 ratio easily exceeds the 9.5pc required by the regulator. Nor should investors forget that Close Brothers' banking arm tends to come into its own during tougher times, as it tends to lend contra-cyclically, when mainstream lenders are running scared. This helps the bank to make that fat net interest margin. Best of all, the share price slide means a lot of bad news may already be factored into the valuation. A £1.3bn market value compares with shareholders' funds, or net assets, of £1.64bn. Strip out £264m of intangible assets and the tangible book value is £1.38bn, so the shares trade around book value. That, and a forecast dividend yield of some 8.3pc, should help to provide some protection as shareholders patiently await a recovery in earnings. Hold. Questor says: hold Ticker: CBG Share price at close: 845p Update: Yellow Cake As we speculated l){kind=link}
Questor share tip: a lot of the bad news related to this financial stock is already priced in
Worries over the trajectory of the Bank of England’s interest rate decisions, sticky inflation and a possible economic downturn continue to weigh on London-listed financial stocks, and Close Brothers is no exception.
It is not hard to see why, as last week’s results for the year to the end of July were far from easy on the eye: bad debts rose and profits and return on equity fell. However, none of this was unexpected, the balance sheet remained strong and the management felt confident enough to raise the dividend.
Best of all, the shares’ spell in the doldrums means they still look cheap, especially relative to book, or net asset, value.
Shares in the FTSE 250 merchant bank have roughly halved from their spring 2021 peak, not least because of the toxic legacy left by 2017’s purchase of Novitas, a specialist provider of finance to the legal sector.