The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Benjamin Toms - RBC Capital Markets, Research Division - Analyst
: Two for me, please. Firstly, on costs, you gave banking cost guidance of 5% to 7% growth half-on-half, which I think implies full year '22 cost growth
in the Banking division of about 10% to 11%. Is the half 2 implied run rate of around GBP 310 million to GBP 315 million the right base for 2023?
Or will a proportion of the increase in costs fall away?
And then secondly, I noted in your release that you mentioned there's no direct exposure to the Ukraine crisis. How are you thinking about the
indirect exposure? I appreciate that it's quite early days, but is it potentially one of those environments where other banks step away and you lean
into risk with an acceleration in lending?
Question: Raul Sinha - JPMorgan Chase & Co, Research Division - Analyst
: Can you hear me, gents?
Question: Raul Sinha - JPMorgan Chase & Co, Research Division - Analyst
: Great. I've got 3 questions, if that's okay. The first one, just a follow-up on the cost side, in particular, on the investment spend. I was wondering if
we could get a little bit more color in terms of the big projects that are likely to drive the step-up in inflation spend if there is one in the second
half of the year. And also, if you could comment a little bit on the depreciation impact as that comes through over this year and over into next year.
Hopefully, that should be quite visible to you already.
The second question is just around the very helpful disclosure on interest rate impact due to the property flows thanks to that. I was wondering if
you could give us a little bit more color on how the headwind from higher rates turns into a tailwind as rates go above 1%. Perhaps if you could
talk us through the mechanism of how that works through the deposit base, that would be really interesting.
And then thirdly, I was wondering whether or not you've made any assumption changes to IFRS 9 models for high inflationary impact on the
economy and whether you got any thoughts of how they would react to perhaps more inflationary pressures on your customers.
Question: Robert Ian Sage - Peel Hunt LLP, Research Division - Analyst
: I've got 2 questions, if I can, the first of which concerns the securities business, which I suspect no surprise that the sort of the revenue is down.
What I do notice though is that the efficiency ratio, cost as a percentage of income have gone up quite smartly in the first half of the year. And sort
of looking into the second half of the year, I was wondering what sort of management action you might be tempted to take here, whether there
might be scope for further reducing sort of variable costs, whether there's perhaps something more structural, or do you sort of simply sort of wait
for the market conditions to improve in this segment?
The second question, looking at the slowdown in lending growth in the first half of the year and given also the corresponding reduction in equity
share prices. I was wondering whether sort of inorganic initiatives to stimulate growth might be coming more onto your radar screen at the moment
or whether we should still be looking predominantly at an organic-driven growth strategy.
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MARCH 15, 2022 / 9:30AM, CBRO.L - Half Year 2022 Close Brothers Group PLC Earnings Call
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