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Close Brothers profit drops amid challenging market conditions

By Verdict Staff

September 23, 2020

Close Brothers profit drops amid challenging market conditions

Close Brothers Group has reported a decrease in profit, with a rise in impairments amid the Covid-19 crisis.

Highlights

In its preliminary results, the firm revealed that its adjusted operating profit in the year to July stood at £144m. This is a 47% decrease from £270.5m in fiscal 2019.

Profit attributable to shareholders dropped 46% to £109.5m from £201.6m over the period.

Driven by the pandemic, impairment charges rose to £183.7m from £48.5m.

The group’s CET1 capital ratio, a key measure of strength, was 14.1% at the end of July 2020. The comparable prior year ratio was 13%.

The leverage ratio increased to 11.2% as of 31 July 2020, versus 11% in the previous year.

Risk weighted assets (RWAs) remained almost unchanged at £8.9bn. This was due to lower credit risk RWAs, which was offset by a fall in operational risk RWAs.

The board proposed a full-year dividend of 40p per share, compared to 66p in the prior year.

Earlier this year, Close Brothers had suspended its 2020 interim dividend to support businesses and individuals during the pandemic.

The Asset Management unit continued to report “strong net inflows” though adjusted operating profit dropped 6% to £20.4m from £21.8m.

Performance was strong at broker Winterflood, with operating profit increasing to £47.9m from £20m.

Close Brothers CEO Adrian Sainsbury said: “The impact of Covid-19 has been felt across our businesses and the outlook is still uncertain, but the fundamental strengths of Close Brothers remain unchanged.”

Change in directorate

Geoffrey Howe, Close Brother’s independent non-executive director and senior independent director, has unveiled that he will not stand for re-election at the company’s Annual General Meeting (AGM).

The board is currently in a lookout for Geoffrey’s replacement.

Oliver Corbett will replace Geoffrey on an interim basis.

Corbett currently is the independent non-executive director and chair of the audit committee.

Until the appointment of Geoffrey’s successor, he will serve as the senior independent director.