Arbuthnot Banking Group faced the sting of easing interest rates in its annual results report as profit at the historic lender tumbled.
The AIM-listed bank recorded £35.1m in profit before tax in its full-year results, a drop of over £10m from the £47.1m booked in 2023.
Shares at the lender were down as much as 1.79 per cent to 898.6p following market open.
As profits fell, the firm reported a stark drop in earnings per share at 152.3p, compared to 222.8p the previous year.
The firm’s net interest margin – an important metric used by banks showing the difference in price at a lender borrows and lends – reduced by 60 basis points to 5.1 per cent.
Lenders across the UK have had to battle changing conditions following the Bank of England cutting its Bank rate twice – by a total of 50 basis points – over the reporting period.
Whilst the central bank held rates in its most recent meeting, further cuts are expected over the coming year forcing many lenders to adjust to new climates.
Andrew Salmon, Arbuthnot’s chief executive, told City AM: “Last year (2023) was flattered by rising interest rates.”
Salmon reiterated the firm had anticipated a change in profit, and the growth of the lender’s deposit books provided a strong perfomance.
Operating income remained steady, with a £179.5m intake in 2024 marking a small bump from the £178.9m in 2023.
The bank reported a 50 per cent increase in its total dividend per share for the year at 69p, with final dividend declared increasing by 2p to 29p.
Arbuthnot continued growth in its customer deposits, reaching £4.13bn which marked a 10 per cent year-on-year increase.
Customers loans also increased two per cent as the bank cited “tighter credit appetite during the year”.
Commenting on the results, Sir Henry Angest, chairman of Arbuthnot, said: “As the interest rate environment normalised and deposit costs caught up with loan pricing, Arbuthnot delivered a creditable performance and made progress against the Group’s “Future State 2” strategic plan.
“We are confident that the continued delivery of our strategic plan will enable Arbuthnot to take advantage of all opportunities to develop the business over the medium term.”
He added: “On a strategic and operational level, I am pleased with the progress being made across the group.
“Our loan book, including assets available for lease, increased to £2.4bn with continued good contributions from our specialist lending subsidiaries.
“Once again, the attractiveness of the proposition and personal service of our banking products continued to resonate with our clients as the deposit balances grew by 10 per cent to close in excess of £4bn.
“This is a major milestone that the bank surpassed for the first time in its history.”