ABG smashed expectations with underlying 1H’22 profits of £10.7m, which is more than we had forecast for the full year. This was driven by widening margins in a rising rate environment, and, in particular, being a bank with relationship deposits rather than rate-sensitive best-buy accounts. Before getting too excited, we note 1H’21 was exceptional, and margins will normalise over time, but we have materially increased both FY’22 and FY’23 estimates, despite cost pressures. Current credit cost metrics continue to improve, and management indicates its forward-looking metrics show no signs of stress. Growth and new capital requirements are absorbing the previously large capital surplus.
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