Manx Financial Group — Record PBT driven by niche growth strategy

Manx Financial Group (AIM: MFX)

Last close As at 19/04/2024

GBP0.21

0.50 (2.44%)

Market capitalisation

GBP25m

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Research: Financials

Manx Financial Group — Record PBT driven by niche growth strategy

Manx Financial Group (MFG) has delivered impressive growth in a weak economy through its strategy of investing in niche markets. PBT rose 71% to a record £5.2m and net attributable profit rose 55% to £4.3m due to a combination of organic growth and an initial contribution from 50%-owned Payment Assist (PAL). Return on equity (ROE) expanded to 15.9% from 11.8% in 2021. PAL was consolidated for just over three months and contributed 13.5% of PBT in FY22. Hence, we calculate a pro-forma PBT run-rate of c £6–7m in FY22. Furthermore, MFG continues to enjoy positive momentum within its chosen scalable and economically resilient high-return businesses.

Written by

Robert Murphy

Managing Director, Financials and Investment Trusts

Financials

Manx Financial Group

Record PBT driven by niche growth strategy

FY22 results

Banking

3 April 2023

Price

24p

Market cap

£28m

Common Equity Tier 1 (CET1) ratio

12.4%

Shares in issue

115.1m

Free float

40.8%

Code

MFX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.7

9.1

159.5

Rel (local)

10.4

6.9

161.3

52-week high/low

29p

8p

Business description

Manx Financial Group is an Isle of Man based diversified financial services group. Through its subsidiaries such as Conister Bank and Payment Assist, the group operates in resilient niche lending and financing markets in both the UK and the Isle of Man.

Next events

AGM

May 2023

Analysts

Rob Murphy

+44 (0)20 3077 5700

Armando Hoxha

+44 (0)20 3077 5700

Manx Financial Group is a research client of Edison Investment Research Limited

Manx Financial Group (MFG) has delivered impressive growth in a weak economy through its strategy of investing in niche markets. PBT rose 71% to a record £5.2m and net attributable profit rose 55% to £4.3m due to a combination of organic growth and an initial contribution from 50%-owned Payment Assist (PAL). Return on equity (ROE) expanded to 15.9% from 11.8% in 2021. PAL was consolidated for just over three months and contributed 13.5% of PBT in FY22. Hence, we calculate a pro-forma PBT run-rate of c £6–7m in FY22. Furthermore, MFG continues to enjoy positive momentum within its chosen scalable and economically resilient high-return businesses.

Year

end

Operating
income (£m)

PBT
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

16.5

3.0

1.66

0.00

14.5

N/A

12/20

16.4

2.0

1.37

0.00

17.5

N/A

12/21

20.0

3.0

1.97

0.24

12.2

1.0

12/22

26.1

5.2

3.15

0.38

7.6

1.6

Note: *EPS is fully diluted.

Growth unhindered by macro environment

Despite an uncertain macroeconomic environment, MFG continues to grow both organically and through acquisitions that fit its strict criteria. Total loan balances for the group increased £62.2m to £291.5m. Despite absorbing additional staff from the acquisition of PAL and hiring in anticipation of being granted a UK deposit-taking licence, the group’s PBT reached a record £5.2m. Net attributable profit for the year increased to £4.3m versus £2.8m in FY21 and a dividend of 0.3764p/share has been recommended for shareholder approval (FY21: 0.2443p/share). Credit risk appears well under control as gross loans 30 days’ overdue remain in line with FY21 at 10.8% of the book (FY21: 10.7%).

PAL to boost earnings and ROE in 2023

MFG completed its purchase of a 50.1% stake in PAL on 21 September 2022. PAL contributed £3.4m in revenues and £0.7m in pre-tax profit to the group in FY22. Using either MFG’s disclosed full year PBT for PAL of £1.5m or the actual three months’ annualised profit would imply a pro-forma profit range for the group of £6–7m (15–35% above reported FY22 PBT). Moreover, MFG is experiencing good organic growth in its structured lending business as it continues to expand its operations in the UK. Approval of a UK deposit licence would provide the group with additional flexibility in funding its rapid growth.

Valuation: P/BV of 1.35x with ROE of 15.9%

Using FY22 results, MFG currently trades at a price to book value (P/BV) ratio of 1.35x (1.01x using undiluted shares outstanding) and has an ROE of 16%, above the FY18–22 average of 12.5% and at the top end of our chosen peer group. Annualising the three-month run-rate profit for PAL would imply an ROE of 19% for FY22. We believe that MFG’s premium rating to peers is justified due to its higher profitability.

