Close Brothers Asset Management (CBAM) had a rocky end to 2022, with profits falling by nearly half due to a reduction in income. 

Statutory operating profit before tax in the six months to the end of January 2023 fell to £7.8m, down from £13.7m the same period a year ago, a drop of 43%.

Adjusted operating profit in CBAM fell 41% to £8.6m, down from £14.5m in the first half of 2022 as stable costs were more than offset by the reduction in income.  

Total operating income declined by 7% to £71m, down from £76.9m, reflecting a lower average assets under management due to markets and lower client activity. 

Following the release of the group's results, Close Brothers' share price fell by 4.8% in early morning trading, according to Morningstar data.

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CBAM's revenue margin reduced to 83bps down from 89bps in the first half of 2022, primarily due to flows into lower margin investment management products.

Ongoing uncertainty continued to impact investor sentiment, and while Close Brothers AM saw net inflows of £474m, this was down significantly from a year ago when it was £634m.

Total managed assets increased 3% to £15.7bn up from £15.3bn as of 31 July 2022, driven by the positive net inflows, and slightly offset by negative market performance. 

Overall, total client assets, which includes advised and managed assets, increased by 2% overall to £16.9bn up from £16.6bn at 31 July 2022.

Group's profits tank by 90%

The wider Close Brothers Group has reported pre-tax profits were down 90% in the six months to January, as it reels from further write downs related to its legal sector loan arm Novitas.

Litigation funder Novitas was bought by Close Brothers in 2017, but ceased lending to new customers in July 2021 and began running down its back book, ultimately to be wound down. 

In the results, the group announced it was making an additional provision for losses related to the lender of £89.8m, bringing the total Novitas total write down in the period to £114.6m.

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As a result, Close Brothers' statutory operating profit before tax for its first half year 2023 fell to £11.7m, down from £128.9m in the same period in 2022. 

Excluding Novitas, adjusted operating profit decreased to £117.5m, down from £160.5m a year ago.

Adrian Sainsbury, Close Brothers chief executive, said the Novitas impact "is clearly disappointing" and the result of a "challenging six months".