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ARBB Arbuthnot Banking Group Plc

1,065.00
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Arbuthnot Banking Group Plc LSE:ARBB London Ordinary Share GB0007922338 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 1,065.00 1,040.00 1,090.00 1 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Commercial Banks, Nec 139.02M 16.46M 1.0085 10.56 173.81M

Arbuthnot Banking Group PLC Results for the six months to 30 June 2016 (5231E)

19/07/2016 7:00am

UK Regulatory


Arbuthnot Banking (LSE:ARBB)
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TIDMARBB

RNS Number : 5231E

Arbuthnot Banking Group PLC

19 July 2016

19 July 2016

ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")

Results for the six months to 30 June 2016

"Period of Transition"

Arbuthnot Banking Group announces a half yearly profit of GBP225m.

Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited and its associated company Secure Trust Bank PLC.

FINANCIAL HIGHLIGHTS

   --      Profit for the period GBP225m (H1 2015: GBP12.7m) 
   --      Underlying profit before tax GBP2.0m (H1 2015: GBP1.4m) 
   --      Reported loss before tax on continuing ops GBP2.4m (H1 2015: GBP0.4m) 
   --      Earnings per share GBP11.11 (H1 2015: GBP0.44) 
   --      Interim dividend per share 13p (H1 2015: 12p) 
   --      Special dividend 25p to be paid on 27 July 2016 * 
   --      Net assets GBP282m (H1 2015: GBP179m) 
   --      Net assets per share GBP18.52 (H1 2015: GBP11.74) 
   --      Net assets increased almost six fold since December 2011 (GBP3.12 per share) 

OPERATIONAL HIGHLIGHTS

   --      Completed sale of Everyday Loans - gain on sale GBP117m 
   --      Placed 33% stake in Secure Trust Bank generating a gain of GBP100m 
   --      Purchased a GBP50m investment property in the West End 
   --      Customer loans GBP657m (H1 2015: GBP584m) 
   --      Customer deposits GBP940m (H1 2015: GBP770m) 
   --      Assets Under Management GBP797m (H1 2015: GBP701m) 

Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said:

"The Group has completed two significant transactions this year, which have substantially increased its financial resources. We are well positioned to accelerate the growth of Arbuthnot Latham and also to invest in other opportunities that may arise given the current volatile economic environment."

The interim results and presentation are available at http://www.arbuthnotgroup.com.

Secure Trust Bank PLC is today releasing its interim statement and it should be read in conjunction with these results.

*The Special dividend was indicated in the 2015 Final results as announced on 17 March 2016 and was dependant on the completion of the sale of Everyday Loans. The dividend was declared on 17 June 2016. ABG shares are currently trading "ex-div" of this dividend.

 
 ENQUIRIES 
 
   Arbuthnot Banking Group 
   Sir Henry Angest, Chairman and Chief 
   Executive 
   Andrew Salmon, Group Chief Operating 
   Officer 
   James Cobb, Group Finance Director 
   David Marshall, Director of Communications      020 7012 2400 
 
   Canaccord Genuity Ltd (Nominated Advisor) 
   Sunil Duggal                                    020 7665 4500 
 
   Numis Securities Ltd (Broker) 
   Chris Wilkinson 
   Mark Lander                                     020 7260 1000 
 
   Bell Pottinger (Financial PR) 
   Ben Woodford 
   Sam Cartwright                                  020 3772 2588 
 

Chairman's Statement

Arbuthnot Banking Group PLC

I can report that Arbuthnot Banking Group has delivered a profit for the period of GBP225m (H1 2015: GBP12.7m). This performance is the result of the completion of two significant corporate transactions. In April, following the agreement we reached with Non-Standard Finance in December 2015, the sale of Everyday Loans was completed. This generated a gain of GBP117m. In May we took the opportunity to reduce our holding in Secure Trust Bank from 51.9% to 18.9%. This transaction resulted in the sale of 6 million shares by way of an institutional placing at the price of GBP25.

The reduction in ownership means that STB is no longer a fully consolidated subsidiary of the Group and is now an associated company. As a result of this transaction the Group was able to recognise a gain of GBP100m. This marks a significant milestone in the history and development of the Group, as Arbuthnot Banking Group has now converted its investment in two subsidiaries into cash and most importantly regulatory capital. Currently, this makes it one of the most highly capitalised banking groups in the UK, with net assets of GBP282m, the equivalent of GBP18.52 per share. Since the end of 2011 the net assets of the Group have risen nearly six-fold from a little over GBP3 per share.

The Group will continue to invest in its remaining wholly owned subsidiary to accelerate the growth in the Private and also Commercial Banking business. Given the current market conditions, the Group will also explore other opportunities to enhance and diversify its income streams.

Meanwhile, given our reduced ownership, STB will now explore the opportunity of achieving a listing on the main market and will be able to expand its horizon for growth opportunities that enhanced access to capital markets will allow. We look forward to watching its continued success while maintaining a significant ownership investment.

Once again the quirks of IFRS accounting rules have done us no favours, and indeed do not make understanding these results easy for the readers. Both of the significant transactions and the earnings of the business in the first half are required to be presented as discontinued operations. This results in a loss before tax from continuing operations of GBP2.4m. However, going forward the Group will recognise 18.9% of the after tax profits of STB in its continuing profits, which are not included in these results. The Group also incurred certain remuneration costs totalling GBP2.3m in its continuing business segments that were dependant on, and fully attributable to the successful completion of the Everyday Loans transaction. These will not be recurring. Therefore on a pro forma basis the underlying performance of the Group's continuing operations is GBP2.0m, which is 45% up on the prior year.

