Always grave, never serious at Arbuthnot

Arbuthnot (ARBB) has always cultivated an appearance of sublime indifference to fashion, trends in finance, or anything so base as actively marketing to clients. The fact that is has returned to stable profitability, despite the turmoil of the past few months, is a testament to its sticking to core principles. For example, the company does not have a Russia desk to service the oligarchs who may have elected to use its services. Officially this is related to risk profile, though one suspects that knowing when to wear the correct yachting shoes at Cowes Week also plays a role in client selection.

Like all banks, Arbuthnot is enjoying a rare period of high margins as the rates on deposits have yet to catch with the rise in the base rate. That means the bank made a monthly underlying profit of £2mn in May and June alone, though management warned that this might reverse in the second half. The impression is that Arbuthnot has not been actively adding to its deposit roll – it allowed £100mn of deposits to mature during the half and the total book remains flat at £2.8bn compared with 2021. In common with peers, Arbuthnot struggled to maintain the nominal level of assets of under management in its wealth arm and saw market movements knock 4 per cent from the £1.3bn total.

Arbuthnot met forecasts for the half and look set to meet expectations for the year. Prior to these results, broker Numis forecast EPS for 2022 of 56.1p, giving a total price/earning ratio of 15 for the year. The hybrid model means the shares are a premium to High Street lenders, but the business is safe, rather than innovative. Hold.

Last IC view: Hold, 805p, 15 Jul 2020