Hardman & Co Research: 2020 interim results: credit robust, rate sensitivity

To be resilient, a bank needs three things - low risk assets, strong capital and surplus deposits. ABG has all three. The low-risk assets are reflected by the small percentage (and falling) Stage 2 and Stage 3 loans in the private bank as well as low loan to values. Surplus capital is now £66m and deposits exceed loans by £0.6bn. Profits before tax, though, fell from £2.9m to £0.2m as the decline in base rate squeezed margins (£2.7m cost) and with a £1m incremental COVID-19-related impairment. Our 2020 base-case scenario is now for a small loss (previously breakeven). The shares trade at 64% of NAV, implying value destruction to perpetuity.

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