Given the confidence in the future the Board has decided to increase the dividend by 1p to 13p, which will be paid on 30 September 2016 to shareholders on the register on 2 September.

The interim dividend comes on top of the special dividend of 25p that is due to be paid on 27 July 2016.

Private banking subsidiary - Arbuthnot Latham & Co., Limited

Arbuthnot Latham has reported a profit before tax for the half year of GBP4.5m (H1 2015: GBP3.7m) which includes the impact of the investment programme that commenced during 2015, with the building out of the commercial banking business and the banking infrastructure upgrade project. This has offset a 13% increase in revenues.

Customer assets have continued on a healthy growth trajectory, increasing by 14% to GBP657m (H1 2015: GBP584m), while deposits increased by 23% as the bank continued to attract new clients. Assets under management increased to GBP797m (H1 2015: GBP701m).

The investment in the commercial banking activities totalled GBP0.6m in the first half of the year. The proposition focuses on servicing SMEs and owner managed businesses providing its clients with excellent service. Three sector teams have already been established in London while further teams are due to establish a presence in Manchester and Exeter to cover the North and South West regions respectively. Staff numbers will reach thirty by the end of the third quarter and this will include seventeen relationship managers, all with twenty years or more commercial banking experience. We are confident that the proposition resonates well with both prospective clients and potential employees.

The bank was also delighted to complete the purchase of the property at 20 King Street in the West End on 23 June 2016 for GBP50.2m plus associated purchase costs. This is expected initially to be held as an investment property receiving approximately GBP1.8m rental income per year. In due course the bank will explore plans to establish a West End client office within the building, using the entrance on St James's Street.

Retail banking subsidiary - Secure Trust Bank PLC

Following the reduction in our shareholding in Secure Trust Bank, the Group will report its ongoing investment in the bank as Income from Associated Undertakings. This will represent the after tax earnings, which for the period from 15 June to the end of the first half was GBP0.3m.

The earnings of the bank up until this date have been reported as discontinued operations as per the accounting requirements.

On a pro forma basis the continuing Income from Associated Undertakings for the first half of 2016 would have been GBP2.5m (H1 2015: GBP1.6m).

Outlook

Given the result of the EU Referendum on 23 June 2016 the UK economy faces short-term economic volatility. However, Arbuthnot Banking Group is well positioned to prosper. It has not only divested its high margin lending business, which is the more likely to experience an uptick in impairments in an economic downturn, but also realised for cash a significant proportion of its investment in Secure Trust Bank. It is therefore highly capitalised and well placed to take advantage of any opportunities that may arise while continuing to invest in the growth of Arbuthnot Latham.

Consolidated Statement of Comprehensive Income

 
                                                                                      *Re-presented 
                                                                         Six months      Six months 
                                                                              ended           ended 
                                                                            30 June         30 June 
                                                                               2016            2015 
                                                                  Note       GBP000          GBP000 
---------------------------------------------------------------  -----  -----------  -------------- 
 Interest income                                                             15,988          13,371 
 Interest expense                                                           (4,105)         (3,315) 
---------------------------------------------------------------  -----  -----------  -------------- 
 Net interest income                                                         11,883          10,056 
---------------------------------------------------------------  -----  -----------  -------------- 
 Fee and commission income                                                    7,708           6,891 
 Fee and commission expense                                                   (376)           (180) 
---------------------------------------------------------------  -----  -----------  -------------- 
 Net fee and commission income                                                7,332           6,711 
---------------------------------------------------------------  -----  -----------  -------------- 
 Operating income                                                            19,215          16,767 
---------------------------------------------------------------  -----  -----------  -------------- 
 Net impairment loss on financial assets                                      (388)           (708) 
 Other income                                                        2        1,665               - 
 Profit from associates                                                         265               - 
 Operating expenses                                                  3     (23,121)        (16,472) 
---------------------------------------------------------------  -----  -----------  -------------- 
 Loss from continuing operations before income tax                          (2,364)           (413) 
 Income tax (expense) / credit                                                (539)              94 
---------------------------------------------------------------  -----  -----------  -------------- 
 Loss after income tax from continuing operations                           (2,903)           (319) 
 Profit from discontinued operations after tax                       6      228,110          13,017 
---------------------------------------------------------------  -----  -----------  -------------- 
 Profit for the period                                                      225,207          12,698 
---------------------------------------------------------------  -----  -----------  -------------- 
 
 Other comprehensive income 
 Items that are or may be reclassified to profit or 
  loss 
 Available-for-sale reserve                                                 (2,321)               - 
 Available-for-sale reserve - Associate                                       (209)               - 
 Tax on other comprehensive income                                              262               - 
---------------------------------------------------------------  -----  -----------  -------------- 
 Other comprehensive income for the period, net of 
  tax                                                                       (2,268)               - 
---------------------------------------------------------------  -----  -----------  -------------- 
 Total comprehensive income for the period                                  222,939          12,698 
---------------------------------------------------------------  -----  -----------  -------------- 
 
 Profit attributable to: 
 Equity holders of the Company                                              163,781           6,507 
 Non-controlling interests                                                   61,426           6,191 
---------------------------------------------------------------  -----  -----------  -------------- 
                                                                            225,207          12,698 
---------------------------------------------------------------  -----  -----------  -------------- 
 
 Total comprehensive income attributable to: 
 Equity holders of the Company                                              161,513           6,507 
 Non-controlling interests                                                   61,426           6,191 
---------------------------------------------------------------  -----  -----------  -------------- 
                                                                            222,939          12,698 
---------------------------------------------------------------  -----  -----------  -------------- 
 * Prior year numbers have been re-presented for discontinuing 
  operations (see note 6). 
 
