Profits slide at downbeat Close

Close Brothers, one of the UK's few remaining independent investment banks, yesterday said the outlook for 2003 was "neither clear nor encouraging" as it reported pre-tax profits for the year had fallen 23 per cent to £68.4m.

Investors, however, rewarded Close for showing some resilience to the tough conditions in the past year and its shares closed up 4.3 per cent at 482p.

The groups' banking division has helped to buoy the group's results as pre-tax profits were up 35 per cent to £55m on increased lending. The division's loan book now stands at £1.4bn and banking now accounts for 61 per cent of the group's operat- ing profits.

Sir David Scholey, chairman of the group, said: "Whilst our banking division continues to grow, the current uncertainty of sentiments in markets means that growth in our other divisions would be hard won. Our asset management and market-making division were not immune to these cold winds. The green shoots that seemed to appear in autumn quickly withered and the year ended on a subdued note."

Assets under management have stayed flat since last year at about £3.1bn, which has surprised analysts who were expecting to see a larger depletion of funds. But Sir David said the outlook for the division "continues to be unexciting".

The group's corporate finance division has seen a huge fall in activity in the past year, and has made about 40 redundancies. The division scraped in a profit, excluding exceptional items from redundancies, of £2.1m.

Sir David said the rebound after 11 September had been short-lived and he was keeping his short-term stance one of caution.

Sarah Ing, an analyst at UBS Warburg, said the results were slightly better than expected. "The banking division was up 35 per cent, which shows enormous resilience to the markets," she said. "It has shown improvements every year for the past 25. The other three divisions have obviously been impacted, but the business as a whole is well balanced and has a mix of assets that have cross-cycle exposure."

The group has maintained its year-end dividend at 26p.