By Noor Zainab Hussain
(Reuters) - British lender Close Brothers Group reported a 4 percent rise in full-year adjusted profit due to a strong banking division and said retail trading had improved in its market-making business, driven in part by Britain's vote to leave the European Union.
The Brexit vote had little direct impact on demand at the company's retail, commercial, and property lending operations, Chief Executive Preben Prebensen told Reuters.
Unlike companies such as IG Group and CMC Markets, Close Brothers said its market-maker, Winterflood, reported an improvement in retail trading activity in the second half.
Online trading company IG Group and financial spreadbetting firm CMC Markets have said that financial markets had become subdued in the two months after the Brexit vote on June 23, presenting clients with limited trading opportunities.
"Retail investors came into the market as institutions sold and they were particularly focused on the big banks stocks and then they rotated down into the AIM (alternative investment market)," Close Brothers CEO Preben Prebensen told Reuters.
"We have a substantial AIM trading business, and that maybe one of the differences," he said.
The merchant banking company, which provides loans, wealth management and securities trading, said adjusted operating profit rose to 233.6 million pounds ($303.21 million) for the year ended July 31 from 224.9 million pounds a year earlier.
Operating income at Winterflood, however, fell 13 percent to 82.3 million pounds, as trading income was hurt by the significant fall in commodity prices in the first half.
Close Brothers said adjusted operating profit at its banking division, rose 7 percent to 223 million pounds, with a 12 percent rise in loan book.
Concerns over the ability of newer banks to challenge the big lenders have increased after Brexit, as analysts predict some may struggle if an economic downturn slashes loan demand.
"We don't do mortgages ... That is different from most banks," Prebensen said.
Virgin Money (LON:VM) has said lower-for-longer interest rates had heaped pressure on banks' financial performance, while Shawbrook expects uncertainty could lead to deferred investment decisions and a decline in borrowing demand.
Close Brothers, which has not cut its dividend since listing in London in 1983, said it would pay a full-year dividend of 57 pence per share, 7 percent higher than a year earlier.
Shares in the lender were down 0.9 percent at 1398 pence at 0824 GMT in line with the boarder market.