 Earnings per share for profit attributable to the 
  equity holders of the Company during the period 
 (expressed in pence per share): 
  - basic                                                            5      1,111.2            44.1 
  - diluted                                                          5      1,107.5            43.6 
 

Consolidated Statement of Financial Position

 
                                                       At 30 June 
                                                       2016        2015 
                                                     GBP000      GBP000 
 ASSETS 
 Cash and balances at central banks                 293,348     224,678 
 Loans and advances to banks                         33,499      35,865 
 Debt securities held-to-maturity                   103,131      98,143 
 Derivative financial instruments                     1,228       1,634 
 Loans and advances to customers                    657,122   1,436,381 
 Other assets                                        14,403      17,269 
 Financial investments                                2,469       1,108 
 Deferred tax asset                                   1,714       1,770 
 Investment in associate                             87,114         943 
 Intangible assets                                    7,004      11,100 
 Property, plant and equipment                        5,216      13,475 
 Investment property                                 50,200           - 
---------------------------------------------    ----------  ---------- 
 Total assets                                     1,256,448   1,842,366 
-----------------------------------------------  ----------  ---------- 
 EQUITY AND LIABILITIES 
 Equity attributable to owners of the parent 
 Share capital                                          153         153 
 Retained earnings                                  283,079     118,822 
 Other reserves                                     (1,320)     (1,263) 
-----------------------------------------------  ----------  ---------- 
 Non-controlling interests                                -      61,716 
-----------------------------------------------  ----------  ---------- 
 Total equity                                       281,912     179,428 
-----------------------------------------------  ----------  ---------- 
 LIABILITIES 
 Deposits from banks                                  1,986      10,871 
 Deposits from customers                            939,539   1,604,929 
 Current tax liability                                  488       5,487 
 Other liabilities                                   20,335      31,256 
 Debt securities in issue                            12,188      10,395 
-----------------------------------------------  ----------  ---------- 
 Total liabilities                                  974,536   1,662,938 
-----------------------------------------------  ----------  ---------- 
 Total equity and liabilities                     1,256,448   1,842,366 
-----------------------------------------------  ----------  ---------- 
 

Consolidated Statement of Changes in Equity

 
                                               Attributable to equity holders 
                                                        of the Group 
                      ------------------------------------------------------------------------------- 
                                                  Capital 
                         Share   Revaluation   redemption   Available-for-sale   Treasury    Retained   Non-controlling 
                       capital       reserve      reserve              reserve     shares    earnings         interests       Total 
                        GBP000        GBP000       GBP000               GBP000     GBP000      GBP000            GBP000      GBP000 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 Balance at 1 
  January 2016             153            98           20                1,047    (1,131)     123,330            67,887     191,404 
 
 Total comprehensive 
 income for 
 the period 
 Profit for the six 
  months ended 
  30 June 2016               -             -            -                    -          -     163,781            61,426     225,207 
 
 Other comprehensive 
 income, net 
 of income tax 
 Revaluation reserve 
 Cash flow hedging 
 reserve 
 Available-for-sale 
  reserve                    -             -            -              (1,572)          -           -             (487)     (2,059) 
 Available-for-sale 
  reserve - 
  Associate                  -             -            -                (209)          -           -                 -       (209) 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 Total other 
  comprehensive 
  income                     -             -            -              (1,781)          -           -             (487)     (2,268) 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 Total comprehensive 
  income for 
  the period                 -             -            -              (1,781)          -     163,781            60,939     222,939 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 
 Transactions with 
 owners, recorded 
 directly in equity 
 Contributions by 
 and distributions 
 to owners 
 STB loss of control         -          (98)            -                  525          -       (427)         (124,046)   (124,046) 
 Equity settled 
  share based 
  payment 
  transactions               -             -            -                    -          -     (1,074)                31     (1,043) 
 Final dividend 
  relating to 2015           -             -            -                    -          -     (2,531)           (4,811)     (7,342) 
 Total contributions 
  by and 
  distributions 
  to owners                  -          (98)            -                  525          -     (4,032)         (128,826)   (132,431) 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 Balance at 30 June 
  2016                     153             -           20                (209)    (1,131)     283,079                 -     281,912 
--------------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  ---------- 
 
 
                                          Attributable to equity holders 
                                                   of the Group 
                 ------------------------------------------------------------------------------- 
                                             Capital 
                    Share   Revaluation   redemption   Available-for-sale   Treasury    Retained   Non-controlling 
                  capital       reserve      reserve              reserve     shares    earnings         interests     Total 
                   GBP000        GBP000       GBP000               GBP000     GBP000      GBP000            GBP000    GBP000 
---------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  -------- 
 Balance at 1 
  January 2015        153            98           20                (250)    (1,131)     114,641            60,038   173,569 
 
 Total 
 comprehensive 
 income for 
 the period 
 Profit for the 
  six months 
  ended 
  30 June 2015          -             -            -                    -          -       6,507             6,191    12,698 
 
 Other 
 comprehensive 
 income, net 
 of income tax 
 Cash flow 
 hedging 
 reserve 
 Total 
  comprehensive 
  income for 
  the period            -             -            -                    -          -       6,507             6,191    12,698 
---------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  -------- 
 
 Transactions 
 with owners, 
 recorded 
 directly in 
 equity 
 Contributions 
 by and 
 distributions 
 to owners 
 Equity settled 
  share based 
  payment 
  transactions          -             -            -                    -          -          56                36        92 
 Final dividend 
  relating to 
  2014                  -             -            -                    -          -     (2,382)           (4,549)   (6,931) 
 Total 
  contributions 
  by and 
  distributions 
  to owners             -             -            -                    -          -     (2,326)           (4,513)   (6,839) 
---------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  -------- 
 Balance at 30 
  June 2015           153            98           20                (250)    (1,131)     118,822            61,716   179,428 
---------------  --------  ------------  -----------  -------------------  ---------  ----------  ----------------  -------- 
 

