Arbuthnot Banking Group (ARBB): 2020 interim results: credit robust, rate sensitivity
To be resilient, a bank needs three things – low risk assets, strong capital and surplus deposits. ABG has all three. The low-risk assets are reflected by the small percentage (and falling) Stage 2 and Stage 3 loans in the private bank as well as low loan to values. Surplus capital is now £66m and deposits exceed loans by £0.6bn. Profits before tax, though, fell from £2.9m to £0.2m as the decline in base rate squeezed margins (£2.7m cost) and with a £1m incremental COVID-19-related impairment. Our 2020 base-case scenario is now for a small loss (previously breakeven). The shares trade at 64% of NAV, implying value destruction to perpetuity.Arbuthnot Banking Group is primarily involved in banking and financial services. Co. is organized into three main operating segments: Retail banking (associate), which incorporates household cash management, personal lending and banking and insurance services; U.K. Private banking, which incorporates private banking, commercial banking and wealth management; and Group Centre, which is comprised in Co.'s Group Centre management. As of Dec 31 2016, Co.'s total assets were £1.27 billion.
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