Banking drives Close Brothers growth

19th May 2011 16:08

Close Brothers is on course to meet full year expectations after a strong start to 2011 by its banking and securities divisions.The banking division has seen a 4% increase in the loan book to £3.3bn at the end of April from £3.2bn at the end of January. The net interest margin has remained strong and the bad debt ratio has reduced slightly, in line with the group's previously stated expectations. The third quarter (January to March) of the group's financial year was a sound one for the securities division, though April was a quieter month. Average bargains per day at the Winterflood brokerage unit have been broadly in line with the first half of the financial year, although income per bargain was modestly lower. Close Brothers Seydler has been resilient in the period reflecting good volumes in the German market although this was offset by a subdued performance for Mako, the group said.Funds under Management (FuM) in the asset management unit have remained broadly unchanged at £8.2bn relative to the position at 31 January 2011, principally reflecting the acquisition of Allenbridge Group, with £440m client assets offset by the sale of £554m of FuM related to the property funds management business.Broker Singer Capital Markets noted the sound performance of the banking division and opined: "Provided the management execute a turn around in the asset management segment into a more profitable division the shares trading on 9.7x July 2012 consensus estimates look very cheap."According to Singer, "given the historic multiple of Close Brothers is closer to 12x, the shares, if management deliver, could be worth closer to £10." ---jh