Reports

Tougher Economy Squeezes Arbuthnot Latham Profits

Tom Burroughes, Group Editor, London, 15 July 2020

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As a number of other banking groups demonstrated, higher provisions to cope with the expected problems stemming from the pandemic took a toll on the bottom line. The group said there were encouraging results in part of its wealth management operations, however.

UK-based Arbuthnot Latham, part of Arbuthnot Banking Group, yesterday reported a pre-tax profit for the six months to 30 June of £5.0 million, contracting from £6.7 million a year earlier, squeezed by higher credit provisions and cuts to official Bank of England base rates.

Within Arbuthnot Latham’s private banking arm, it logged a £2.3 million loss, reversing from an £800 million profit a year before. Incremental credit provisions and lower official rates hit the bottom line, it said in a statement.

The firm said that one of its private bank “leading indicators” - customer balances - showed “good growth in the first six months of 2020”. Deposit balances rose slightly (1 per cent) to £1.05 billion and loan balances rose by 2 per cent to £564 million. 

“In due course, we expect a portion of the increase in deposit balances will lead to new investment management and wealth planning opportunities. We are pleased with this performance given the external environment and pricing pressure seen for deposits and lending,” the firm said. 

“The wealth management division experienced significant global market volatility as the pandemic took effect. Investment management focused on existing clients as well as new to bank clients, a strategy that proved fruitful with positive net flows and £58.3 million of gross inflows, 77 per cent ahead of the same period last year and also with increased new client numbers,” it continued. 

Of the gross inflows, £28.8 million of this figure included wealth planning advice, with advice fees at the end of June already surpassing the full year 2019 performance. 

The Dubai Private Banking business continued its positive story and has seen growth in all key business areas in the first half of the year. New deposit balances increased by 12 per cent compared with H1 2019 and customer loan balances rose by 4 per cent at the end of June 2020 compared with the 2019 year-end position. Arbuthnot said AuM in this business segment rose by 10 per cent during the first half of the year.

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Arbuthnot Banking Group logged a half-year profit before tax of £200,000 compared with £2.9 million in the prior year. Provisions increased by 19 per cent over the period.

The UK-listed group had a Common Equity Tier 1 capital ratio – a standard international capital strength yardstick – of 13.9 per cent, narrowing from 14.4 per cent at the end of 2019.

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