Close Brothers Group shares deepens sell-off 📉

Shares of banking services company Close Brothers Group (CBG.UK) are under pressure today, losing 13% despite better sentiment among UK companies as the market took a negative view of its H2 2022 results:

• Its loan portfolio rose to £9.23 billion versus £9.1 billion previously (1.5% increase). This was mainly driven by premium customer activity and the real estate market;
• Net client inflows rose 6% although assets under management fell to £15.2 billion from £15.3 billion in H1. Total client assets fell to £16.3 billion from £16.6 billion;
• The bank's CET1 banking ratio, which measures the bank's resilience to stress, was 14.5%, exceeding the required range between 12 and 13%, confirming that the company has an adequate capital-to-asset ratio.

Novitas and Winterflood Securities weaker results

• The business of brokerage and custody company Winterflood Securities was hit by the crisis in the risky asset industry. Profit was £1.7 million compared to £14.1 million in 2021;
• Already in 2021, Close Group has withdrawn from offering loans to new clients in products offered by legal services company Novitas. Despite this, the company has now had to set aside £90 million for this purpose, reflecting a significant probability increase of defaulting;
• Net income from Novitas is expected to fall to about £8 million by 2024, from about £36 million in 2022. In view of this, the group's CET1 capital ratio could fall by 0.8%.

Close Brothers Group (CBG.UK) shares, W1 interval. Looking at the company's shares on a broader interval, we see that the valuation has retreated to the vicinity of £9 per share from where the upward impulse has been repeatedly triggered over the past 10 years. The SMA100 and SMA200 averages have crossed again, forming the so-called 'death cross', which may suggest that the stock will remain in the oversold zone longer. Source: xStation5