Half Year 2017 Results

POSTED: 10th August 2017
IN: Newsroom

32% increase in profit before tax to £78m (H1 2016: £59m)

  • Operating income up 17% to £150m (H1 2016: £128m)
  • Underlying cost to income ratio¹ improved to 44% (H1 2016: 46%) while continuing to invest in the Group

Delivering a high-teens return on equity

  • Return on equity of 19% (H1 2016: 16%)
  • Basic earnings per share grew by 45% to 14.9p (H1 2016: 10.3p)

Continued strong, profitable organic growth and robust credit control across the diversified portfolio

  • Excellent loan origination; up by 10% to £1.6bn (H1 2016: £1.5bn)
  • Loan growth of 8% to £8.1bn (FY 2016: £7.5bn), with healthy pipeline at £0.8bn (H1 2016: £0.7bn)
  • Business Finance loans +8% to £1.9bn; Mortgages +9% to £6.2bn
  • Net interest margin in line with guidance at 3.5% (H1 2016: 3.6%)
  • Continued secure and well controlled credit performance; cost of risk 14bps (H1 2016: 20bps)

Continued strong organic capital generation

  • CET1 capital ratio up 30bps to 11.8% (FY 2016: 11.5%)
  • Anticipate delivering a CET1 above 12% by FY17, enabling the Board to consider the payment of dividends
  • Total capital ratio of 14.9% and leverage ratio of 6.9% (FY 2016: 15.6%, 7.0%) with £40m Tier 2 notes called in May
  • Tangible book value per share up 9% to 167p (FY 2016: 153p)

Further strategic progress

  • Announced investment in SME Broker AFS demonstrates our commitment to the broker market and provides strategic opportunities to enhance returns
  • Continuing focus on dynamic service, enhancing our proposition to intermediaries in both Business Finance and

Mortgages through our “we back you” campaign

  • Continue to delight our customers, with Net Promoter Score (“NPS”) increasing to +44 (2016: +43)

Phillip Monks OBE, Chief Executive Officer, commented:

“We have made excellent progress during the first half of 2017, building on our track record of delivery in loan growth, deposit growth and profitability, leaving us well positioned entering the second half with a strengthened capital position and a strong pipeline of new lending.

“We have continued to adopt a balanced approach to growth through strong organic origination and a consistent, robust approach to risk management. We approved £1.6bn of new customer loans in the period taking total lending to customers to more than £8.1bn.

“SMEs play a vital role in the UK’s economic prosperity and we remain focused on helping them access the working capital and investment funding they need to succeed. Business Finance lending grew by 8% during the first half of the year and our agreed investment in AFS, one of the UK’s largest asset and commercial finance introducers, highlights our continued commitment to this market. Mortgage lending increased by 9%, to £6.2bn, as we continue to serve landlords, first time buyers and the self-employed.

“We are delighted with the performance and strategic progress made so far in 2017. Whilst we remain vigilant to the risks posed by the economic uncertainty facing the UK, continued earnings and balance sheet momentum provide us with greater resilience and position us well to capitalise on further strategic opportunities.”

¹ Underlying basis excludes goodwill impairment of £4.1m (pre-tax and post-tax) in 2016. No exceptional items have been recognised with respect to 2017 financial results.




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