Consolidated Statement of Cash Flows

 
                                                                 Six months   Six months 
                                                                      ended        ended 
                                                                    30 June      30 June 
                                                                       2016         2015 
                                                                     GBP000       GBP000 
------------------------------------------------------------    -----------  ----------- 
 Cash flows from operating activities 
 Interest received                                                   87,027       73,555 
 Interest paid                                                     (16,490)     (12,512) 
 Fees and commissions received                                       12,987       11,482 
 Cash payments to employees and suppliers                          (63,503)     (49,020) 
 Taxation paid                                                      (6,053)      (1,163) 
--------------------------------------------------------------  -----------  ----------- 
 Cash flows from operating profits before changes in 
  operating assets and liabilities                                   13,968       22,342 
 Changes in operating assets and liabilities: 
  - net decrease in derivative financial instruments                    127            6 
  - net decrease/(increase) in loans and advances to 
   customers                                                        956,385    (283,097) 
  - net decrease/(increase) in other assets                          22,212        (403) 
  - net decrease in deposits from banks                            (53,319)     (16,786) 
  - net (decrease)/increase in amounts due to customers           (990,299)      410,644 
  - net decrease in other liabilities                              (20,342)      (3,728) 
--------------------------------------------------------------  -----------  ----------- 
 Net cash (outflow)/inflow from operating activities               (71,268)      128,978 
--------------------------------------------------------------  -----------  ----------- 
 Cash flows from investing activities 
 Purchase of financial investments                                    (462)      (1,580) 
 Disposal of financial investments                                      837        1,602 
 Purchase of computer software                                      (5,071)      (1,200) 
 Proceeds from sale of software                                       8,062            - 
 Purchase of property, plant and equipment                         (51,139)      (1,648) 
 Proceeds from sale of property, plant and equipment                  8,815            - 
 Disposal of subsidiaries, net of cash and cash equivalents 
  disposed                                                           65,695            - 
 Purchases of debt securities                                      (59,893)    (152,243) 
 Proceeds from redemption of debt securities                         41,424      145,783 
--------------------------------------------------------------  -----------  ----------- 
 Net cash inflow/(outflow) from investing activities                  8,268      (9,286) 
--------------------------------------------------------------  -----------  ----------- 
 Cash flows from financing activities 
 Dividends paid                                                     (7,342)      (6,931) 
--------------------------------------------------------------  -----------  ----------- 
 Net cash used in financing activities                              (7,342)      (6,931) 
--------------------------------------------------------------  -----------  ----------- 
 Net (decrease)/increase in cash and cash equivalents              (70,342)      112,761 
 Cash and cash equivalents at 1 January                             397,189      147,782 
--------------------------------------------------------------  -----------  ----------- 
 Cash and cash equivalents at 30 June                               326,847      260,543 
--------------------------------------------------------------  -----------  ----------- 
 

1. Operating segments

The Group is organised into three main operating segments as disclosed below:

1) Retail banking - incorporating household cash management, personal lending and banking and insurance services.

2) UK Private banking - incorporating private banking, wealth management and commercial banking.

3) Group Centre - ABG Group Centre management.

Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet.

 
                              Discontinued operations 
                                  (Retail Banking)                      Continuing operations 
                                                               Retail 
                                                                 Bank 
                                                            Associate   UK Private       Group                   Group 
                               ELL        STB      Total       Income      banking      Centre       Total       Total 
 Six months ended 30        GBP000     GBP000     GBP000       GBP000       GBP000      GBP000      GBP000      GBP000 
  June 2016 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Interest revenue           11,137     57,498     68,635            -       16,112          68      16,180 
 Inter-segment revenue           -          -          -            -        (128)        (64)       (192) 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Interest revenue from 
  external customers        11,137     57,498     68,635            -       15,984           4      15,988 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Fee and commission 
  income                       147      7,981      8,128            -        7,708           -       7,708 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Revenue from external 
  customers                 11,284     65,479     76,763            -       23,692           4      23,696 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Interest expense                -   (12,107)   (12,107)            -      (3,996)          64     (3,932) 
 Add back inter-segment 
  revenue                        -          -          -            -          128       (128)           - 
 Subordinated loan note 
  interest                       -          -          -            -            -       (173)       (173) 
 Fee and commission 
  expense                    (124)      (779)      (903)            -        (376)           -       (376) 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Segment operating 
  income                    11,160     52,593     63,753            -       19,448       (233)      19,215 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ---------- 
 Impairment losses         (2,610)   (12,172)   (14,782)            -        (388)           -       (388) 
 Other income                    -          -          -            -        1,665           -       1,665 
 Income from associates          -          -          -          265            -           -         265 
 Operating expenses        (6,016)   (29,073)   (35,089)            -     (16,218)     (6,903)    (23,121) 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Segment profit / (loss) 
  before tax                 2,534     11,348     13,882          265        4,507     (7,136)     (2,364)      11,518 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Income tax (expense) 
  / income                   (507)    (2,199)    (2,706)            -         (48)       (491)       (539)     (3,245) 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Segment profit / (loss) 
  after tax                  2,027      9,149     11,176          265        4,459     (7,627)     (2,903)       8,273 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Profit on sale of 
  discontinued 
  operations               116,754    100,180    216,934 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Segment profit / (loss) 
  after tax                118,781    109,329    228,110          265        4,459     (7,627)     (2,903)     225,207 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 
 Loans and advances to 
  customers                                            -            -      657,122           -     657,122     657,122 
 Other assets                                          -            -      515,489      83,837     599,326     599,326 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Segment total assets            -          -          -            -    1,172,611      83,837   1,256,448   1,256,448 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Customer deposits                                     -            -      939,539           -     939,539     939,539 
 Other liabilities                                     -            -      179,577   (144,580)      34,997      34,997 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Segment total 
  liabilities                    -          -          -            -    1,119,116   (144,580)     974,536     974,536 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 Other segment items: 
 Capital expenditure                                                -     (53,721)           -    (53,721)    (53,721) 
 Depreciation and 
  amortisation                                                      -        (753)         (1)       (754)       (754) 
------------------------  --------  ---------  ---------  -----------  -----------  ----------  ----------  ---------- 
 

