Close Brothers resilient despite Brexit uncertainty
UK merchant bank says loan book grew by 9.3% in 2016
Close Brothers Group, the UK merchant bank, posted a 2.3 per cent rise in its loan book in the five months to December 2016, in an indication of the recent resilience of the wealth management sector.
For the whole of 2016, the bank reported that its loan book had grown by 9.3 per cent to £6.6bn.
The merchant bank is one of several midsized financial services companies to report growth despite the continuing uncertainty in the markets following the UK’s decision to leave the EU in last year’s referendum.
In its third-quarter results for 2016, wealth manager St James’s Place reported that new investment was 21 per cent higher, at £2.8bn, over three months to September. David Bellamy, chief executive, said at the time that despite the backdrop of political uncertainty, it was “very much business as usual”.
In November, Arbuthnot Banking Group paid a further special dividend of £3 per share on the back of half-year profits of £225m — up from £12.7m over the same period in 2015. Profits were boosted by the sale of its Everyday Loans division and a reduction in ABG’s holding in Secure Trust Bank.
And in September, private banks Lombard Odier and Kleinwort Benson — now Kleinwort Hambros — announced further job hires in London despite market quivers over Brexit.
The wealth management sector is in the throes of a wave of consolidation. In December, Duncan Lawrie was broken up and sold to Brewin Dolphin and Arbuthnot Latham, with Brewin paying £28m for the private bank’s asset management business and Arbuthnot scooping up the £44.9m loan book for £42.7m.
Also last year, Liechtenstein’s LGT Group took a majority stake in London-based boutique, Vestra Wealth, and Société Générale moved to buy City stalwart Kleinwort Benson.
Close ascribed its five-month performance to “good growth particularly in the premium finance and property businesses”.
Its share price nudged higher, gaining almost 0.5 per cent in early trading on Friday.
However, analysts remain cautious about the sector’s prospects. Shore Capital has upgraded its full-year adjusted earnings per share estimate for Close Brothers by 3 per cent, but analyst Gary Greenwood said he would leave subsequent years “broadly unchanged”.
“We think the drivers of the upgrade may not be sustainable,” he wrote in an analyst’s note.