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Arbuthnot Banking Group PLC
24 May 2023
Arbuthnot Banking Group PLC
Annual General Meeting 2023 Trading Update
The Board of Arbuthnot Banking Group PLC ("Arbuthnot", "the
Company", "the Bank" or "the Group") is pleased to make the
following statement regarding the trading performance of the Group
for the four months to 30 April 2023 ahead of the Annual General
Meeting due to be held later today.
Highlights
-- The Group continues to benefit from the business model it has
established over many years, whereby the return of a higher Bank of
England ("BoE") Base Rate brings increased revenue on both its
lending and excess liquidity.
-- BoE Base Rate rises continue to contribute to increased
revenue, with deposit costs due to increase over time.
-- Loan Balances including Leased Assets at 30 April 2023 of
GBP2,234m (30 April 2022: GBP2,061m, 31 December 2022: GBP2,216m),
a 1% increase on the 31 December 2022 balance and an 8% increase
year on year.
-- Deposits of GBP3,255m (30 April 2022: GBP2,752m, 31 December
2022: GBP3,090m), a 5% increase since the year end and an 18%
increase year on year.
-- Assets Under Management ("AUM") of GBP1,376m, a 4% increase
against 31 December 2022 and an increase of 2% year on year.
Summary
Since the end of 2022, the Bank of England Base Rate has had
three further rate increases, from 3.50% at the year end to 4.50%
currently. As previously reported, the Group benefits from Base
Rate rises immediately as its treasury assets and the majority of
its loan book are referenced to the BoE Base Rate. In response the
Group has also increased its deposit pricing. However, the blend of
call, current, time and notice accounts mean the increase in the
cost of deposits lags behind that of the revenue generated from the
Group's assets. Deposit balances have continued to grow with a net
inflow of GBP165m for the period, despite the Bank allowing some
non-relationship deposits to mature and not be renewed.
As expected, loan book growth for the 4 months to end of April
was lower than previous periods, as the Group endeavoured to
tighten its credit criteria whilst demand for lending post-pandemic
has been suppressed by rising inflation and the financial impact of
the war in Ukraine.
The Group was pleased to announce in April 2023 that it had
raised GBP12m through an equity capital raising. The new capital
will enable the Group to maintain its current growth momentum
aspirations for 2023 and beyond. The Board also noted that the
additional capital would allow the Group to take advantage of the
opportunities that are expected to emerge. The first of these has
been agreed, with the Group's Asset Alliance business purchasing
GBP42m of operating leases at a discount to face value.
The Board believes that the successful capital raise also
demonstrates shareholders' confidence in the Group's business model
and core principles of lending against high quality security whilst
maintaining high levels of liquidity.
Banking
Against the backdrop of ongoing economic uncertainty, the Bank
has continued to stay focused on client service, which has led to
growth in client acquisition for both deposits and lending in the
first four months of 2023.
The Bank's long term approach and cautious banking model
resonates well with criteria clients looking for a bank where they
can build a long term relationship.
Deposits grew GBP165m in the first four months of 2023 to reach
GBP3,255m at the end of April, despite the turbulence in the global
banking sector. The cost of deposits has increased but at a slower
rate than the BoE Base Rate increases given the mix of deposits,
with growth in current, call, time and notice products.
Lending increased marginally by GBP10m for the 4 months and is
on plan reflecting the continued focus on allowing capital
intensive lending to mature and refinance away, to be replaced with
more capital efficient lending, whilst the Group also tightened its
credit criteria. The impact of the changing macroeconomic
environment is resulting in some signs of stress in the loan book,
however given the Bank's cautious underwriting approach with low
LTV ratios, the Bank is well positioned to exit any defaults with
little or no loss.
Wealth Management
Total AUMs have increased 4% for the first four months of 2023
to GBP1,376m at the end of April 2023 as a result of positive net
inflows and market performance.
Arbuthnot Commercial Asset Based Lending ("ACABL")
In early May, ACABL celebrated its 5(th) year anniversary. Since
launch, the business has grown its loan book with facility limits
in excess of GBP500m and built a team of 31 highly experienced
staff.
Demand for ACABL products slowed towards the end of 2022 which
has carried over into early 2023, with fewer corporate finance
transactions proposed due to ongoing market challenges. The
business has been introduced to, but declined, an increased number
of refinancing opportunities due to a more cautious approach being
taken in the current market. Funds in use finished the period at
GBP256m, compared to GBP269m for the previous year end as a more
conservative approach to lending has been adopted and some expected
client attrition has been seen, coupled with reduced activity from
Private Equity sponsors.
In the first quarter ACABL renewed its accreditation to provide
Recovery Loan Scheme loans as a continued additional source of
funding for deal structures where appropriate.
Renaissance Asset Finance ("RAF")
RAF finished the period with a loan book of GBP146m, up 9% from
the year end, with 48% year on year growth.
New business levels have remained positive and the balance sheet
continues to grow in line with the new Future State plan, with
improved margins achieved on new business despite the current
economic environment.
Whilst some pressure is expected, particularly in the SME
customer base, the book continues to perform in the current
economic climate with problem debts marginally lower than
expected.
Asset Alliance Group ("AAG")
AAG continues to trade well with Assets Available to Lease of
GBP209m at the end of April 2023, equating to year on year growth
of 66%, and 11% year to date.
Supply chain issues, although slowly resolving, continue to be a
headwind although it is expected that these issues will improve in
the near term. Where in prior periods, supply chain issues have led
to a buoyant used truck market, the business expects this market to
weaken, but margins currently remain stronger than expected.
AAG has agreed terms to purchase GBP42m of operating leases at a
discount to face value, to provide buses for contracted operations
in London. This is expected to draw down on 26 May 2023.
The Directors of the Company accept responsibility for the
contents of this announcement.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Enquiries:
Arbuthnot Banking Group
Sir Henry Angest, Chairman and Chief
Executive
Andrew Salmon, Group Chief Operating
Officer
James Cobb, Group Finance Director 020 7012 2400
Grant Thornton UK LLP (Nominated
Adviser and
AQSE Exchange Corporate Adviser)
Colin Aaronson
Samantha Harrison
George Grainger
Ciara Donnelly 020 7383 5100
Shore Capital (Broker)
Daniel Bush
David Coaten
Tom Knibbs 020 7408 4090
H/Advisors Maitland (Financial PR)
Sam Cartwright 020 7379 5151
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END
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May 24, 2023 02:00 ET (06:00 GMT)
Arbuthnot Banking (AQSE:ARBB)
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