The "Group Centre" segment above includes the parent entity and all intercompany eliminations. Segment profit is shown prior to any intra-group eliminations. The UK private bank opened a branch in Dubai in 2013. Other than the Dubai branch, all other operations of the Group are conducted wholly within the United Kingdom and therefore geographical information is not presented.

 
                               Discontinued operations 
                                   (Retail Banking)                      Continuing operations 
                                                                 Retail 
                                                                   Bank 
                                                              Associate   UK Private      Group                  Group 
                                ELL        STB       Total       Income      banking     Centre      Total       Total 
 Six months ended 30         GBP000     GBP000      GBP000       GBP000       GBP000     GBP000     GBP000      GBP000 
  June 2015 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Interest revenue            19,574     44,588      64,162            -       13,460         60     13,520 
 Inter-segment revenue            -      (159)       (159)            -         (89)       (60)      (149) 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Interest revenue from 
  external customers         19,574     44,429      64,003            -       13,371          -     13,371 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Fee and commission 
  income                      1,086      8,396       9,482            -        6,891          -      6,891 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Revenue from external 
  customers                  20,660     52,825      73,485            -       20,262          -     20,262 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Interest expense                 -    (9,769)     (9,769)            -      (3,162)        172    (2,990) 
 Add back inter-segment 
  revenue                         -        159         159            -           89      (248)      (159) 
 Subordinated loan note 
  interest                        -          -           -            -            -      (166)      (166) 
 Fee and commission 
  expense                   (1,249)      (386)     (1,635)            -        (180)          -      (180) 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Segment operating 
  income                     19,411     42,829      62,240            -       17,009      (242)     16,767 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  --------- 
 Impairment losses          (3,223)    (7,995)    (11,218)            -        (708)          -      (708) 
 Operating expenses        (10,608)   (24,265)    (34,873)            -     (12,640)    (3,832)   (16,472) 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Segment profit / (loss) 
  before tax                  5,580     10,569      16,149            -        3,661    (4,074)      (413)      15,736 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Income tax (expense) 
  / income                  (1,131)    (2,001)     (3,132)            -            -         94         94     (3,038) 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Segment profit / (loss) 
  after tax                   4,449      8,568      13,017            -        3,661    (3,980)      (319)      12,698 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 
 Loans and advances to 
  customers                                        852,291            -      584,090          -    584,090   1,436,381 
 Other assets                                      149,701            -      281,135   (24,851)    256,284     405,985 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Segment total assets             -          -   1,001,992            -      865,225   (24,851)    840,374   1,842,366 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Customer deposits                                 835,083            -      769,846          -    769,846   1,604,929 
 Other liabilities                                  38,555            -       52,495   (33,041)     19,454      58,009 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Segment total 
  liabilities                     -          -     873,638            -      822,341   (33,041)    789,300   1,662,938 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 Other segment items: 
 Capital expenditure                               (1,435)            -      (1,313)          -    (1,313)     (2,748) 
 Depreciation and 
  amortisation                                       (799)            -        (587)        (5)      (592)     (1,391) 
------------------------  ---------  ---------  ----------  -----------  -----------  ---------  ---------  ---------- 
 

2. Other income

As a result of the completion of the Visa Europe transaction the group realised a gain of GBP1.6m.

3. Operating expenses

Operating expenses include Group bonuses paid relating to the sale of the Everyday Loans Group amounting to GBP2.3m.

4. Underlying profit reconciliation

The profit before tax from continuing operations as reported in the operating segments can be reconciled to the underlying profit from continuing operations for the year as disclosed in the tables below.

 
                                                          Arbuthnot   Arbuthnot 
                                                             Latham     Banking 
 Underlying profit reconciliation                             & Co.       Group 
 Six months ended 30 June 2016                               GBP000      GBP000 
-------------------------------------------------------  ----------  ---------- 
 Profit / (loss) before tax from continuing operations        4,507     (2,364) 
 ABG Group bonuses relating to sale of ELL                        -       2,304 
 STB full year equivalent associate income*                       -       2,261 
 AL realised profit on AFS investment (Visa)                (1,665)     (1,665) 
 Investment in operating systems                                260         260 
 AL commercial banking investment                               567         567 
 AL incremental office space                                    650         650 
-------------------------------------------------------  ----------  ---------- 
 Underlying profit                                            4,319       2,013 
-------------------------------------------------------  ----------  ---------- 
 
 * - STB associate income adjustment (excl. ELL & bonuses relating to 
  ELL sale) as if received from 1 January 2016. 
 
 
                                                          Arbuthnot   Arbuthnot 
                                                             Latham     Banking 
 Underlying profit reconciliation                             & Co.       Group 
 Six months ended 30 June 2015                               GBP000      GBP000 
-------------------------------------------------------  ----------  ---------- 
 Profit / (loss) before tax from continuing operations        3,661       (413) 
 STB full year equivalent associate income*                       -       1,622 
 Investment in operating systems                                170         170 
 AL commercial banking investment                                13          13 
-------------------------------------------------------  ----------  ---------- 
 Underlying profit                                            3,844       1,392 
-------------------------------------------------------  ----------  ---------- 
 
 * - STB associate income adjustment (excl. ELL) as if 
  received from 1 January 2015. 
 

