Fri, January 20, 2023 8:19 am
Close Brothers will set aside an additional £90m in its 2023 financial statements for bad loans from Novitas Loans which specialize in legal finance.
Close Brothers bought Novitas in 2017. Close Brothers stopped approving Novitas loans in 2021 and let existing loans run out.
Today, Novitas, a commercial banking group, stated in a statement that it was reviewing its options regarding cases it funds and which “now faces limited prospects of success in the courts.”
Approximately £90m will be set aside in the financial statement from the first half of 2023 reflecting a ‘significant increase’ in the probability of default and loss due to default assumptions.
Close Brothers expects net income from Novitas to fall to around £8m by financial year 2024, down from around £36m in financial year 2022. This will also reduce CET1’s capital ratio by approximately 80 basis points.
According to the London-listed banking group, “The group’s financial strength allows us to absorb this and continue our long-term record for disciplined growth and returns for shareholders.”
Early Friday, shares in the company were trading at a 13 percent loss.
Close Brothers also provided updates on trading for the five-month period ending December 31, 2022.
Loan book increased 1.5 per cent to 9.2 billion pounds after a “recovery in aggregate demand” driven by businesses, in the premium and real estate sectors.
Net inflows in the year to date are up six per cent despite “challenging market conditions”, assets under management fell slightly to £15.2bn from £15.3bn on July 31, while total client assets fell to £16.3bn. £16.6 billion from £16.6 billion.
Winter Flood, a provider of outsourcing and custody services for asset managers, was “negatively affected” by the market slowdown in trading activity within higher-margin segments. As a result, the operating profit in this period was £1.7 million. In financial year 2022 it was £14.1m.
Adrian Sainsbury, chief executive, said: “We’ve delivered a resilient performance so far this financial year, despite an uncertain market backdrop. We have seen healthy demand, strong profit margins in banks, and good net flow at CBAM. However activity Commercial remained low at Winterflood.
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