Arbuthnot Banking Group (LON:ARBB) has demonstrated its strength once again with a solid set of full-year 2024 results that reflect its resilience and strategic discipline. Despite a year marked by shifting interest rates and broader macroeconomic uncertainty, the company delivered performance in line with expectations, reinforcing confidence in its long-term direction.
Pre-tax profit came in at £35.1 million, slightly ahead of Shore Capital’s estimate of £34.9 million, even as it marked a 26% year-on-year decline. This was largely due to the lag in deposit cost adjustments catching up with previous base rate hikes and increased operating costs from the company’s recent office upgrade.
Yet the numbers tell a story of strategic progress. Deposits rose to £4.1 billion, up 10% from the prior year, and the Group’s liquidity position remains robust with £2.2 billion on hand, including approximately £0.9 billion of surplus. Loans also grew modestly to £2.4 billion, continuing to reflect the group’s cautious yet steady lending approach.
Importantly, the wealth management arm posted standout performance, with assets under management increasing 30% year-on-year to £2.2 billion – underpinned by a 28% rise in net inflows. This growth underscores the success of Arbuthnot’s relationship-led model and its ability to attract new client funds.
Shore Capital’s analyst Vivek Raja highlighted the value opportunity in Arbuthnot’s shares, stating:
“For a high single-digit/low double-digit RoTE, on a trailing P/TNAV of 0.6x and with dividend yield at c.6%, ARBB’s undemanding valuation more than discounts the profitability impact of a turn in the rate cycle.”
While acknowledging a cautious outlook given the wider economic environment and potential changes in banking capital rules, Raja pointed to Arbuthnot’s balance sheet strength and underwriting discipline as key positives. The firm is also launching a project aimed at enhancing efficiency in its Wealth Management business – a move that could unlock further value over the medium term.
The final dividend of 29p brought the total FY24 payout to 69p, including a special dividend, reflecting a 7% year-on-year increase in the ordinary dividend.
On a Final Note
With a conservative loan-to-deposit ratio of 58%, rising capital ratios, and strong momentum in wealth management, Arbuthnot Banking Group continues to present a compelling case for investors. Shore Capital retains the stock as a “House Stock”, reinforcing their confidence in the group’s ability to deliver through cycles.