5. Earnings per ordinary share

Basic

Basic earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares 14,738,548 (2015: 14,738,548) in issue during the period. The weighted average number of ordinary shares has been restated for 2015 from 15,279,322, after taking into account treasury shares (390,274) and shares held in an ESOP trust (150,500).

Diluted

Diluted earnings per ordinary share are calculated by dividing the dilutive profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, as well as the number of dilutive share options in issue during the period. The number of dilutive share options in issue at the end of June was 50,000 (2015: 200,000).

 
                                                                      Six months   Six months 
                                                                           ended        ended 
                                                                         30 June      30 June 
                                                                            2016         2015 
 Profit attributable                                                      GBP000       GBP000 
-------------------------------------------------------------------  -----------  ----------- 
 Total profit after tax attributable to equity holders of 
  the Company                                                            163,781        6,507 
 Loss after tax from continuing operations attributable 
  to equity holders of the Company                                       (2,903)        (319) 
 Profit after tax from discontinuing operations (ELL) attributable 
  to equity holders of the Company                                        61,667        2,310 
 Profit after tax from discontinuing operations (STB) attributable 
  to equity holders of the Company                                       105,017        4,516 
-------------------------------------------------------------------  -----------  ----------- 
 
                                                                      Six months   Six months 
                                                                           ended        ended 
                                                                         30 June      30 June 
                                                                            2016         2015 
 Dilutive profit attributable                                             GBP000       GBP000 
-------------------------------------------------------------------  -----------  ----------- 
 Total profit after tax attributable to equity holders of 
  the Company                                                            163,781        6,507 
 Profit after tax from continuing operations attributable 
  to equity holders of the Company                                       (2,903)        (319) 
 Profit after tax from discontinuing operations (ELL) attributable 
  to equity holders of the Company                                        61,667        2,310 
 Profit after tax from discontinuing operations (STB) attributable 
  to equity holders of the Company                                       105,017        4,516 
-------------------------------------------------------------------  -----------  ----------- 
 
                                                                      Six months   Six months 
                                                                           ended        ended 
                                                                         30 June      30 June 
                                                                            2016         2015 
 Basic Earnings per share                                                      p            p 
-------------------------------------------------------------------  -----------  ----------- 
 Total Basic Earnings per share                                          1,111.2         44.1 
 Basic Earnings per share from continuing operations                      (19.7)        (2.2) 
 Basic Earnings per share from discontinuing operations 
  - ELL                                                                    418.4         15.7 
 Basic Earnings per share from discontinuing operations 
  - STB                                                                    712.5         30.6 
-------------------------------------------------------------------  -----------  ----------- 
 
                                                                      Six months   Six months 
                                                                           ended        ended 
                                                                         30 June      30 June 
                                                                            2016         2015 
 Diluted Earnings per share                                                    p            p 
-------------------------------------------------------------------  -----------  ----------- 
 Total Diluted Earnings per share                                        1,107.5         43.6 
 Diluted Earnings per share from continuing operations                    (19.6)        (2.1) 
 Diluted Earnings per share from discontinuing operations 
  - ELL                                                                    417.0         15.5 
 Diluted Earnings per share from discontinuing operations 
  - STB                                                                    710.1         30.2 
-------------------------------------------------------------------  -----------  ----------- 
 

6. Discontinued operations

The profit after tax from discontinued operations is made up as follows:

 
                                                          Six months   Six months 
                                                               ended        ended 
                                                             30 June      30 June 
                                                                2016         2015 
 Discontinued operations                                      GBP000       GBP000 
-----------------------------------------------------    -----------  ----------- 
 Profit after tax from discontinued operations - ELL 
  (up to 13 April 2016)                                        2,027        4,449 
 Profit after tax on sale of discontinued operations 
  - ELL                                                      116,754            - 
 Profit after tax from discontinued operations - STB 
  (up to 15 June 2016)                                         9,149        8,568 
 Profit after tax on sale of discontinued operations 
  - STB                                                      100,180            - 
-----------------------------------------------------    -----------  ----------- 
 Profit after tax from discontinued operations               228,110       13,017 
-------------------------------------------------------  -----------  ----------- 
 

On 4 December 2015, the Bank agreed to the conditional sale of its non-standard consumer lending business, ELL, which comprises Everyday Loans Holdings Limited and subsidiary companies Everyday Lending Limited and Everyday Loans Limited, to Non Standard Finance PLC (NSF) for GBP106.9 million in cash subject to a net asset adjustment and GBP16.3 million in NSF ordinary shares. The Disposal completed on 13 April 2016, and on completion, NSF repaid intercompany debt of GBP108.1 million to STB. After selling costs of GBP6.2m, this resulted in a gain recognised on disposal of GBP113.3m.

Details of the profits of discontinued operations, net assets disposed of and consequential gain recognised on disposal and cash flow from discontinued operations is set out below.

