Close Brothers confident over outlook, reports loan book growth

FTSE 250 merchant bank Close Brothers expressed confidence over its full-year results as it reported growth in its loan book.

In the five months to the end of December, the loan book was up 2.3% to £6.6bn, driven by good growth, particularly in the premium finance and property businesses. On the year, this was a 9.3% rise.

The group said its banking division generated strong returns and profit growth during the period, thanks to higher income, a stable net interest margin and a lower bad debt ratio, as a result of continued good underlying credit performance and provision releases.

Close Brothers’ market-making business, Winterflood, delivered a “good performance,” with strong retail trading activity throughout the period.

Meanwhile, the asset management business was underpinned by improved market conditions and net inflows were positive. Overall, however, managed assets dipped to £7.8bn from £8bn at the end of July 2016 due to the disposal of OLIM Investment Managers.

“Given our performance year to date, we are confident in delivering a strong result for the first half as well as a good outcome for the full 2017 financial year.”

RBC Capital Markets said: “A positive statement from Close on all metrics. We forecast FY17E earnings per share of 124.9p which is 1% ahead of Bloomberg consensus at 123.7p, and we believe that consensus forecasts will be subject to upward revisions of at least a few percentage points.”

Meanwhile, Numis said: "The outlook statement for the second half of the year as well as the year as a whole is positive and there is nothing in the statement for the bears. We expect to upgrade our forecasts for this year by about 5%. We continue to believe that Close will perform well through the cycle and is a low risk way to play UK banking."

At 0900 GMT, the shares were up 0.4% to 1,438p.