FY22 results

Exhibit 1 details the key profit and loss items over recent years and the half years for FY22.

During 2022, MFG grew its loan book by 27% to £291.5m (FY21: £229.3m), as the consolidation of PAL augmented the robust organic growth across the majority of the group; excluding the three-month contribution from PAL, PBT would have grown 48% y-o-y.

Despite the cost of deposits increasing to 2.4% (FY21: 1.5%), as the Bank of England raised interest rates, the group’s net interest margin (NIM or NII/average assets) improved to 7.1% (6.2% in FY21). This is the result of the consolidation of PAL (which has higher margins) and higher utilisation of the deposit base underlined by the loan-to-deposit ratio increasing to 95.8% from 90.4%.

Net fee income decreased 10% y-o-y to £1.2m, although this made a small 4.5% contribution to overall core operating income. Commissions in the Edgewater Associates Independent Financial Advisory (IFA) business declined due to weak investor sentiment and activity. Commission expense was also affected by the acquisition of PAL, accounting for 11.7% of interest income, roughly in line with the 11.5% in H122. Commission income growth at subsidiaries Conister Bank (+15.7%) and MFX (+14.1%) was not enough to offset the above factors.

Exhibit 1: Selected figures, FY18–22

£’000s

H122

H222

 

FY18

FY19

FY20

FY21

FY22

Net interest income (NII)

10,532

13,820

 

15,568

17,929

15,470

17,980

24,352

Net fee income

986

164

 

(2,738)

(1,630)

384

1,282

1,150

Depreciation on leasing assets

(16)

0

 

0

(333)

(406)

(269)

(16)

Core operating income

11,502

13,984

 

12,830

15,966

15,448

18,993

25,486

Other operating income

275

39

 

131

388

200

365

314

Gains on securities and asset revaluations

(113)

386

 

205

178

757

689

273

Total operating income

11,664

14,409

 

13,166

16,532

16,405

20,047

26,073

Operating expenses

(7,059)

(9,831)

 

(9,748)

(11,632)

(11,394)

(12,789)

(16,890)

Operating profit before impairments

4,605

4,578

 

3,418

4,900

5,011

7,258

9,183

Impairment on loans and advances to customers

(2,268)

(1,722)

 

(857)

(1,900)

(3,950)

(4,360)

(3,990)

Associates profit

0

18

 

30

124

54

32

18

VAT recovery

0

0

 

119

(101)

906

113

0

Profit before tax

2,337

2,874

 

2,710

3,023

2,021

3,043

5,211

Income tax expense

(160)

(377)

 

(243)

(350)

(53)

(234)

(537)

Net profit

2,177

2,497

 

2,467

2,673

1,968

2,809

4,674

Minority interests

(16)

(327)

 

0

0

(33)

(16)

(343)

Net attributable profit

2,161

2,170

 

2,467

2,673

1,935

2,793

4,331

 

Key ratios (%, else stated)

 

 

 

 

 

 

 

 

NIM (NII/average assets)

6.7

7.9

 

8.4

8.0

5.9

6.2

7.1

Impairment provision % average loans

1.9

1.3

 

0.6

1.2

2.1

2.1

1.5

Cost income ratio

60.5

68.2

 

74.0

70.4

69.5

63.8

64.8

ROE

16.7

15.4

 

13.3

12.7

8.7

11.8

15.9

Loan as % deposits

96.6

95.8

 

93.6

85.4

88.5

90.4

95.8

Total capital ratio (%)

17.7

17.7

 

18.1

16.9

19.1

19.1

15.3

Stage 3 loans as % of net loans

4.4

5.1

 

0.7

3.5

7.2

4.4

4.5

Stage 3 loans as % of gross loans

7.7

8.2

 

2.7

5.7

10.2

7.7

8.8

Loans (£'000s)

244,923

291,475

 

148,278

179,370

193,143

229,251

291,475

Equity (£'000s)

26,987

29,770

 

19,723

22,319

22,435

24,985

29,770

Source: Manx Financial Group, Edison Investment Research

Total operating expenses for the business increased 32% to £16.9m (£12.8m), mainly from an increase in personnel costs (including an additional one-off £200 per employee to provide support during the cost-of-living crisis) following the acquisition of PAL and hiring in readiness for expected approval of a UK deposit-taking licence. Expenses were also affected by IT investments to improve operational efficiency.

