Arbuthnot Banking - Half Yearly Report London Stock Exchange
RNS Number : 9054M
Arbuthnot Banking Group PLC
22 July 2014
 



22 July 2014

For immediate release

 

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

Results for the six months to 30 June 2014

"Continued Momentum"

 

Arbuthnot Banking Group is pleased to announce a half yearly profit before tax of £9.5m an increase of 368% compared to the same period in the prior year. Both banks continue to make good progress and with the completion of the £75m institutional placing of shares in Secure Trust Bank PLC, Arbuthnot is well positioned for further growth.

 

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

 

FINANCIAL HIGHLIGHTS

·      Reported profit before tax £9.5m (H1 2013: £2.0m)

·      Underlying profit before tax £13.2m (see footnote)

·      Customer loans £842m (H1 2013: £673m)

·      Customer deposits £1,066m (H1 2013: £840m)

·      Interim dividend per share 11p (H1 2013: 11p)

 

OPERATIONAL HIGHLIGHTS

 

Retail Banking - Secure Trust Bank

·      Profit before tax £11.5m (H1 2013: £6.2m)

·      Customer loans £448m (H1 2013: £366m)

·      Customer deposits £477m (H1 2013: £387m)

 

Private Banking - Arbuthnot Latham

·      Profit before tax £1.7m (H1 2013: £1.0m)

·      Customer loans £394m (H1 2013: £307m)

·      Customer deposits £589m (H1 2013: £453m)

 

Commenting on the results, Henry Angest, Chairman and Chief Executive of Arbuthnot, said: "The Group has made good progress and following the successful raising of £75m of new capital is well placed to pursue the opportunities that exist in the banking industry."

 

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 £0.8m, acquisition accounting adjustments of £2.7m and acquisition costs of £0.2m.

 

ENQUIRIES:

Arbuthnot Banking Group

Henry Angest, Chairman and Chief Executive

Andrew Salmon, Group Chief Operating Officer

James Cobb, Group Finance Director

David Marshall, Director of Communications

 

020 7012 2400

Canaccord Genuity Ltd (Nominated Advisor)

Lawrence Guthrie

Sunil Duggal

 

020 7665 4500

Numis Securities Ltd (Broker)

Chris Wilkinson

Mark Lander

 

020 7260 1000

Bell Pottinger (Financial PR)

Ben Woodford

Zoë Pocock

020 7861 3917

 

Chairman's Statement

 

Arbuthnot Banking Group PLC

I am pleased to report that Arbuthnot Banking Group continued to trade robustly during the first half of 2014. The Group has reported a profit before tax of £9.5m (H1 2013: £2.0m) with underlying profits of £13.2m. I also note that the Group has now exceeded £1bn in customer deposits for the first time.

 

Both of our banks have continued to deliver attractive products to their customers and have seen good growth in all of their business lines.

 

Although not included in these results, I am delighted to note that the Institutional share placing carried out by Secure Trust Bank, was successfully completed early in July. As a result, the Group's shareholding in STB now stands at 53.26%. The effect of this transaction is expected to result in an £73.15m increase in the net assets of the Group, which represents an increase of 81% compared to the position at 30 June 2014, all of which is available to support new business.

 

The Board is maintaining the interim dividend at 11p (gross) which will be paid on 3 October 2014 to shareholders on the register at 5 September 2014.

 

Private banking subsidiary - Arbuthnot Latham & Co., Limited

Arbuthnot Latham reported a profit before tax for the half year of £1.7m (H1 2013: £1.0m), which reflects good momentum in the business. The investment in senior and experienced Bankers and Wealth Managers continued to have a positive impact in the development of a broader based business. There has also been a benefit from fluidity in the market that has seen many private banking clients seeking to diversify their existing relationships and move their business to Arbuthnot Latham.

 

Customer deposits have grown 30% to £588.9m and Customer loans have increased by 28% to £393.8m.

 

The Bank continued to see good quality lending transactions and supported its client base in the fulfilment of several high quality projects. Where appropriate, the opportunity to support clients in their entrepreneurial ambition and value creation is as much a feature of the Arbuthnot Latham philosophy as is the management of their wealth.

