July 18, 2018 / 6:58 AM / a year ago

UPDATE 1-Close Brothers' loan book grows on commercial, property lending

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July 18 (Reuters) - British lender Close Brothers Group Plc reported on Wednesday a bigger loan book as its commercial and property finance businesses grew, while its net interest margin held largely steady.

The company said there was no significant change to its bad debt ratio in the eleven months to June end when compared with the first half and its 11-month net interest margin of 8 percent was broadly consistent with the last financial year.

The growth in loan book comes after the company warned in September that its banking business would face competitive challenges, prompting analysts to caution that loan growth would be limited and net interest margin could be pressured.

The merchant banking group, which provides loans and wealth management and securities trading services, said the loan book at its banking division rose 6.6 percent to 7.3 billion pounds ($9.55 billion) as at June 30.

Close Brothers, founded in 1878 as a merchant bank to provide farm mortgages in Iowa, said its market maker Winterflood delivered a good performance and saw high levels of trading activity so far this financial year.

Greater market volatility tends to bolster profits at firms such as Europe’s largest market maker Winterflood as investors turn portfolios around more frequently. The trade war between the United States and China has sparked market volatility in recent months.

Total client assets at Close Brothers’ asset management arm rose 8 percent to 12 billion pounds at the end of June.

Close Brothers expects an impact of 45 to 55 basis points on its common equity tier-one capital ratio – a key measure of financial strength - from the new European accounting rule, reflecting the expected increase in bad debt provisions on the balance sheet.

The company will report full-year results in September. ($1 = 0.7642 pounds)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri

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