Looking at H2 versus H1, operating profits before impairments were roughly flat at £4.6m mostly as a result of the notable cost items above.

Profit before tax for the company reached a record £5.2m (FY21: £3m) and post minority interest (nearly all the 49.9% that MFG does not own of PAL) net income attributable to shareholders for the year totalled £4.3m, up from £2.8m in the previous year.

Improved profitability had a positive impact on average ROE, which increased to 15.9% versus 11.8% the prior year.

MFG’s subsidiary Conister Bank remains well capitalised with a CET1 ratio of 12.4% (FY21: 15.2%), well above the minimum requirement of 8.5%. The fall in CET1 is a result of the PAL acquisition and we would expect this to rebuild rapidly due to the group’s high ROE and low dividend payout. Consistent with the board’s policy to reward shareholders with 10% of group profit in cash and shares, a dividend of 0.3764p/share has been recommended to shareholders (FY21: 0.2443p/share).

Stable credit risk trends

The group has taken a conservative approach to credit risk in recent years, moving away from unsecured lending towards secured. Currently only 16% of the book is in unsecured personal loans (albeit this slightly increased with the acquisition of PAL). Hire purchase (HP), finance leases, vehicle stocking plans, block discounting, secured commercial, personal loans and wholesale funding arrangements are all secured.

Exhibit 2: Gross loan breakdown FY21

Exhibit 3: Gross loan breakdown FY22

Source: Manx Financial Group, Edison Investment Research

Source: Manx Financial Group, Edison Investment Research

Exhibit 2: Gross loan breakdown FY21

Source: Manx Financial Group, Edison Investment Research

Exhibit 3: Gross loan breakdown FY22

Source: Manx Financial Group, Edison Investment Research

Exhibits 2 and 3 illustrate the change in loan mix over the year. Following the PAL acquisition, unsecured personal loans have risen somewhat from 13% to 16% of the loan book. However, in the context of a highly secured book overall, this is not very significant and we note the impairment allowance has increased to 4.7% of gross loans (FY21: 3.7%).

Total gross loans and advances in FY22 were £305.7m. Of those loans, £27.0m are in stage 3 (the highest risk of default) and overdue 30 days, representing 8.8% of total gross loans (see Exhibit 4) and up from 7.7% the previous year. Stage 3 loans are 52% covered by impairment reserves, which rises to 100% including £12.9m collateral held (FY21: 108%). Total gross loans overdue 30 days amount to £31.4m or 10.3% of total gross loans, remaining in line with FY21 (see Exhibits 5 and 6). Overall, we conclude asset quality remains well managed and stable and consistent with 2021.

Note: Stage 1 loans are not deemed credit impaired with payments up to date to 30 days. Stage 2 loans are not deemed credit impaired but payments are over 30 days overdue. Stage 3 loans are deemed credit impaired and payments are more than 90 days overdue. Grade A loans are the lowest risk within each stage, while Grade C are the highest risk.

Exhibit 4: Credit quality analysis

2022

2021

£'000

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Grade A

273,332

-

-

273,332

213,102

-

-

213,102

Grade B

-

5,006

9,347

14,353

-

5,735

5,594

11,329

Grade C

391

-

17,622

18,013

342

541

12,656

13,539

Allowance for impairment

(303)

(3)

(13,917)

(14,223)

(503)

(124)

(8,092)

(8,719)

Carrying value

273,420

5,003

13,052

291,475

212,941

6,152

10,158

229,251

Impairment coverage

0%

0%

52%

5%

0%

2%

44%

4%

Current

269,130

-

-

269,130

210,491

-

-

210,491

Overdue < 30 days

4,593

604

-

5,197

2,953

-

-

2,953

Overdue > 30 days

-

4,402

26,969

31,371

-

6,276

18,250

24,526

Total

273,723

5,006

26,969

305,698

213,444

6,276

18,250

237,970

Collateral

-

-

12,927

-

-

-

11,625

-

Collateral coverage

-

-

48%

-

-

-

64%

-

Total impairment and collateral coverage

-

-

100%

-

-

-

108%

-

Source: Manx Financial Group, Edison Investment Research

Exhibit 5: Overdue loans and impairment allowance

Exhibit 6: Stage 2 and 3 as a % of gross loans

Source: Manx Financial Group, Edison Investment Research

Source: Manx Financial Group, Edison Investment Research

Exhibit 5: Overdue loans and impairment allowance

Source: Manx Financial Group, Edison Investment Research

Exhibit 6: Stage 2 and 3 as a % of gross loans

Source: Manx Financial Group, Edison Investment Research

Conservative interest rate risk

The recent failure of Silicon Valley Bank (SVB) has focused investor attention more acutely on liquidity and interest risk management in financial institutions. MFG maintains a very conservative risk profile compared to peers, with a mostly fixed-term deposit book matching its fixed-term loan book (ie no material mismatch).