 

Investment assets under discretionary management grew by 32% from the prior year to £565.9m. The Bank continued to receive good inflows of new investment assets although investment markets generally have traded within a narrow range during the first half of this year.

 

The Dubai branch will celebrate its first anniversary at the end of July. The early signs for business development have been very positive and a number of new client relationships have been established. Dubai is an important centre for business in the Middle East region and the forecasts for business growth and general economic activity for the years ahead provide the background for an interesting diversification of business opportunities for Arbuthnot Latham.

 

Following a return to profitability of Gilliat Financial Solutions, we have been approached by a third party competitor and have agreed the sale of certain intellectual assets of the business, which will result in the cessation of the business in the third quarter of 2014. The outcome of this is not expected to have a material impact on the full year financial results of the Group.

 

Retail banking subsidiary - Secure Trust Bank PLC

The Retail bank has reported a profit before tax of £11.5m (H1 2013: £6.2m) with record underlying profits of £15.2m, an increase of 48%.

 

The bank has continued to see strong demand for its loan products with the overall loan book closing at £447.8m, which is 22% higher than the prior year.

 

The Retail Finance business has begun its diversification into new markets. It has already managed to sign up a dozen top football clubs to provide finance to their season ticket holders. This has also been enhanced by take up with a number of rugby clubs and additionally the Welsh Rugby Union. Secure Trust Bank continues to enjoy excellent commercial relationships with the Association of Cycle Traders and Creative United (formerly the Arts Council England). The Association of Cycle Traders have recently renewed their term contract with Secure Trust Bank.

 

The SME finance proposition has developed as planned. The Real Estate Finance team has already grown its loan balances to £12m and has seen strong demand in the market with a pipeline of over £70m having been established.

 

The Invoice Finance division continues to build its team having recruited a number of executives and sales directors. The operating platform is being tested with a launch scheduled for the third quarter 2014.

 

Loan impairments have been well controlled and remain below rates that were anticipated when the loans were originated.

The bank has maintained its cautious funding strategy and has no reliance on wholesale funding. Its loan to deposit and capital ratios remain strong.

 

The deposit book increased to £476.8m which is a year on year growth of 23%. Demand for the deposit product offer remains strong, as does the level of customer loyalty with a high level of reinvestment taking place on the maturity of medium term savings bonds.

 

Outlook

The UK banking sector has continued to see a rebalancing, with the larger banks deleveraging and the resultant spare capacity being absorbed by those organisations that have strong balance sheets, access to funding and no constraints caused by exposure to legacy issues. Given the position that both of our banks have created in their respective markets, and the completion of the recent share placing, the Group has confidence in its future prospects and is looking forward to taking advantage of opportunities as they arise.

 

 

Consolidated Statement of Comprehensive Income

 




Six months ended 30 June

Six months ended 30 June




2014

2013


Note


£000

£000

Interest income



50,909

40,931

Interest expense



(9,844)

(10,868)

Net interest income



41,065

30,063

Fee and commission income



18,240

14,062

Fee and commission expense



(2,123)

(927)

Net fee and commission income



16,117

13,135

Operating income



57,182

43,198

Net impairment loss on financial assets



(7,502)

(8,150)

Other income

2


 -  

842

Operating expenses



(40,155)

(33,853)

Profit before income tax



9,525

2,037

Income tax expense



(2,862)

(633)

Profit for the period



6,663

1,404






Revaluation reserve





 - Amount transferred to profit and loss



(2)

48

Cash flow hedging reserve





 - Effective portion of changes in fair value



378

7

Other comprehensive income for the period, net of income tax



376

55

Total comprehensive income for the period



7,039

1,459






Profit attributable to:





Equity holders of the Company



3,873

5

Non-controlling interests



2,790

1,399




6,663

1,404






Total comprehensive income attributable to:





Equity holders of the Company



4,249

60

Non-controlling interests



2,790

1,399




7,039

1,459






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





(expressed in pence per share):





