Close Brothers’ profits plummeted by 13% in the year to July for its Winterflood business, due to unstable markets and a dip in trading activity.
As a result of Winterflood’s 77% profit decline to £14.1 million from £60.9 million in the prior year, the group’s adjusted operating profit decreased to £234.8 million from £270.7 million in the 12 months to July.
Although the asset management sector of the company experienced difficulty, the core banking division’s earnings increased by 7% to £227 million.
Close Brothers Asset Management’s adjusted operating profit decreased by 8% to £21.7 million as a result of lower revenue in the second half of the year and higher employee costs.
Despite declining markets and their effects on broader client sentiment in the second half of the year, positive net inflows of £844 million for the year and market moves in the first half of the year increased CBAM’s overall operating income by 6% to £148 million.
Total managed assets fell by 2% to £15.3 billion as negative market moves totaling £1.1 billion outweighed net inflows. To reach £16.6 billion, total client assets—including advised and managed assets—fell 3% overall.
“Falling markets had an impact on CBAM, but it was still able to draw in client funds. In stark contrast to the very favorable circumstances the year before, Winterflood had deteriorating markets and decreased trading activity ” CEO Adrian Sainsbury said.
The revenue margin decreased to 87bps from 91bps in 2021 as a result of increasing flows of products with lower margins. This is due to lower investment management margins.
Adjusted operating expenditures rose 9% to £126.3 million as labor costs grew due to inflation and new hiring. The company also continued to invest in its re-platforming project, which will increase productivity and improve the customer experience.
The board is recommending a final dividend of 44p per share, which would bring the group’s total payout for the year to 66p, up 10% and returning the dividend to its pre-pandemic level. According to data from Morningstar, the group’s share price is down 33.4% for the year thus far.