Exhibit 7 shows the maturity profile of the assets and liabilities is well matched with a short aggregate duration. 40% of assets and 32% of liabilities reprice within six months. 54% of assets and 65% of liabilities reprice within one year.

Exhibit 7: Maturity of assets and liabilities at the reporting date (£'000)

Maturity of assets and liabilities at the reporting date

Sight – 1 month

>1 month – 3 months

>3 months – 6 months

>6 months – 1 year

>1 year – 3 years

>3 years – 5 years

>5 years

Total

Assets

53,715

48,698

48,647

53,599

106,755

51,316

16,531

379,261

Liabilities

17,908

28,052

67,537

115,960

99,611

19,833

590

349,491

Coverage

Asset/Liabilities

200%

74%

-28%

-54%

7%

159%

2702%

Asset/Total Assets

14%

13%

13%

14%

28%

14%

4%

100%

Liabilities/Total Liabilities

5%

8%

19%

33%

29%

6%

0%

100%

Source: Manx Financial Group, Edison Investment Research

Exhibit 8 shows that on a cumulative basis the group is slightly liability sensitive up to three years by just over £12m or only 3% of total assets. Conister Bank has a significant proportion of term deposit funding compared to a typical high-street bank. The bank’s interest rate disclosure in accordance with FSA reporting standards shows that an instantaneous 2% increase in interest rates benefits net interest income by £1.08m or only 3% of revenues.

Exhibit 8: Interest rate risk (£'000)

Sight – 1 month

>1 month – 3 months

>3 months – 6 months

>6 months – 1 year

>1 year – 3 years

>3 years – 5 years

>5 years

Non-interest bearing

Total

Assets

53,593

48,698

48,647

47,813

106,755

46,176

3,098

24,481

379,261

Liabilities and equity

17,908

28,052

67,537

104,466

99,611

19,833

237

41,617

379,261

Interest rate sensitivity gap

35,685

20,646

(18,890)

(56,653)

7,144

26,343

2,861

(17,136)

Cumulative

35,685

56,331

37,441

(19,212)

(12,068)

14,275

17,136

Source: Manx Financial Group, Edison Investment Research

Looking ahead into 2023

The end of 2021 marked the beginning of global interest rate rises. In the UK, rates rose from 0.1% to 3.5% by the end of 2022. Given recent events in the banking sector and the lagged impact of monetary policy on the economy, there is continued potential for additional economic and market turbulence. On the other hand, the most bearish economic forecasts for the UK are moderating and the Office for Budget Responsibility (OBR) currently expects the UK to avoid a technical recession (two successive quarters of negative GDP growth) in 2023, with GDP growth for the year as a whole of 0.5%.

MFG has been growing its business despite the uncertain backdrop, through a strategy of operating in niche or underserved markets, but which are large in relation to the size of MFG and have demonstrated the ability to generate high returns through varying economic cycles. This strategy appears to have been validated considering the growth the company has achieved in the past several years, during which markets and economies have endured a series of disruptive events (Brexit, COVID-19, Ukraine war, rapid reversal of monetary policy, the UK ‘fiscal event’ fallout, accelerating inflation and interest rates, etc).

MFG’s management sees ample scope to continue to pursue its growth strategy on an organic basis and through selective acquisitions.

Further upside optionality of Payment Assist

The recent acquisition of PAL is a good example of how MFG is rapidly building out its franchise without taking excessive risk. MFG has been familiar with PAL for some years as it has been providing finance to it through Conister bank. This has allowed MFG management to gain a good understanding of the business.

PAL is the UK’s leading automotive repair point-of-sale finance provider and distributes through prominent national organisations such as Halfords and Formula One. There are additional organic growth opportunities in insured products (eg warranties) and retail as well as the core market, which is still quite fragmented, according to management. Expansion into new areas will take advantage of using trusted partners to mitigate risk.