 
                                                              From 
                                                         1 January   Six months 
                                                             to 13        ended 
                                                             April      30 June 
                                                              2016         2015 
                                                 Note       GBP000       GBP000 
---------------------------------------------  ------  -----------  ----------- 
 Interest income                                            11,137       19,574 
 Net interest income                                        11,137       19,574 
---------------------------------------------  ------  -----------  ----------- 
 Fee and commission income                                     147        1,086 
 Fee and commission expense                                  (124)      (1,249) 
---------------------------------------------  ------  -----------  ----------- 
 Net fee and commission income                                  23        (163) 
---------------------------------------------  ------  -----------  ----------- 
 Operating income                                           11,160       19,411 
---------------------------------------------  ------  -----------  ----------- 
 Net impairment loss on financial assets                   (2,610)      (3,223) 
 Operating expenses                                        (6,016)     (10,608) 
---------------------------------------------  ------  -----------  ----------- 
 Profit before tax                                           2,534        5,580 
 Tax expense                                                 (507)      (1,131) 
---------------------------------------------  ------  -----------  ----------- 
 Profit after tax                                            2,027        4,449 
---------------------------------------------  ------  -----------  ----------- 
 Profit on sale of business                                116,754            - 
---------------------------------------------  ------  -----------  ----------- 
 Total profit from discontinued operation                  118,781        4,449 
---------------------------------------------  ------  -----------  ----------- 
 
 Profit attributable to: 
 Equity holders of the Company                              61,667        2,310 
 Non-controlling interests                                  57,114        2,139 
---------------------------------------------  ------  -----------  ----------- 
 Profit after tax                                          118,781        4,449 
---------------------------------------------  ------  -----------  ----------- 
 
 Earnings per share for profit attributable to the equity holders of the 
  Company from discontinued operations during the year 
 (expressed in pence per share): 
  - basic                                           5        418.4         15.7 
  - diluted                                         5        417.0         15.5 
 
 
 The following unaudited assets were sold as part of the sale of ELL: 
                                                                          Recognised 
                                                                              values 
                                                                             on sale 
                                                                                2016 
                                                                              GBP000 
-----------------------------------------------------------------------  ----------- 
 
 Loans and advances to banks                                                     457 
 Loans and advances to customers                                             116,744 
 Property, plant and equipment                                                   452 
 Intangible assets                                                             1,258 
 Deferred tax assets                                                             371 
 Prepayments and accrued income                                                  451 
 Other assets                                                                     11 
-----------------------------------------------------------------------  ----------- 
 Total assets                                                                119,744 
 
 Intercompany funding                                                        108,088 
 Current tax liability                                                         3,212 
 Other liabilities                                                             4,748 
-----------------------------------------------------------------------  ----------- 
 Total liabilities                                                           116,048 
 
 Net identifiable assets / (liabilities)                                       3,696 
-----------------------------------------------------------------------  ----------- 
 
 Consideration                                                               123,206 
 Costs                                                                       (2,756) 
 
 Profit on sale of ELL                                                       116,754 
-----------------------------------------------------------------------  ----------- 
 
 The intercompany funding was repaid by NSF at the time of completion. 
 
 
                                                                 From 
                                                            1 January   Six months 
                                                                to 13        ended 
 Cash flow from discontinued operations - ELL                   April      30 June 
                                                                 2016         2015 
                                                               GBP000       GBP000 
------------------------------------------------------    -----------  ----------- 
 Cash flows from operating activities 
 Interest received                                             11,137       19,574 
 Fees and commissions received                                     23        (163) 
 Cash payments to employees and suppliers                     (8,626)     (13,831) 
 Taxation (paid)/received                                       (507)      (1,131) 
--------------------------------------------------------  -----------  ----------- 
 Cash flows from operating profits before changes in 
  operating assets and liabilities                              2,027        4,449 
 Changes in operating assets and liabilities: 
  - net increase in loans and advances to customers           (3,618)     (11,427) 
  - net decrease in other assets                                (249)          407 
  - net increase in other liabilities                           2,621        5,146 
--------------------------------------------------------  -----------  ----------- 
 Net cash inflow/(outflow) from operating activities              781      (1,425) 
--------------------------------------------------------  -----------  ----------- 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                        (9)        (179) 
 Net cash from investing activities                               (9)        (179) 
--------------------------------------------------------  -----------  ----------- 
 Cash flows from financing activities 
 Increase in borrowings 
 Dividends paid 
 Net increase/(decrease) in cash and cash equivalents             772      (1,604) 
 Cash and cash equivalents at 1 January                         1,661        1,623 
--------------------------------------------------------  -----------  ----------- 
 Cash and cash equivalents at 13 April / 30 June                2,433           19 
--------------------------------------------------------  -----------  ----------- 
 

On 15 June 2016 Arbuthnot Banking Group ('ABG') sold 6 million shares in Secure Trust Bank PLC ('STB'), which reduced its shareholding in STB from 51.92% to 18.93%. From this date the Group accounted for its remaining shareholding in STB as an associate. After the sale of the 6 million shares, the Group retained Board representation and as such is seen to have significant influence over STB. The profit and cash flow from discontinued operations relating to ELL have been shown in the tables above. The ELL entities were subsidiaries of STB and therefore formed part of the STB number reported in the operating segments of ABG. The tables below therefore reflect the profit and cash flow from the STB group excluding ELL. The combined impact can be seen in the operating segments (see note 1 - Retail banking).

