Close Brothers Group PLC has released its trading update for the third quarter of the 2024 financial year. The Chief Executive Officer, Adrian Sainsbury, highlighted the continued loan book growth, strong margins, and resilient credit quality in the Banking division. The loan book in Banking increased by 1.5% in the quarter, mainly driven by strong customer demand in Property and continued growth in the UK Motor Finance and Invoice Finance loan books. The recently acquired Motor Finance business in the Republic of Ireland is also performing well.
The net interest margin (NIM) for the year-to-date was 7.4%, reflecting continued pricing dynamics from a higher interest rate environment and lower fees. The company expects a stable NIM for the remainder of the year. Close Brothers anticipates 8-10% growth in Banking costs for the 2024 financial year, excluding costs related to the recently acquired Irish Motor Finance business. The bad debt ratio for the year-to-date was 0.9%, and the company expects it to be below the long-term average of 1.2% for the 2024 financial year.
Close Brothers Asset Management (CBAM) delivered strong year-to-date annualized net inflows of 9% and continued to attract new client assets. Winterflood's performance improved in the quarter, resulting in an operating profit of £1.7 million. The Group reported net expenses of £11.6 million in the quarter and expects a higher level of net expenses for the remainder of the 2024 financial year, primarily due to an increase in professional fees and expenses associated with the FCA's review of historical motor finance commission arrangements.
The company maintained a strong balance sheet and a prudent approach to managing financial resources, with a diverse funding base that increased to £13.1 billion. Customer deposits grew 6% in the quarter to £8.8 billion. Close Brothers is currently conducting a Past Business Review of customer forbearance related to its motor finance lending, with an estimated total impact from the review and potential customer compensation to be in single-digit millions.
In conclusion, Close Brothers Group PLC remains committed to executing its strategy and protecting its valuable franchise, making good progress against the actions outlined to strengthen its capital position, and focusing on positioning the group to resume its track record of earnings growth and attractive returns.