PAL helps customers spread one-off or larger costs over relatively short time frames. Thus, the loan book is short duration and granular, and problems with individual customers can be identified early and action taken. The short duration loan book enhances the credit management process through fast identification of potential payment problems and subsequent loss mitigation. PAL performed well during the COVID-19 pandemic and, with a similar current squeeze on household incomes from persistent inflation, we would expect a similar resilient demand for PAL’s financing services.

PAL has an attractive business model. The average loan duration is c 10 months. This means PAL is able to turn its loan book over 1.2 times on attractive one-year funding from Conister Bank.

Management maintains strict risk management policies, writing off debt over three months past due. Currently, write-off volumes remain low as vehicles remain an essential means of transport for many households.

The economics of the deal appear highly favourable: the initial 50.1% stake cost £4.2m in cash, which compares with an annualised attributable profit contribution of c £1.1m based on the three months of PAL contribution in FY22. This represents an annualised 26% return on investment and immediate earnings accretion.

Rather than buy out the whole of PAL in one transaction, MFG has retained an option to buy the remaining 49.9% stake for a variable cash consideration of only two times average net profit, capped at £5m. The option can be exercised before PAL declares a dividend for FY26, which gives MFG time to rebuild the capital required to finance the deal through retained earnings.

The acquisition of the remaining 49.9% looks to be a potentially attractive option that could provide the company with further upside in earnings.

We outline below how the other two main business areas within MFG are similarly performing strongly during the current difficult economic environment.

Conister Bank: Anticipating a UK deposit-taking branch

During FY22, Conister Bank continued to grow its lending, adding £57.7m to its loan book totalling £292.1m (FY21: £234.4m). The bank retains a strong customer base in the Isle of Man (IOM). Lending to customers and small and medium enterprises (SMEs) reached a record £50.5m (FY21: £42.9m) with over 65% originating from the online portal (FY21: 60%).

Loan quality also remains stable as loans overdue by 30 days are in line with FY21 at 10.3% of gross loans and just above the five-year average of 9.9%.

The bank has shifted to secured lending over the past few years. Thus, Conister Bank was able to increase its structured lending in the UK by 34.8% to £150m (FY21: £114.1m), and at the same time hold lower loss provisions due to the collateral support.

To diversify funding and support its growth ambitions on the UK mainland, Conister Bank applied for a UK deposit-taking licence in October 2022. The regulator’s go-ahead is still pending, but the bank’s management has shown its confidence in the approval process by already staffing up operations and incurring an extra £1m in personnel expenses. The UK branch would give Conister Bank more flexible funding options and access to cheaper deposits to support its ambitions to grow in the UK, according to management.

The growth potential and relatively large addressable markets in its chosen lending segments have led management to guide to increased lending in H123 in comparison to H122. Through its structured finance lending in the UK and strong reputation in the Isle of Man, the group is well positioned to expand its activity in the UK in niche markets, be it organically or through acquisitions.

MFX

MFX Limited is the subsidiary of MFG that provides access to competitive foreign exchange and international processing facilities, serving predominantly SMEs in the IOM. Increases in global interest rates have resulted in increasing currency and interest rate volatility, on which MFX was able to capitalise. In FY22, MFX generated £1.74m in fee and commission income (FY21: £1.53m), generating a pre-tax return on assets of 260%, above the five-year average of 171%. This highly cash-generative business provides a useful counter-cyclical benefit to the group during periods of market and economic volatility.

Valuation

Currently, there are no consensus forecasts for MFG. Exhibit 9 shows the market’s current relative valuation of the peer group based on 2022 figures. In our valuation we compare current price to FY22 book value (P/BV) against both reported ROE and an adjusted FY22 ROE figure using the three-month annualised contribution from PAL.

MFG shares trade at a P/BV ratio of 1.35x, calculated using a diluted share count. On a non-diluted basis, the P/BV for MFG is 1.01x. MFG trades at a premium to peers, which we believe is supported by a higher profitability on an ROE basis compared to the peer group (see Exhibit 9). Considering MFG’s FY18–22 ROE averaged 12.5%, the group remains attractively priced at book value.

Using either MFG’s disclosed full year PBT for PAL of £1.5m or the actual three months’ annualised profit would imply a pro-forma profit range for the group of £6–7m (15–35% above reported FY22 PBT).

In Exhibit 9, MFG* is the pro-forma figure for FY22 based on the actual three-month profit contribution from PAL.

