Arbuthnot Banking Group profits hold steady as client balances pass £10bn

Arbuthnot Banking Group's first-half numbers tell a story of strong operational growth meeting a less helpful interest-rate environment.

Profit before tax was broadly unchanged at £11.0 million for the six months to 30 June 2026, compared with £10.9 million a year earlier. That modest headline movement masks meaningful growth in deposits, lending and funds under management and administration.

The interim dividend rose by 9% to 24p per share, while earnings per share increased from 42.5p to 49.9p. However, investors should also note that operating expenses and impairment losses increased, while the Group's regulatory capital ratios moved lower.

Arbuthnot's key figures

Metric	H1 2026	Comparator	Change disclosed
Profit before tax	£11.0 million	£10.9 million	Broadly unchanged
Earnings per share	49.9p	42.5p	Higher
Interim dividend	24p	22p	Up 9%
Customer deposits	£4.78 billion	£4.57 billion at December 2025	Up 4%
Customer loans, including leased assets	£2.45 billion	£2.25 billion at December 2025	Up 9%
FUMA	£3.00 billion	£2.68 billion at December 2025	Up 12%
Net assets per share	1,712p	1,694p at December 2025	Higher
CET1 capital ratio	12.0%	13.3% at December 2025	Lower

FUMA means funds under management and administration. It measures client assets overseen by the wealth business, even where Arbuthnot does not directly manage every asset.

Growth was stronger than the profit line suggests

Total Group operating income increased from £84.9 million to £88.2 million. Net interest income edged up to £59.6 million, while net fee and commission income increased from £14.6 million to £16.8 million.

That fee growth matters because Arbuthnot remains exposed to changes in the Bank of England base rate. The average base rate during the period was 3.75%, down from 4.48% in the first half of 2025. Earnings on the Group's significant liquidity resources are linked to that rate, so cuts create a headwind.

The bank does not currently hedge the earnings generated by £523 million of free cash because it considers the cost prohibitive. It does, however, invest some excess liquidity in short-dated UK gilts and Treasury bills, partially delaying the effect of rate changes by three to 12 months.

Operating expenses increased from £73.3 million to £76.2 million as the Group continued investing in people and technology. Impairment losses also rose from £1.4 million to £1.8 million. These movements largely absorbed the additional income, leaving profit before tax almost flat.

Profit after tax increased more clearly, from £6.9 million to £8.1 million, helped by a lower tax charge. The reason for the reduction in the tax expense was not disclosed.

Specialist lending supplied the momentum

Arbuthnot's specialist lending balances passed £1 billion, reaching £1.05 billion. That was 18% above the end of 2025 and 17% higher year on year.

Renaissance Asset Finance was a standout performer. Its loan book grew by £82.2 million in six months to £369.4 million, with most of the growth coming from financing high-value cars for high-net-worth individuals. Profit before tax increased by 17% to £3.8 million, and the division passed £1 billion of cumulative lending since its launch in 2014.

Arbuthnot Commercial Asset Based Lending also returned to growth. Its loan book increased by 29% from the year-end position to £282.1 million. Asset-based lending is finance secured against items such as invoices, stock or other business assets.

ACABL's profit before tax declined from £4.8 million to £4.3 million despite the larger loan book. Management nevertheless said the current pipeline indicated that lending momentum should continue during 2026.

Asset Alliance Group moved back into profit, recording £0.8 million of profit before tax against a £0.5 million loss a year earlier. Used commercial vehicle sales were profitable in the period, compared with losses during 2025. The coach market remained affected by higher fuel costs, although the bus sector was described as more resilient.

Wealth Management reached £3 billion

FUMA reached £3.00 billion, up 26% year on year. The division attracted gross inflows of £343 million and net inflows of £189 million during the half, despite equity-market volatility linked to conflict in the Middle East.

The Wealth Management division remained loss-making, but its pre-tax loss narrowed substantially from £1.9 million to £0.5 million. Fee and commission income increased from £7.8 million to £9.3 million.

The business also launched its first fund range in April, aimed at making its investment proposition accessible to clients with lower levels of capital. A Global Direct Service, offering direct access to bonds and equities, was due to launch in July.

This is strategically useful because wealth fees can broaden the Group's income mix and reduce reliance on interest earned from the balance sheet. Investors will want to see whether continued asset growth can take the division into sustainable profitability.

Deposits remain a notable strength

Customer deposits increased to £4.78 billion, despite approximately £250 million of seasonal private banking outflows linked to payments to HMRC.

Some wealth inflows came from cash already held by Arbuthnot Latham clients. Even after this movement between products, total deposits still increased, which management views as evidence of a strong deposit-gathering franchise.

Customer loans, including leased assets, rose to £2.45 billion. Management said lending discipline was maintained, with Banking watchlist client numbers at medium-term historic lows. Stage 3 loans, which are considered credit-impaired, declined to £59.9 million from £63.7 million at the end of 2025.

Capital ratios require attention

The common equity tier one, or CET1, ratio fell to 12.0% from 13.3% at December 2025. CET1 is a key measure of a bank's highest-quality capital relative to its risk-weighted assets.

The total capital ratio also declined, from 15.4% to 13.9%. Arbuthnot said all regulated entities complied with their externally imposed capital requirements and described the capital position as strong. Its total capital requirement ratio was 8.05%.

Even so, the direction of travel matters. Rapid lending growth consumes capital, so investors should watch whether future profit generation can support expansion, dividends and adequate regulatory headroom at the same time.

What investors should watch next

Arbuthnot has reached its Future State 2 target of £10 billion in total client balances more than two years ahead of schedule. That includes loans, assets available for lease, deposits and FUMA, and shows that growth is coming from several parts of the business.

The main positive is the breadth of that growth. Deposits, specialist lending and wealth assets all advanced, Asset Alliance returned to profit, and the dividend increased.

The counterweight is that this progress has not yet produced much growth in pre-tax profit. Lower base rates weighed on income, costs rose and capital ratios declined. The economic outlook also remains uncertain, with management highlighting inflation, energy prices, supply-chain disruption and the possibility of interest rates staying higher for longer.

No quantitative full-year profit guidance was disclosed. For the remainder of 2026, the key tests will be whether lending growth converts into higher earnings, whether Wealth Management reaches profitability and whether capital ratios stabilise while the Group continues expanding.