Close Brothers Group boosted by market volatility

The finance house will reveal its full-year results on 22 September, and its securities business is starting to pick up as trading volumes jump.

London Stock Exchange
Source: Bloomberg

The firm issued a trading statement in July which covered the five months until 30 June. It was largely business as usual – with the expectation of an improvement in the securities division.

The finance house made inroads into the lending market after the credit crisis because high street banks were curtailing their loan books. Close Brothers Group has been expending its banking business which provides loans to medium-sized companies. Its loan book increased by 7.7% until the end of June.

The company’s asset management division has been a solid performer, and the operation registered a 7% increase in funds under management during the period. Winterflood Securities, the company’s stockbroking unit, has typically been lagging in comparison with the rest of the business, but a more risk-on attitude by clients helped the business have a good five months until 30 June. The jump in market volatility in August is likely to assist the stockbroking business, which will bring it up to par with the rest of the firm.

When Close Brothers posts its annual numbers, traders are expecting revenue of £678 million and adjusted net income of £173 million. These forecasts represent a 2.88% rise in revenue and a 13% jump in adjusted net income. The company will also announce its second-half figures on the same date, and the market is expecting revenue of £351 million and adjusted net income of £86 million, which compares with the first-half revenue and adjusted net income of £330 million and £85.9 million respectively.

Equity analyst are bullish on Close Brothers Group, and out of the 14 ratings, six are buys, seven are holds, and one is a sell. The average target price is £15.67, which is 5.3% above the current price. Investment banks are even more bullish on Investec, and out of the 11 ratings, nine are buys, and two are holds. The average target price is £6.57, which is 24% above the current price.

The share price has been gaining ground since 2009, and the 200-simple moving average at £15.39 is the initial target. A move through it will bring the resistance at £16.30 into play. Any pullbacks in the stock will find support in the £14.25 area.

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