Based on these assumptions, the implied adjusted FY22 ROE for MFG is 19%. Using the current valuation of 1.35x P/BV, and the reported 2022 ROE of 15.9%, the market is currently pricing in a cost of equity (COE) of 11.8% (COE = ROE/PBV) with no implied growth. Conservatively assuming zero growth, the same COE of 11.8% and adjusted FY22 ROE of 19%, the implied P/BV would be 1.61x, which is 19% above the current P/BV ratio.

Exhibit 9: Peer group P/BV ratio versus ROE using 2022 financials

Source: Company accounts, Refinitiv, Edison Investment Research. Note: PAG using company underlying figure. MFG* includes annualised figures for PAL. Priced at 3 April 2023.

Exhibit 10: Financial summary

Year-end 31 December

FY18

FY19

FY20

FY21

FY22

£m except where stated

Profit and loss

Net interest income

15,568

17,929

15,470

17,980

24,352

Net commission income

(2,738)

(1,630)

384

1,282

1,150

Other income

336

233

551

785

571

Total operating income

13,166

16,532

16,405

20,047

26,073

Total operating expenses

(9,748)

(11,632)

(11,394)

(12,789)

(16,890)

Operating profit pre impairments & exceptionals

3,418

4,900

5,011

7,258

9,183

Impairment charges on loans

(857)

(1,900)

(3,950)

(4,360)

(3,990)

Associates

30

124

54

32

18

VAT recovery

119

(101)

906

113

0

Operating profit post impairments

2,710

3,023

2,021

3,043

5,211

Non-recurring items

0

0

0

1

0

Profit before tax

2,710

3,023

2,021

3,044

5,211

Corporation Tax

(243)

(350)

(53)

(234)

(537)

Tax rate

9%

12%

3%

8%

10%

Profit after tax

2,467

2,673

1,968

2,810

4,674

Minority interests

0

0

(33)

(16)

(443)

Net income attributable to equity shareholders

2,467

2,673

1,935

2,794

4,331

Shares and per share ratios

Average basic number of shares in issue (m)

131.1

131.1

119.0

114.3

114.8

Average diluted number of shares in issue (m)

172.8

172.8

155.5

150.8

153.8

Period end shares in issue (m)

131.1

131.1

114.1

114.3

115.1

Reported diluted EPS (p)

1.54

1.66

1.37

1.97

3.15

Reported DPS (p)

0.00

0.00

0.00

0.24

0.38

NAV per share (p)

11.4

12.9

14.4

16.6

19.4

Tangible NAV per share (p)

8.9

9.4

10.1

10.7

10.7

Income ratios and per share

Net interest/average loans

11.5

10.9

8.3

8.5

9.4

Impairments /average loans

0.6

1.2

2.1

2.1

1.5

Cost income ratio

74.0

70.4

69.5

63.8

64.8

Return on average equity

13.3

12.7

8.7

11.8

15.9

Return on average TNAV

17.2

16.9

12.3

17.6

28.6

Balance sheet

Net customer loans

148,278

179,370

193,143

229,251

291,475

Other assets

48,636

73,517

74,818

79,502

87,786

Total assets

196,914

252,887

267,961

308,753

379,261

Total customer deposits

158,500

209,933

218,285

253,459

304,199

Other liabilities

18,691

20,635

27,241

30,309

45,292

Total liabilities

177,191

230,568

245,526

283,768

349,491

Net assets

19,723

22,319

22,435

24,985

29,770

Minorities

0

0

84

56

189

Shareholders' equity

19,723

22,319

22,351

24,929

29,581

Reconciliation of movement in equity

Opening net assets

Profit in period

2,467

2,673

1,968

2,809

4,674

Other comprehensive income

(6)

(77)

(292)

236

538

Ordinary dividends

0

0

0

(185)

(217)

Minority changes from subsidiaries

0

0

(1,560)

(310)

(210)

Closing net assets

19,723

22,319

22,435

24,985

29,770

Balance sheet ratios

Loans as % deposits

93.6

85.4

88.5

90.4

95.8

Loans to equity (x)

7.5

8.0

8.6

9.2

9.7

Stage 3 as % loans

0.7

3.5

7.2

4.4

4.5

Impairments as % stage 3 loans gross

81.5

45.3

34.7

47.8

52.7

Total capital ratio (%)

18.1

16.9

19.1

19.1

15.3

Source: Manx Financial Group, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Manx Financial Group and prepared and issued by Edison, in consideration of a fee payable by Manx Financial Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Manx Financial Group and prepared and issued by Edison, in consideration of a fee payable by Manx Financial Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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