Close Brothers beats profit forecasts

Merchant bank Close Brothers posted a 25 percent drop in full year pretax operating profit, as weaker income from its banking and asset management arms offset a strong performance by brokerage Winterflood.

Close, which had warned in July of stiff headwinds faced by its banking and asset management units, said its operating profit before tax for continuing operations came in at 88.3 million pounds for the year to the end of July.

That compares to 118.4 million pounds a year ago.

The British bank said its adjusted operating profit came in at 113.7 million pounds, down from 127.5 million a year earlier.

The strongest performance was seen in its securities arm, thanks to Winterflood, its UK market making business. The bank said Winterflood had had a "strong start" to the financial year with good volumes in August and September, but cautioned the division's performance remained sensitive to market conditions.

Close had warned in July of rising bad debt provisions, and the bank said on Tuesday that its bad debt ratio rose to 2.6 percent from 1.3 percent a year earlier, reflecting the impact of the recession on borrowers.

It expects bad debts to continue to run "at a high level."