Arbuthnot Banking Group (LON:ARBB) has delivered a trading update for the three months to 30 September 2025, demonstrating resilience and strategic focus amid a cautious macroeconomic backdrop. While broader sentiment in the residential investment and private equity markets has softened ahead of the Autumn Budget, ARBB has opted to stay the course, prioritising credit quality and deposit growth over aggressive loan expansion.
In its latest update, Arbuthnot reported a 17% year-on-year rise in customer deposits to £4.4 billion, underlining the strength of its funding franchise. In contrast, loans and leased assets stood at £2.3 billion, down 9% year-on-year. Despite the dip in lending volumes, the bank’s counter-cyclical approach is paying off in terms of credit stability and long-term positioning.
Research Analyst Vivek Raja of Shore Capital notes, “During this period of uncertainty, ARBB has avoided being drawn into price competition amidst thinner volumes and spread compression in lending markets, whilst leveraging its strong funding franchise through continued deposit growth… We continue to highlight ARBB’s income credentials with dividend yield at 6%.”
The bank’s cautious stance has resulted in a -3% decline in loans and lease balances compared to the previous quarter, and a -10% drop year-to-date. However, the asset management division provided a bright spot, with Funds under Management and Administration (FuMA) rising 24% year-on-year to £2.5 billion. Inflows remained robust, with £88 million in Q3 and £191 million year-to-date, helping ARBB outperform its UK wealth management peers.
Significantly, Arbuthnot has no exposure to regulated motor finance, placing it outside the scope of any Financial Conduct Authority (FCA) compensation schemes – a notable advantage in the current regulatory climate.
Although the subdued loan environment may make the previously forecast end-FY25 loan balance of £2.36 billion harder to achieve, Shore Capital suggests that any adjustments will primarily affect FY26/27 profitability, not the current year’s core outcomes.
In terms of valuation, Shore Capital views ARBB’s current position favourably. The shares trade on a trailing price-to-tangible net asset value (P/TNAV) of just 0.6x, with a strong 6% dividend yield reinforcing its income appeal. As Mr Raja comments, “We view ARBB’s valuation as undemanding against our prevailing high single digit RoTE forecasts.”
Q3 2025 Highlights
- Customer Deposits: £4.4bn, +17% YoY
- Loans and Leased Assets: £2.3bn, -9% YoY
- Funds under Management & Administration (FuMA): £2.5bn, +24% YoY
- Q3 FuMA Net Inflows: £88m
- Year-to-Date FuMA Net Inflows: £191m
- Loan Book Focus: Support existing customers, avoid price competition
- Dividend Yield: 6%
- Trailing P/TNAV: 0.6x
On a Final Note
Despite headwinds in lending markets and broader macroeconomic uncertainty, Arbuthnot Banking Group continues to execute a disciplined, strategic plan rooted in risk awareness and strong deposit gathering. Its focus on long-term value, combined with a steady wealth management performance and attractive shareholder returns, sets a stable foundation for future growth.
