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Close Brothers Group PLC (LSE:CBG) , a merchant bank, has reached an agreement to sell its Close Brothers Asset Management (CBAM) business to Oaktree Capital for £200 million. This divestiture aligns with the company's strategy to simplify its operations and concentrate on its core lending business.
The decision to divest CBAM comes amid ongoing uncertainty regarding the company’s motor finance arm, which is currently under review by the Financial Conduct Authority (FCA). Close Brothers acknowledged that the outcome of this review, particularly concerning historical motor finance commission arrangements, remains uncertain. The timing and potential financial implications are not yet clearly defined, but the company anticipates incurring costs between £10 million and £15 million related to the review in the upcoming year, with the possibility of more significant financial repercussions.
By disposing of CBAM, Close Brothers aims to strengthen its capital base, which is crucial for maintaining its common equity tier one (CET1) capital target range of 12% to 13%. In a move to further solidify its capital position, the company has opted not to distribute dividends this year.
The announcement of the CBAM sale coincided with the release of Close Brothers' full-year results, which indicated a 27% increase in group-wide profit before tax, reaching £142 million. Despite CBAM's assets under management growing by 18% in the first half, the adjusted operating profit for this segment fell by nearly a quarter to £12.2 million, attributed to the hiring of new investment managers.
In its core banking segment, Close Brothers reported a 6% growth in its loan book, which now stands at £10.1 billion, while delivering a net interest margin of 7.4%, a slight decrease from 7.7% in the previous year. This strategic focus and restructuring aim to position Close Brothers for future stability and growth within its primary lending operations.
