Arbuthnot Banking Group has reported a first-half profit before tax of £10.9 million, down from £20.8 million a year earlier, amid falling base rates, according to a company announcement about its unaudited results.

But while headline profits softened, the Group’s specialist lending divisions — Renaissance Asset Finance (RAF), Arbuthnot Commercial Asset Based Lending (ACABL), and Asset Alliance Group (AAG) — delivered notable operational highlights that underscore the resilience and growth potential of its asset-focused businesses.

Sir Henry Angest, Chairman and CEO, noted that despite the macroeconomic headwinds, “Arbuthnot has continued to grow the overall business and in particular… specialist commercial lending,” reinforcing the Group’s strategy of disciplined, counter-cyclical lending.

RAF profit surge

RAF, Arbuthnot’s high-value asset finance arm, posted a standout performance with profits rising 48% to £3.3 million. The loan book grew 19% year-on-year to £279.6 million, bolstered by a sharp increase in block discounting, which now represents over a fifth of the RAF portfolio.

Despite a challenging climate for SMEs, “problem debt provisions remain low and favourable net margins were maintained,” suggesting both underwriting discipline and credit quality remained intact.

ACABL steady

ACABL delivered a stable performance with profit increasing to £4.8 million, up from £4.4 million a year earlier. Though its loan book remained broadly flat at £231.2 million, the second quarter saw signs of improvement in originations and client facility expansions.

The division’s continued emphasis on high-quality collateral has helped mitigate credit risk. “The proven business model… continues to mitigate against credit losses,” the Group said.

AAG feels pressure

Asset Alliance Group, which focuses on commercial vehicle leasing, reported a small loss of £0.5 million (2024: £0.03m profit), reflecting a still-recovering truck and trailer market. However, total leasing assets rose 6% to £385 million, and the bus and coach division continued to outperform, benefiting from rising demand tied to low-emission transport initiatives in UK cities.

“The strategy to diversify the portfolio has resulted in strong performance from the bus and coach division offsetting the more challenging truck sector,” Arbuthnot said.

Looking forward, signs of recovery in used commercial vehicle trading and strong yields in new business provide grounds for optimism, particularly within the newly launched Bus Rental Division, which boasts full utilisation and a “healthy forward pipeline.”

Interim dividend up

Despite a more cautious lending approach across the Group, Arbuthnot increased its interim dividend by 10% to 22p per share, signalling confidence in its long-term strategy. As base rates continue to fall, the Group reiterated its commitment to lending selectively and profitably rather than pursuing growth at the expense of returns.

“The continued strength of the business is reflected in the decision to increase the interim dividend,” said Angest, adding that Arbuthnot would “preserve our capital for the future, when these markets become firmer.”