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Close Brothers recovers after tricky six months

Close Brothers recovers after tricky six months

Flows into Close Brothers’ asset management business have jumped slightly over the past three months, marking improved performance for the firm after a six-month downturn.

The merchant bank saw net inflows in its managed assets hit £7.5bn at the end of April, a 4 per cent increase from the £7.3bn reported at the end of January, according to a trading update published today (10 May).

This comes after the company’s assets dropped to £9.4bn on 30 January from £10.8bn at the end of July last year, said to be caused by difficult markets and its abandonment of certain corporate activities.

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The turnaround was helped by tighter cost controls and better market conditions for Winterflood Securities, Europe’s largest broker-dealer firm, according to the group, which increased profitability across all its trading books.

According to the trading update, this recovery reflected modest improvements in the equity markets and the return of investor risk appetite.

However, a spokesperson for Close Brothers said the business “remains sensitive to an unpredictable market”.

Its upward trajectory was also driven by modest growth in its loan book, creeping up 4 per cent in the quarter to £6.2bn from £6bn at the end of January after benefiting from strong growth in leasing products and a seasonal uplift in motor finance.

The spokesperson said: “The return on net loan book remains strong, as both the net interest margin and bad debt ratio have remained broadly in line with the first half.

“The rate of growth in expenses was lower than the first half as we continue to tighten cost control, while maintaining investment in the business and in new growth initiatives.”

Total client assets increased by 2 per cent, reaching £9.3bn at the end of April after scraping in over the £9bn mark at the end of January.

The group said it is confident it will deliver a “satisfactory outcome” for the full year by building on its positive performance.

katherine.denham@ft.com