Arbuthnot Banking Group (AIM:ARBB) PLC shares rose 11% to 1,052p, near a two-year high, after the company reported strong profitability in the first half of 2023.
Profit before tax jumped 676% to £26.4mln for the private and commercial bank, reflecting the benefits of higher interest rates and growth in the specialist lending subsidiaries.
Customer loans increased 2% in the period and 7% year-on-year to £2.3bn despite a tighter credit appetite, while deposits grew 5% in the period and 16% on the year to £3.3bn.
In the wealth management arm, assets under management rose to £1.4bn from £1.3bn at the end of December, driven by net inflows in the period.
The interim dividend was hiked to 19p per share from 17p a year ago.
Arbuthnot said its profitability benefitted from its long-established business model, with the “more normalised” Bank of England base rate bringing increased revenue on both its lending and excess liquidity.
“Interest rates paid on client deposits have been increased to reflect base rate increases,” the company said, regarding its outlook.
“As previously guided, the total cost of funding is expected to increase in the second half of 2023 due to cheaper maturing deposits being replaced with deposits at higher rates.
“Whilst the outlook for the economy looks increasingly uncertain and Arbuthnot remains alert to potential increases in credit risk, the improved profitability, and robust financial strength, means the group remains well positioned.”