Merchant bankers Close Brothers posted a 13% rise in full-year pre-tax profits today that the group credited to underwriting discipline combined with investment into new products and markets.
Adjusted operating profit was £264.8m up from £233.6m last year with a return on opening equity of 17.9%.
Despite the rise, shares in the company fell by almost 9% in morning trading as the company announced that the competitive environment in banking remains challenging for some of its businesses.
It added: “We continue to monitor market conditions carefully for any change in demand or credit performance. The UK motor finance market remains highly competitive and we continue to prioritise margin and credit quality.”
Profit growth across the board
All three of Close Brothers’ divisions saw profit growth. This was due to favourable financial market conditions that benefited both Winterflood and Asset Management.
Winterflood, the group’s securities arm, delivered a profit leap of almost 50% to £28.1m from £19.0m last year. The boost came from high levels of retail trading activity with the company reporting only one loss day this year.
Asset Management had an adjusted operating profit of £17.4m that was up 21% on the prior year. This was attributed to good net inflows, reflecting continued demand for its integrated advice and investment management services.
An operating profit increase of 24% in property finance saw the banking division report a 9% rise with an adjusted operating profit of £243.5m.
The company said: “Property Finance had a particularly successful year, achieving strong growth in both operating profit and the loan book. The business benefited from continued demand for residential property finance, particularly new build family homes. It remains well positioned competitively, reflecting the specialised nature of our lending and our many years of experience in this market."
Diverse loan book
In lending, the loan book grew 7.0% to £6.9bn aided by low interest rates. An increase supported by continued low impairments and an abundant supply of credit creating no change to the current highly competitive lending environment.
Its diverse loan book allows some businesses to grow faster than others at the current point in the cycle. Both property and premium finance delivered good growth in the year, with asset and motor finance both broadly flat.
It warned that although current market conditions remain stable overall, the longer-term economic outlook and impact of Brexit on its customers and wider markets remain uncertain.
Prebensen added: " In an evolving market environment, we remain committed to our established business model, which relies on the expertise of our people to deliver consistently high levels of service, building deep and sustainable relationships with clients and intermediaries.
“As a business, we remain well positioned longer-term, focusing on protecting our margins and underwriting discipline, improving our model through continued investment and extending into new products and markets."