Close Brothers Group PLC (LSE:CBG) will deliver a year-end update tomorrow, fresh from its shares scraping a decade low, its savings accounts appearing on best-buy lists and a report that it is looking at options for its asset management arm.
Expect the merchant bank's results to potentially see confirmation or denial of this latter point, which Bloomberg reported in the past week.
Other fund managers also trading near lows amid a squeeze from cyclical fund withdrawals and the rise of passive investments.
On the other hand with groups like Lloyds and Aviva investing in wealth management M&A, investors will be keen to hear the rationale and progress of any CBAM spin-off and the potential impact on earnings and capital.
Analysts at UBS noted that Rathbones and Investec recently announced the combination of their wealth management businesses, while Aviva acquired Succession Wealth recently.
“Past valuations for advice businesses have been in the 2-3% of AUM range; however, consolidators (backed by private equity) have paid higher valuations in the 8% of AUM range,” the analysts noted.
A separated CBAM has a potential valuation of around £300m according to the news report, which with £16.1bn of AUM would represent roughly a 2% multiple of AUM in line with the recent Rathbones/Investec transaction.
With shares in Close Bros down 14% in the year to date, recently falling below 820p for the first time since 2012, that is not far off similar moves among FTSE 250-listed sector peers, with Rathbones down 10%, Investec 13%, Virgin Money 11% and OSB Group PLC (LSE:OSB) after its recent warning down 32%.
Some specialist insurers are more volatile (Direct Line down 38%, Sabre Insurance up 24%).
At the last update in May, Close boss Adrian Sainsbury said there was good demand in the banking business, with loan book growth accelerating, a strong net interest margin and stable credit performance, while CBAM delivered increased net inflows, but stock market trading activity remained subdued for the Winterflood market maker business.
He said the group was “committed to resuming our track record of earnings growth and returns by focusing on disciplined growth, cost efficiency and capital optimisation”.
Investors will be keen to hear management’s updated views on the banking and insurance landscape, having made more forward-looking impairment provisions and seen a rise in arrears in motor finance in the first half.
The dividend will also be in focus, following the slight increase in the first half.