Close Brothers loan book rises, hails good start to year

FTSE 250 merchant bank Close Brothers reported a 1.4% rise in its loan book for the first quarter, saying it has made “a good start” to the year with continued strong profitability across all three divisions.

In the quarter from 1 August to 31 October, the loan book grew to £7bn, helped along by good growth in Property and Premium Finance. Loan books in Asset and Motor Finance remained broadly flat, as expected, as the company maintained its underwriting and pricing discipline.

The company said its securities division, Winterflood, benefited from continued retail investor trading activity, although it gave no actual figures.

The asset management arm, meanwhile, continued to benefit from strong net inflows as well as positive market movements, with managed assets increasing 6.5% to £9.5bn and total client assets rising to £11.7bn from £11.2bn.

Close said that both the net interest margin and bad debt ratio remained in line with the last financial year, and it has not seen any significant change in credit performance or trading conditions.

“We achieved a good performance in the first quarter and, at this early stage, remain well positioned for the remainder of the financial year,” it said.

Canaccord Genuity said: “We think this statement could be enough to turn the stock's sharp recent and year-to-date underperformance against the FTSE 250 and UK banks index, which has coincided with little change in consensus estimates. At this early stage in the year, we make no changes to our forecasts and do not anticipate a material movement in consensus.”

At 0940 GMT, the shares were up 4.4% to 1,374p.