Close weathers rumour storm to report soaring profits

Close Brothers, one of the City's last independent investment banks, yesterday demonstrated that uncertainty about its future ownership was not hindering its business as it reported a 14% rise in full year profits.

Colin Keogh, the new chief executive, said speculation that a 17% stake owned by Caledonia Trust would be put up for sale was not a worry for the bank. Rumours that the shares would be sold off by Caledonia have swirled after a feud with dissident shareholders, including the wealthy Cayzer family which controls the trust, led to pressure for the trust to be broken up.

A decision on the future of the trust is expected on Thursday although Mr Keogh indicated that he expected the majority of shareholders in Caledonia to support the status quo.

In any case, he said Close could see off any attempt to take it over. "Independence is steeped in our culture," he said.

He painted an upbeat picture for Close after an upturn in activity on the stock market and more corporate activity which helped the rise in profits to £85m.

Much of the rise in profits was fuelled by a 40% improvement at Winterflood, the business which makes markets in shares, largely for retail brokers. Mr Keogh said this increase in business was a sign that retail investors were starting to dip their toes into the stock market again after a torrid three-year period.

Sir David Scholey, Close's chairman, said: "The long storm in the stock market appears to have blown out ... however, the general economic situation remains uncertain."

The group's asset management division was hit hard by the difficult market conditions with profits halving to £8m.

The group bought Nelson Money Management during the year, in the process acquiring more than £900m of funds under management. Two years ago, asset management made up 23% of Close's operating profits but for the last financial year it was 8%.

The asset management arm is part of the investment banking division of Close, which overall achieved a 6% rise in profits. Within this, the group said corporate finance had performed particularly well, achieving a doubling in profit after a busy last quarter to the year.

The traditional banking business reported a 14% rise in profits after bad debts were unchanged on the year.

The shares rose 2.5p to 715p. Despite the rise in profits, Close held the dividend payment at 26p.