Group

Six months ended 30 June 2014

£000

£000

£000

Profit before tax

1,737

11,514

9,525

ELL & V12 fair value amortisation

 -  

2,767

2,767

STB acquisition costs

 -  

183

183

STB share options

 -  

754

754

Underlying profit

1,737

15,218

13,229

 

 

 

 

Basic earnings per share (pence)

 

 

38.1  

3.  Earnings per ordinary share

Basic

Earnings per ordinary share are calculated on the net basis by dividing the profit attributable to equity holders of the Company of £6,607,000 (H1 2014: £3,873,000) by the weighted average number of ordinary shares 15,279,322 (H1 2014: 15,279,322) in issue during the year.

 

Diluted

Diluted earnings per ordinary share are calculated on the net basis by dividing the profit attributable to equity holders of the Company of £6,607,000 (H1 2014: £3,873,000) by the weighted average number of ordinary shares 15,279,322 (H1 2014: 15,279,322) in issue during the year, as noted above, as well as the number of dilutive share options in issue during the year. The number of dilutive shares in issue at the half year was 53,699 (H1 2014: 42,533), being based on the number of options granted of 200,000 (H1 2014: 200,000), the weighted exercise price of 994 pence (H1 2014: 994 pence) per option and the average share price during the year of 1359 pence (H1 2014: 1300 pence).

4.  Basis of reporting

The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2014 statutory accounts as amended by standards and interpretations effective during 2015 and in accordance with IAS 34 "Interim Financial Reporting" (except for the comparatives in the statement of financial position). The directors do not consider the fair value of the assets and liabilities presented in these financial statements to be materially different from their carrying value.

 

The statements were approved by the Board of Directors on 20 July 2015 and are unaudited. The interim financial statements will be posted to shareholders and copies may be obtained from The Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 7 Wilson Street, London EC2M 2SN.

 


This information is provided by RNS
The company news service from the
 
END
 
 
IR PKKDDABKDQOB ]]>