Close Brothers (CBG) suffered a dip in operating profit during the first half after the challenger bank’s bad debt ratio rose to 0.9 per cent, from 0.6 per cent the same time the prior year. However, this rise in impairments reflected a series of “unconnected dots” – a small number of larger defaults in the commercial loan book – rather than a consistent trend, said chief executive Preben Prebensen.
The loan book was flat as political and economic uncertainty weakened towards the end of last year, while continued competition within commercial lending markets meant the net interest margin declined to 7.8 per cent, from 8.1 per cent.
Net inflows into the asset management division were behind the prior year, but still came in at a respectable £672m. However, given income is earned based on the level of assets under management, a prolonged market decline during the second half could reverse the revenue gains enjoyed during the period. Conversely, increased volatility could provide a fillip to earnings for broking services provider Winterflood, which benefited from election-based market fluctuations.
Analysts at Investec forecast adjusted net tangible assets of 857p a share at the July 2020 financial year-end, rising to 916p the same time the following year.
| CLOSE BROTHERS (CBG) | ||||
| ORD PRICE: | 1,155p | MARKET VALUE: | £1.75bn | |
| TOUCH: | 1,154-1,156p | 12-MONTH HIGH: | 1,663p | LOW: 1,014p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 949p | LEVERAGE: | 8.7 | |
| Half-year to 31 Jan | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 407 | 136 | 68.1 | 22.0 |
| 2020 | 420 | 124 | 63.0 | 22.7 |
| % change | +3 | -9 | -7 | +3 |
| Ex-div: | 19 Mar | |||
| Payment: | 22 Apr |
