Hardman & Co Research on Arbuthnot Banking Group (ARBB):
2025 lower margins, 2026 profit stability
ABG’s 2025 results noted i) strong growth in low-capital-intensity businesses (deposits, wealth management) and high risk-adjusted-return specialist lending ‒ ABG continues to walk away from business that does not meet its target returns, and ii) pre-tax profits fell 31% on 2024 due to the well-flagged impact of the falling rate environment, lower PE-related ACABL activity and low truck resale profits, partially offset by a one-off £3.25m gain. Some of this is short-term noise. A higher-for-longer interest rate environment, due to the Iran war, will aid deposit margins in 2026. We forecast a near-7% yield for 2026, with cover of over 2x.
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