Arbuthnot profit leaps after rate hikes but bank backs ‘conservative’ model as UK prospects ‘not clear’
Arbuthnot Latham saw its profit surge with rising interest rates boosting its coffers, as the lender sought to distance itself from recent difficulties in the banking sector.
Pretax profit in 2022 lept to £20m, up from just £4.6m last year as net interest income grew by over £30m.
The boutique bank said this increase was due “to a number of factors” but admitted that rising interest rates in the face of higher inflation was “the most important”.
The Bank of England has hiked interest rates eleven times in a row in an attempt to stall rising prices. Higher interest rates widens bank’s net interest margin, the difference between what a bank pays and receives in interest payments.
Rate increases which have already taken place in 2023 will further boost Arbuthnot, although it said “the prospects for the UK economy are less clear”.
Arbuthnot also confirmed that it has no natural hedge on the assets it holds at the central bank, so revenue will continue to fluctuate as the base rate changes.
Arbuthnot, whose history goes back to 1833, also sought to distance itself from ongoing banking turmoil in the wake of Silicon Valley Bank’s collapse.
The London-based bank said the bank’s business model proves itself in “circumstances such as those we have witnessed in the last few weeks”.
“Arbuthnot Latham adopts a conservative operating model that targets long-term stability over short-term gain,” it said.
Over the year customer loans increased 10 per cent while deposits increased nine per cent.
“The group made good progress in 2022 after investing over many years in a business model built on relationship-based banking, while also diversifying our lending to higher margin specialist sectors. These results demonstrate the benefits of this strategy.
Secure Trust Bank, formerly Arubthnot’s retail arm until its IPO in 2011, also released results today. Arbuthnot sold its last shares in the bank in 2021.
Secure Trust’s pretax profit fell 21 per cent, although before impairments it recorded a 28 per cent increase.
It also announced that its chair Lord Forsyth, formerly secretary of state for Scotland, will stand down in 2024.