Arbuthnot Banking Group predicts franchise growth and outlook through 2025

In an exclusive interview, Hardman & Co’s Analyst Mark Thomas discussed Arbuthnot Banking Group plc (LON:ARBB), providing insight into the company’s recent growth and future outlook.

Thomas highlighted the importance of offering clients the products they desire to drive business growth and attract new customers. The 2024 results showcased Arbuthnot Banking Group’s success in this area with a significant increase in specialist lending, deposit volumes, and wealth management assets. The group added 1,200 new banking clients in 2024 alone.

While short-term profits dipped in 2024 due to predicted margin pressure, Thomas explained that this decline was expected. Arbuthnot capitalised on a rising rate environment in 2023, resulting in significant profits that could not be sustained. The reduction in profits in 2024 was a natural consequence of the group’s strategic positioning.

The long-term success of Arbuthnot Banking Group lies in its commitment to meeting customer needs and maintaining strong franchise growth. In 2024, the group onboarded 1,200 new clients, with a notable increase in non-personal banking clients. Private client numbers grew by 9%, outperforming market trends, and wealth management clients increased by 51%.

Arbuthnot’s asset-backed specialist lending division also experienced growth, completing 22 new transactions in 2024. The group’s investments in infrastructure and business expansion set the stage for continued growth in deposits and wealth management services.

Looking ahead to 2025, Thomas predicted a modest profit dip before a rebound in 2026. The group’s sensitivity to interest rate changes remains a key factor in its financial performance. Mitigating actions, such as growing specialist lending and shifting investments, have been implemented to counteract potential rate impacts.

Credit quality at Arbuthnot has shown improvement, with fewer charges in the specialist lending divisions compared to previous years. However, Thomas noted that the core bank still faces challenges, particularly related to private banking losses.

While Arbuthnot Banking Group has taken steps to address risks associated with falling interest rates, uncertainties persist in the macroeconomic and political landscape. Thomas cautioned that credit deterioration and inflationary pressures could impact the group’s performance moving forward.

Overall, Arbuthnot Banking Group’s strategy of customer-centric growth and strategic investments position it for long-term success and continued financial stability.