 - basic and fully diluted

4


25.3

 -  

 

 

Consolidated Statement of Financial Position

 




At 30 June




2014

2013




£000

£000

ASSETS





Cash



172,402

117,724

Loans and advances to banks



98,474

82,168

Debt securities held-to-maturity



49,980

16,477

Derivative financial instruments



101

Loans and advances to customers



841,602

673,204

Other assets



18,573

17,110

Financial investments



1,622

3,358

Deferred tax asset



3,080

4,724

Investment in associate



943

Intangible assets



12,235

14,014

Property, plant and equipment



5,617

22,352

Total assets



1,204,629

951,131

EQUITY AND LIABILITIES





Equity attributable to owners of the parent





Share capital



153

153

Retained earnings



69,739

51,245

Other reserves



(1,091)

(1,198)

Non-controlling interests



20,777

15,805

Total equity



89,578

66,005

LIABILITIES





Deposits from banks



1,619

1,163

Derivative financial instruments



6

Deposits from customers



1,065,678

840,358

Current tax liability



1,145

290

Other liabilities



33,123

29,755

Deferred tax liability



1,720

974

Debt securities in issue



11,766

12,580

Total liabilities



1,115,051

885,126

Total equity and liabilities



1,204,629

951,131

 

 

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 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










Revaluation reserve










 - Amount transferred to profit and loss

 -  

(2)

 -  

 -  

 -  

 -  

2

 -  

 -  

Cash flow hedging reserve










 - 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

 

 


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 2013

153

140

20

81

(363)

(1,131)

53,372

16,376

68,648











Total comprehensive income for the period










Profit for the six months ended 30 June 2013

 -  

 -  

 -  

 -  

 -  

 -  

5

1,399

1,404











Other comprehensive income, net of income tax










Cash flow hedging reserve reserve










 - Adjustment

 -  

48

 -  

 -  

 -  

 -  

(48)

 -  

 -  

 - Effective portion of changes in fair value

 -  

 -  

 -  

 -  

7

 -  

 -  

 -  

7

Total other comprehensive income

 -  

48

 -  

 -  

7

 -  

(48)

 -  

7

Total comprehensive income for the period

 -  

48

 -  

 -  

7

 -  

(43)

1,399

1,411











Transactions with owners, recorded directly in equity










Contributions by and distributions to owners










Final dividend relating to 2012

 -  

 -  

 -  

 -  

 -  

 -  

(2,084)

(1,970)

(4,054)

Total contributions by and distributions to owners

 -  

 -  

 -  

 -  

 -  

 -  

(2,084)

(1,970)

(4,054)

Balance at 30 June 2013

153

188

20

81

(356)

(1,131)

51,245

15,805

66,005

 

Consolidated Statement of Cash Flows

 




Six months ended 30 June

Six months ended 30 June




2014

2013




£000

£000

Cash flows from operating activities





Interest received



53,775

40,471

Interest paid



(11,240)

(11,185)

Fees and commissions received



16,117

13,135

Net trading and other income



 -  

842

Cash payments to employees and suppliers



(54,805)

(38,252)

Taxation paid



(3,144)

(689)

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



703

4,322

Changes in operating assets and liabilities:





 - net decrease in derivative financial instruments



36

192

 - net increase in loans and advances to customers



(100,071)

(91,678)

 - net increase in other assets



(1,306)

(5,444)

 - net (decrease)/increase in deposits from banks



(384)

790

 - net increase/(decrease) in amounts due to customers



107,887

(54,187)

 - net increase in other liabilities



2,106

6,734

Net cash inflow/(outflow) from operating activities



8,971

(139,271)

Cash flows from investing activities





Purchase of computer software



(765)

(3,631)

Purchase of property, plant and equipment



(306)

(286)

Disposal of property, plant and equipment



 -  

2,000

Proceeds from sale of property, plant and equipment



42

11

Purchases of debt securities



(37,766)

(6,957)

Proceeds from redemption of debt securities



7,252

4,006

Net cash outflow from investing activities



(31,543)

(4,857)

Cash flows from financing activities





Dividends paid



(4,659)

