Arbuthnot Banking Group PLC (LON:ARBB) published its Annual Report and Accounts for the year to 31 December 2023.
Chairman’s statement
Arbuthnot Banking Group (“ABG” or “The Group”) is pleased to report a profit before tax of £47.1m. This represents a continued trend of improved financial performance compared to the prior years and an increase of 135% over 2022 which was £20.0m.
While the Group has been developing its business in accordance with the “Future State 2” strategic plan, the financial results have also benefited from the continued upward movement in the Bank of England (“BOE”) base rate which increased from 3.5% to 5.25% in 2023. The impact of this has been two-fold.
Firstly, the significant surplus liquidity balances that the Bank holds at the BOE have earned more income in line with the higher rates. Secondly, the lending balances that are linked to the base rate have repriced immediately, while the cost of deposits has naturally lagged behind, despite the Bank quickly adjusting its rates in favour of depositors. This is due to the fact that fixed rate deposits have to reach their maturity in order to be able to take advantage of the higher rates. Typically, it takes 12 months for the lag to completely catch up with current pricing levels. Clearly, the reverse will be the case in a falling rate environment.
