Arbuthnot Banking Group: Acquisition of Asset Alliance

Hardman & Co
[shareaholic app="share_buttons" id_name="post_below_content"]

We have long argued that Arbuthnot Banking Group plc (LON:ARBB) strong funding and capital position give it a competitive advantage in doing cheap deals in uncertain markets. On 10 December 2020, ABG announced the acquisition of Asset Alliance (AA), a vehicle finance and related services provider, predominantly in the truck & trailer and bus & coach markets. The expected consideration is £4.1m, against an NAV of £8.1m (with acquisition adjustments, the expected negative goodwill (an equity uplift) is £1.7m)). AA has leases with a net book value of ca.£150m. ABG expects 2021 EBITDA of £5.5m, and, with lower-cost refinancing, we expect bottom-line profitability.

  • ABG’s competitive advantage: With strong capital and access to retail deposits (including the flexibility through the best-buy comparator market via Arbuthnot Direct), ABG is in a position to buy companies whose access to finance is less certain or ones who need a strong backer in uncertain times.
  • Why AA: ABG has been building its SME finance business through a series of deals and team builds. AA’s customers’ markets include bus & coach finance, which will have been especially hard-hit by COVID-19. We suspect that the bank providers of credit would be looking for a material increase in their interest.
  • Valuation: Our forecast scenarios, and multiple valuation approaches, see a broad range of valuations. Our base-case range is 871p to 1,652p. Our upside scenario is 1,044p to 1,918p, and our downside 783p to 1,412p. The share price is 62% of the 1H’20 NAV (1,248p).
  • Risks: Short term, the impact of lower base rates is critical. Going forward, the key risk is credit. Historically, ABG has been very conservative in lending and security taken. Its financial strength means that it can take time to optimise recoveries. Other risks include reputation, regulation and compliance.
  • Investment summary: Arbuthnot Banking Group offers strong-franchise and continuing-business (normalised) profit growth. Its balance sheet strength gives it a number of wide-ranging options to develop organic and inorganic opportunities. The latter are likely to increase in uncertain times. Management has been innovative, but also very conservative, in managing risk. Having a profitable, well-funded, well-capitalised and strongly growing bank priced below book value is an anomaly.

DOWNLOAD THE FULL REPORT

Share on:
Find more news, interviews, share price & company profile here for:

Arbuthnot Banking Group Demonstrates Capital Discipline and Strategic Progress, Shore Capital Notes

Arbuthnot Banking Group's H1 FY25 results highlight strong capital discipline and strategic growth in Wealth and Asset Finance. Despite a tough comparative, deposits grew by 7% and the interim dividend increased by 10%, demonstrating resilience and a clear path for future performance.

When the tables turn on building your empire

Discover how to transform your company into an attractive proposition for buyers and chart a confident course from founder to investor.

Arbuthnot Banking H1 2025 PBT £10.9m, dividend up 10% to 22p

Arbuthnot Banking Group delivered profit before tax of £10.9m in H1 2025, raised the interim dividend 10% to 22p, and grew deposits to £4.42bn and FUMA to £2.38bn. CET1 stood at 12.7% and net assets per share rose to £16.49, with Specialist Division lending up 7% since year end.

A forgotten bowling boom reframes today’s AI narrative

An unexpected 1950s bowling frenzy offers a revealing mirror for today’s AI-driven markets, underlining the need for grounded expectations and disciplined capacity planning.

Redefining home for the active generation

Investors who anticipate the evolving lifestyle priorities of the over-55s will discover one of the most compelling opportunities in today’s UK property market.

Arbuthnot names Charlotte Crosswell OBE as non-executive director

Arbuthnot has appointed Charlotte Crosswell OBE as independent non-executive director, joining the board and its banking subsidiary from 16 July 2025 and strengthening its financial services expertise.

Search

Search