(4,054)

Net cash used in financing activities



(4,659)

(4,054)

Net decrease in cash and cash equivalents



(27,231)

(148,182)

Cash and cash equivalents at 1 January



298,107

348,074

Cash and cash equivalents at 30 June



270,876

199,892

 

 

 

 

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 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)

 

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, the results of which are currently immaterial. 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 2013

£000

£000

£000

£000

Interest revenue

33,171

7,876

50

41,097

Inter-segment revenue

 -  

(116)

(50)

(166)

Interest revenue from external customers

33,171

7,760

 -  

40,931

Fee and commission income

8,163

5,899

 -  

14,062

Revenue from external customers

41,334

13,659

 -  

54,993






Interest expense

(6,602)

(4,108)

50

(10,660)

Subordinated loan note interest

 -  

 -  

(208)

(208)

Fee and commission expense

(743)

(184)

 -  

(927)

Add back inter-segment revenue

 -  

116

(116)

 -  

Segment operating income

33,989

9,483

(274)

43,198

Impairment losses

(7,541)

(609)

 -  

(8,150)

Other income

17

825

 -  

842

Operating expenses

(20,258)

(8,729)

(4,866)

(33,853)

Segment profit / (loss) before tax

6,207

970

(5,140)

2,037

Income tax (expense) / income

(1,375)

424

318

(633)

Segment profit / (loss) after tax

4,832

1,394

(4,822)

1,404






Loans and advances to customers

365,786

307,418

 -  

673,204

Other assets

98,042

205,536

(25,651)

277,927

Segment total assets

463,828

512,954

(25,651)

951,131

Customer deposits

387,291

453,067

 -  

840,358

Other liabilities

27,317

34,012

(16,561)

44,768

Segment total liabilities

414,608

487,079

(16,561)

885,126

Other segment items:





Capital expenditure

(347)

(453)

 -  

(800)

Depreciation and amortisation

(1,524)

(326)

(6)

(1,856)


2.  Other income
Other income for 2013 mainly consist out of rental income received from the letting of the premises at Wilson Street.

3.  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 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

Underlying profit reconciliation
Arbuthnot Latham & Co.
Secure Trust Bank
Arbuthnot Banking Group
Six months ended 30 June 2013
£000
£000
£000
Profit before tax
970
6,207
2,037
ELL & V12 fair value amortisation
 -  
2,766
2,766
STB acquisition costs
 -  
384
384
STB share options
 -  
1,021
1,021
ABG share options
 -  
 -  
1,021
Underlying profit
970
10,378
7,229
 
 
 
 
Basic earnings per share (pence)
 
 
20.7

4. Earnings per ordinary share
Basic and fully diluted
Earnings per ordinary share are calculated on the net basis by dividing the profit attributable to equity holders of the Company of £3,873,000 (2013: £5,000) by the weighted average number of ordinary shares 15,279,322 (2013: 15,279,322) in issue during the year. There is no difference between basic and fully diluted earnings per ordinary share.

5. Basis of reporting
The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2013 statutory accounts as amended by standards and interpretations effective during 2014 and in accordance with IAS 34 "Interim Financial Reporting". 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 21 July 2014 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, 20 Ropemaker Street, London EC2Y 9AR.

6. Events after the balance sheet date
On 19 June 2014 Secure Trust Bank PLC announced a proposed placing to institutional investors of 3,125,000 Ordinary Shares in aggregate, comprising 2,083,333 new Ordinary Shares to be issued by Secure Trust Bank PLC and 1,041,667 existing Ordinary Shares to be sold by Arbuthnot Banking Group PLC. 

On 9 July 2014 the new and existing shares were placed at a price of £24.00 per share following approval of the Resolutions for the issue and allotment of the new Ordinary Shares at a General Meeting. The placing of the shares raised £73.15 million, net of estimated expenses, whilst the shareholding of Ordinary Shares by Arbuthnot Banking Group PLC post-placing reduced from 67.0% to 53.3% of the new enlarged issued share capital of Secure Trust Bank PLC.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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