Close Brothers Group PLC on Tuesday raised its dividend despite profit halving in its recent financial year due to a provision for its shuttered litigation funding business.

The London-based merchant bank said pretax profit fell to £81.1 million in the financial year that ended July 31 from £165.2 million the year before. Net interest income rose 2.5% to £592.6 million from £578.0 million, but non-interest income declined by 5.1% to £340.0 million from £358.1 million.

Administrative expenses rose by 2.8%. More importantly, Close Brothers took a £204.1 million impairment of financial assets, up from £103.3 million the year before. The impairments in the recent year included most significantly a £114.6 million provision in relation to the Novitas Loans business, up from £60.7 million the year before. Novitas provided litigation finance but has ceased lending.

Close Brothers also noted lower income from the Winterflood stock brokerage business, amid ‘subdued trading activity’. Adjusted operating profit for Winterflood fell to £3.5 million from £14.1 million.

‘Although performance at Winterflood reflected the continuation of challenging trading conditions, we remain confident in the track record of our trading business and are well positioned to retain our market position and benefit when investor appetite returns,’ Close Brothers said.

Overall, group adjusted operating profit fell to £113.5 million from £234.8 million.

More positively, Close Brothers said its loan book grew by 4.4% to £9.5 billion from £9.1 billion, and total client assets by 4.2% to £17.3 billion from £16.6 billion.

Close Brothers declared a 45.0 pence final dividend, up 2.3% from 44.0p, giving a full-year dividend of 67.5p, also up 2.3%, from 66.0p.

Looking ahead, the company said, ‘we have seen a good start to the 2024 financial year, and our underlying business is well positioned to maintain stable returns this year.’

Close Brothers shares were down 3.6% to 821.50 pence on Tuesday morning in London.

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