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(Alliance News) – Arbuthnot Banking Group PLC on Thursday reported a decline in customer loans and leased assets at the end of the third quarter, with budget uncertainty weighing on sentiment.

The London-based merchant bank reported GBP2.3 billion in customer loans and lease assets at September 30, down 9% from GBP2.5 billion a year earlier.

Lending fell by 12% on-year to GBP1.4 billion, and was down 3% from the second quarter.

Arbuthnot emphasised the importance of residential investment and private equity for its business, with both markets hit by lower confidence among businesses and households. The bank attributed the uncertain mood to “speculation around the autumn budget where various tax increases are being suggested”.

“The uncertain economic outlook has meant that lending markets have continued to observe thin volumes of business with lenders aggressively competing for transactions by offering low rates,” Arbuthnot added, but maintained it “has not been drawn into this competition.”

Still, the bank reported 24% annual growth in funds under management and administration, which amounted to GBP2.5 billion at the end of September, compared to GBP2.0 billion a year prior. This was “driven by strong inflows year to date and investment portfolio performance following the market turbulence at the beginning of the year,” Arbuthnot said. FUMA grew 5% on-quarter.

In addition, customer deposit balances rose 17% on-year to GBP4.4 billion from GBP3.8 billion, but remained flat on a quarterly basis.

Looking ahead, Arbuthnot expects “continuing macro-economic uncertainty,” and plans to “focus on continuing to support existing clients, whilst maintaining its principle of high quality credit lending for new business.”

Arbuthnot Banking shares traded 0.4% higher at 901.00 pence on Thursday afternoon in London.

By Holly Munks, Alliance News reporter

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