Close Brothers Group PLC has released its trading update for the first quarter of its 2024 financial year, covering the period from 1 August 2023 to 31 October 2023. The update highlights continued momentum in the Banking division, with loan book growth, strong margins, and stable credit performance. However, the market-facing businesses were impacted by unfavorable market conditions.
In the Banking division, the loan book increased by 3.0% in the quarter and 7.5% year-on-year to £9.8 billion. This growth was driven by good demand in the Commercial sector, strong new business volumes in Leasing and Invoice Finance, and growth in the UK Motor Finance and Premium Finance businesses. The Property loan book also continued to grow. The acquisition of Bluestone Motor Finance (Ireland) DAC was completed on 31 October 2023, providing a platform for Close Brothers to re-establish its Motor Finance business in Ireland.
The annualized year-to-date net interest margin remained strong at 7.6%, reflecting the company's focus on maintaining pricing discipline in a higher interest rate environment. Close Brothers continued to invest in strategic programs and make progress with cost management initiatives. The company expects growth in Banking costs for the full year 2024 to be within the 8-10% range.
Close Brothers Asset Management (CBAM) delivered strong year-to-date annualized net inflows of 10%, with the new bespoke investment managers contributing significantly. However, managed assets decreased slightly to £16.2 billion, primarily due to unfavorable market movements. Winterflood's performance was adversely impacted by weakening investor appetite and market uncertainty, resulting in an operating loss of £2.5 million in the first quarter.
The Group's net expenses for the quarter were £9.5 million, primarily driven by net interest expenses from debt issued by the holding company. Close Brothers maintained a strong balance sheet and prudent management of financial resources. The funding base increased to £12.7 billion, and the retail deposit base grew by 5% to £4.4 billion. The Common Equity Tier 1 (CET1) capital and Total Capital ratios were 12.7% and 14.7%, respectively, at 31 October 2023.
Looking ahead, Close Brothers expects its Banking business to sustain its growth momentum and remain well positioned to take advantage of opportunities in the current environment. CBAM will continue to drive growth organically through high-quality hiring and in-fill acquisitions. Winterflood will focus on navigating market uncertainty. The company remains committed to optimizing its capital structure and targeting a CET1 capital ratio range of 12% to 13% over the medium term.