Half Year 2024 Close Brothers Group PLC Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Benjamin Toms - RBC Capital Markets - Analyst : Good morning, thank you for taking my questions. You noted in the presentation that Close Brothers has the optionality to reduce RWAs by GBP1 billion, partially driven by securitizations of motor finance. Can you just confirm, are you intending to take this action, whatever the outcome in September? Could you clarify what this could potentially mean for revenues? And then I think the action implies securitization of over half the motor finance book. And then secondly, a softening of Basel 3.1, although not listed, is one of the capital drivers on slide 23. I guess because the outcome is not within the bank's control, could potentially provide some material capital relief. One of your peers last week identified that the regulator seems most inclined to soften their initial proposal in respect of commercial finance, which will be particularly helpful for Close Brothers. Have you've been hearing similar noises? I guess in theory, this could add up to another 100 basis points of capital versus your current plan. Thank you.

Question: Sanjena Dadawala - UBS - Analyst : Hi, good morning. Thank you. Maybe some follow-ups on the securitization, please. So could you give some idea about the economics of the transactions? And then just a clarification on the timing. So given that we probably won't know more on the FCA outcome than today by full-year results, how do we think about that and whether GBP1 billion number is appropriate or too large, given the associated income impact. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 9:30AM, CBRO.L - Half Year 2024 Close Brothers Group PLC Earnings Call And then maybe some clarifications on the mechanics of recognition in the books. So you mentioned the income and cost impact. So like in terms of recognition, does it get recognized in the income line with operating costs and impairments continuing to be recognized as usual. And then do we still see the loans recognized on the books or will the loan book be reported net of that, I presume it depends on the type of securitization, but just trying to triangulate with your second half loan growth guidance, please.

Question: Sanjena Dadawala - UBS - Analyst : Thank you.

Question: Portia Patel - Canaccord Genuity - Analyst : Thanks, good morning and thanks for taking my questions. I just wanted to clarify, where you talk on the other potential management actions about the sale of portfolios with your business and restructuring. Are you talking there about, review of other aspects within the banking loan book and the potential sale of other loan book parts? Or are you talking about other divisions of the group? And then secondly, when you talk about potential retention from FY25 earnings. Are you talking there about continuing to put the dividend on hold? Or is there something else you meant by that? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 9:30AM, CBRO.L - Half Year 2024 Close Brothers Group PLC Earnings Call

Question: Gary Greenwood - Shore Capital Stockbrokers - Analyst : Hello, can you hear me okay? Hello?

Question: Gary Greenwood - Shore Capital Stockbrokers - Analyst : All right, thank you. I've got three questions, if I can, please. So first, would just clarification on the loan growth, where I think you said it was 4% in the second half similar to the first half. Does that take account of the fact that you're planning to slow loan book growth, i.e., you would have expected loan book growth to have been faster, have that not been the case? And the second question was just around management actions. I know the one thing that isn't on your list is potential business disposals or sales. So I was just wondering if that's something that you've considered with regards to either asset management or Winterflood? And then lastly, on costs. And I know you're taking some action on costs, but I just wonder whether this goes far enough. I mean, there's a very significant differential between cost growth and income growth in the first half of the year. So are there further levers that you can pull to bring costs down and bring the cost income ratio back to a more respectable level? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 9:30AM, CBRO.L - Half Year 2024 Close Brothers Group PLC Earnings Call

Question: Corinne Cunningham - Bernstein Autonomous LLP - Analyst : Hi there, and morning, everyone. I have a question on the real estate book. I wonder if you can perhaps give us a bit more detail on specifically where the growth is coming from? Is it really exclusively drawdown? And then also, if you can talk a bit about asset quality and cost of risk because it dropped off. And I just wondered specifically what's behind that, and whether that's release of management overlays or whether it's you're actually seeing a much higher quality of the underlying book. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 9:30AM, CBRO.L - Half Year 2024 Close Brothers Group PLC Earnings Call

Question: Corinne Cunningham - Bernstein Autonomous LLP - Analyst : Can I just -- the cost of risk, was that due to releases or just lower additions to the provision?

Question: Corinne Cunningham - Bernstein Autonomous LLP - Analyst : Thank you.

Question: Ed Firth - Keefe, Bruyette & Woods Europe - Analyst : Thanks so much, good morning. Just had a couple of quick ones. Firstly, WBS. You've talked a lot about this in the past. I think you said the revenue was up 24%, something like that. It sounds like everything is going very well, at what point do you think we will be able to see that in wint numbers? And at what point do you think we get to a stage where that actually starts to drive the profitability of that business rather than -- or become significant relative to the trading business? I guess that's my first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 19, 2024 / 9:30AM, CBRO.L - Half Year 2024 Close Brothers Group PLC Earnings Call And then the second question is a broader one. Are you seeing any signs that the publicity surrounding the FCA review and or other issues are actually impacting your ongoing businesses in any way? Maybe in the motor finance business. Obviously, I don't mean so much the complaints. I mean, in terms of how your customers behave with you, how your funding is going, et cetera, et cetera, are there any impact you see, that are reading across from that? Thanks so much.