 
                                                              From 
                                                         1 January   Six months 
                                                             to 15        ended 
                                                              June      30 June 
                                                              2016         2015 
                                                 Note       GBP000       GBP000 
---------------------------------------------  ------  -----------  ----------- 
 Interest income                                            57,498       44,588 
 Interest expense                                         (12,107)      (9,769) 
---------------------------------------------  ------  -----------  ----------- 
 Net interest income                                        45,391       34,819 
---------------------------------------------  ------  -----------  ----------- 
 Fee and commission income                                   7,981        8,396 
 Fee and commission expense                                  (779)        (386) 
---------------------------------------------  ------  -----------  ----------- 
 Net fee and commission income                               7,202        8,010 
---------------------------------------------  ------  -----------  ----------- 
 Operating income                                           52,593       42,829 
---------------------------------------------  ------  -----------  ----------- 
 Net impairment loss on financial assets                  (12,172)      (7,995) 
 Operating expenses                                       (29,074)     (24,265) 
---------------------------------------------  ------  -----------  ----------- 
 Profit before tax                                          11,347       10,569 
 Tax expense                                               (2,198)      (2,001) 
---------------------------------------------  ------  -----------  ----------- 
 Profit after tax                                            9,149        8,568 
---------------------------------------------  ------  -----------  ----------- 
 Profit on sale of shares                                  100,180            - 
---------------------------------------------  ------  -----------  ----------- 
 Total profit from discontinued operation                  109,329        8,568 
---------------------------------------------  ------  -----------  ----------- 
 
 Profit attributable to: 
 Equity holders of the Company                             105,017        4,516 
 Non-controlling interests                                   4,312        4,052 
---------------------------------------------  ------  -----------  ----------- 
 Profit after tax                                          109,329        8,568 
---------------------------------------------  ------  -----------  ----------- 
 
 Earnings per share for profit attributable to the equity holders of the 
  Company from discontinued operations during the year 
 (expressed in pence per share): 
  - basic                                           5        712.5         30.6 
  - diluted                                         5        710.1         30.2 
 
 
 The following unaudited assets were deconsolidated as part of the sale 
  of 6 million shares in STB: 
                                                                Recognised 
                                                                    values 
                                                                   on sale 
                                                                      2016 
                                                                    GBP000 
------------------------------------------------------------  ------------ 
 
 Cash and balances at central banks                                176,647 
 Loans and advances to banks                                        27,618 
 Loans and advances to customers                                 1,117,700 
 Other assets                                                        5,805 
 Financial investments                                              15,030 
 Deferred tax asset                                                    606 
 Intangible assets                                                   7,017 
 Property, plant and equipment                                       8,606 
------------------------------------------------------------  ------------ 
 Total assets                                                    1,359,029 
 
 Deposits from banks                                                25,000 
 Deposits from customers                                         1,046,009 
 Current tax liability                                                 293 
 Other liabilities                                                  29,748 
------------------------------------------------------------  ------------ 
 Total liabilities                                               1,101,050 
 
 Net identifiable assets                                           257,979 
------------------------------------------------------------  ------------ 
 
 
 Profit on sale of shares were calculated as follows: 
                                                                      2016 
                                                                    GBP000 
------------------------------------------------------------  ------------ 
 Consideration received                                            150,000 
 Less costs                                                        (2,001) 
 Less net identifiable assets                                    (257,979) 
 Add back non-controlling interest                                 124,046 
 Add back fair value of remaining investment in STB                 86,114 
 
 Profit on sale of STB                                             100,180 
------------------------------------------------------------  ------------ 
 
 
                                                                   From 
                                                              1 January   Six months 
 Cash flow from discontinued operations - STB excluding           to 15        ended 
  ELL                                                              June      30 June 
                                                                   2016         2015 
                                                                 GBP000       GBP000 
--------------------------------------------------------    -----------  ----------- 
 Cash flows from operating activities 
 Interest received                                               68,635       44,667 
 Interest paid                                                 (12,107)      (9,841) 
 Fees and commissions received                                    7,226        7,995 
 Cash payments to employees and suppliers                      (51,552)     (32,413) 
 Taxation (paid)/received                                       (6,034)      (1,977) 
----------------------------------------------------------  -----------  ----------- 
 Cash flows from operating profits before changes in 
  operating assets and liabilities                                6,168        8,431 
 Changes in operating assets and liabilities: 
  - net increase in loans and advances to customers           (165,976)    (229,688) 
  - net decrease in other assets                                117,395        (661) 
  - net / in deposits from banks                               (10,000)       24,285 
  - net / in amounts due to customers                            12,936      226,690 
  - net increase in other liabilities                           (5,031)      (1,164) 
----------------------------------------------------------  -----------  ----------- 
 Net cash (outflow)/inflow from operating activities           (44,508)       27,893 
----------------------------------------------------------  -----------  ----------- 
 Cash flows from investing activities 
 Purchase of computer software                                  (1,754)        (433) 
 Purchase of property, plant and equipment                        (531)        (884) 
 Disposal of property, plant and equipment                        2,179            - 
 Proceeds from disposal of businesses                           106,912            - 
 Proceeds from sale of property, plant and equipment                456            - 
 Net cash inflow/(outflow) from investing activities            107,262      (1,317) 
----------------------------------------------------------  -----------  ----------- 
 Cash flows from financing activities 
 Increase in borrowings 
 Dividends paid                                                (10,005)      (9,500) 
 Net cash used in financing activities                         (10,005)      (9,500) 
----------------------------------------------------------  -----------  ----------- 
 Net increase in cash and cash equivalents                       52,749       17,076 
 Cash and cash equivalents at 1 January                         141,595      104,530 
----------------------------------------------------------  -----------  ----------- 
 Cash and cash equivalents at 15 June / 30 June                 194,344      121,606 
----------------------------------------------------------  -----------  ----------- 
 

7. Basis of reporting

The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2015 statutory accounts as amended by standards and interpretations effective during 2016 and in accordance with IAS 34 "Interim Financial Reporting" (except for comparatives in the statement of financial position). The directors do not consider the fair value of the assets and liabilities presented in these financial statements to be materially different from their carrying value.

The statements were approved by the Board of Directors on 18 July 2016 and are unaudited. The interim financial statements will be posted to shareholders and copies may be obtained from The Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 7 Wilson Street, London EC2M 2SN.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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