26 March 2026                                                                                                                                                                   

For immediate release

 

ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")

Audited Final Results for the year to 31 December 2025

 

Resilient performance in line with expectations

 

Arbuthnot Banking Group today announces its audited results for the year ended 31 December 2025.

 

Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited ("Arbuthnot Latham").

 

FINANCIAL HIGHLIGHTS

·      Profit Before Tax of £24.2m (2024: £35.1m)

·      Operating income of £169.5m (2024: £179.5m)

·      Average net margin of 4.7% (2024: 5.1%)

·      Earnings per share of 109.1p (2024: 152.3p)

·      Final dividend declared increased by 2p to 31p (2024: 29p)

·      Total dividend per share for the year of 53p (2024: 69p, including special dividend of 20p per share); ordinary dividend per share increased by 4p

·      Year-end net assets per share of 1694p (2024: 1636p)

·      Total net assets of £276.4m (2024: £267.0m)

·      Strong capital ratios maintained with a CET1 ratio of 13.3% (2024: 13.2%) and a total capital ratio of 15.4% (2024: 15.3%)

·      Substantial surplus liquidity at the year-end of £1.42bn above the regulatory minimum (2024: £896m)

 

OPERATIONAL HIGHLIGHTS

·      Continued growth in customer deposits to £4.57bn (2024: £4.13bn), up 11% year-on-year, driven by the success of the Group's relationship-based approach across both Private & Commercial Banking

·      Customer loans reduced 6% to £2.25bn (2024: £2.38bn)* as the Group maintained tight credit discipline, preserving capital in the face of market driven suboptimal rates

·      Funds under management and administration ("FUMA") increased 21% to £2.68bn (2024: £2.21bn), driven by very strong inflows which represented 22% of FUMA at the start of the year

·      Continued growth in the Group's target markets, with 1,200 new banking clients and over 200 new investment management clients

 

Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said: "The Group performed resiliently in what continues to be an uncertain and low-growth economic environment. We are encouraged by the double-digit growth in customer deposits and the inflows-driven growth in funds under management. The Group remains conservatively managed with a robust balance sheet and continues to see client growth opportunities."

 

Note:      *   This balance includes both Customer loans and assets available for lease.      

 

The Directors of the Company accept responsibility for the contents of this announcement.

 

 

ENQUIRIES:
Arbuthnot Banking Group	0207 012 2400
Sir Henry Angest, Chairman and Chief Executive
Andrew Salmon, Group Chief Operating Officer
James Cobb, Group Finance Director
Grant Thornton UK LLP (Nominated Adviser and AQSE Corporate Adviser)	0207 383 5100
Colin Aaronson
Samantha Harrison
Ciara Donnelly
Shore Capital (Broker)	0207 408 4090
Daniel Bush
David Coaten
Tom Knibbs
H/Advisors (Financial PR)	0207 379 5151
Sam Cartwright

 

The 2025 Annual Report and Notice of Meeting will be available on the Arbuthnot Banking Group website http://www.arbuthnotgroup.com on or around 15 April 2026. Copies will then be available from the Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 20 Finsbury Circus, London, EC2M 7EA.

 

Consolidated statement of comprehensive income

 

			Year ended 31 December
			2025	2024
	Note		£000	£000
Income from banking activities
Interest income calculated using the effective interest method	8		247,248	263,435
Interest expense			(129,122)	(137,568)
Net interest income			118,126	125,867
Fee and commission income	9		31,689	29,142
Fee and commission expense			(1,444)	(1,029)
Net fee and commission income			30,245	28,113
Operating income from banking activities			148,371	153,980
Income from leasing activities
Revenue	10		118,569	110,832
Cost of goods sold	10		(97,466)	(85,301)
Gross profit from leasing activities	10		21,103	25,531
Total group operating income			169,474	179,511
Net impairment loss on financial assets	11		(2,501)	(6,275)
Other income	12		4,419	1,660
Operating expenses	13		(147,208)	(139,806)
Profit before tax			24,184	35,090
Income tax expense	14		(6,374)	(10,236)
Profit after tax			17,810	24,854
Other comprehensive income
Items that will not be reclassified to profit or loss
Changes in fair value of equity investments at fair value through other comprehensive income			(59)	778
Tax on other comprehensive income			15	(182)
Other comprehensive income for the period, net of tax			(44)	596
Total comprehensive income for the period			17,766	25,450
Earnings per share for profit attributable to the equity holders of the Company during the year
(expressed in pence per share):
Basic earnings per share	16		109.1	152.3
Diluted earnings per share	16		109.1	152.3

 

Consolidated statement of financial position

 

			At 31 December
			2025	2024
	Note		£000	£000
ASSETS
Cash and balances at central banks	17		437,548	911,887
Loans and advances to banks	18		117,497	66,971
Debt securities at amortised cost	19		2,033,158	1,199,847
Derivative financial instruments	20		1,398	2,970
Loans and advances to customers	22		1,960,542	2,094,212
Current tax assets			1,619	-
Other assets	24		50,247	51,701
Financial investments	25		2,061	4,947
Intangible assets	27		33,448	30,565
Property, plant and equipment	28		310,569	313,366
Right-of-use assets	29		44,501	47,511
Investment property	30		5,250	5,250
Total assets			4,997,838	4,729,227
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital	37		167	167
Share premium	37		11,606	11,606
Retained earnings	38		265,738	254,575
Other reserves	38		(1,113)	608
Total equity			276,398	266,956
LIABILITIES
Deposits from banks	31		1,389	192,911
Deposits from customers	32		4,570,365	4,132,493
Current tax liability			-	3,001
Other liabilities	33		42,489	35,384
Deferred tax liability	26		10,258	5,671
Lease liabilities	34		58,267	54,829
Debt securities in issue	35		38,672	37,982
Total liabilities			4,721,440	4,462,271
Total equity and liabilities			4,997,838	4,729,227

Chairman's statement

 

Arbuthnot Banking Group ("ABG" or "The Group" or "The Bank") is pleased to report a profit before tax of £24.2m for the year ended 31 December 2025.

 

During 2025 the Bank of England reduced its base rate with four separate cuts of 25 basis points each time, to end the year at 3.75%. As we have previously indicated, the Group maintains very high levels of surplus liquidity, which is deposited at the Bank of England. This means that along with investments in other treasury assets, any reduction in revenue from these reserves will directly impact the Group's profitability.

 

We had anticipated that we were nearing the end of the cycle of interest rate reductions, and the base rate would come to the normal neutral resting rate in 2026. However, the Middle East conflict has created much uncertainty around the near term interest rate policy. Expectations are now that the base rate may not fall this year as expected and may increase if further inflation becomes embedded in the economy.

 

The Bank continued to develop its strategic plan with the loan portfolios growing in both our asset finance division ("RAF") and our commercial vehicle leasing business ("AAG"). However, this growth was offset by reductions in the lending balances in the core bank and our Asset based lending division "ACABL". These reductions were as a result of market conditions and the decision taken not to invest at suboptimal rates and to preserve capital ahead of the implementation of Basel 3.1.

 

The return to a more normal interest rate environment after the historic lows that followed the global financial crisis and continued into the covid pandemic, has meant that banks can once again develop a balanced business with deposits also providing a good contribution to the revenue stream. Thus, we have in recent years focussed on building out our deposit raising franchise within the Private and Commercial bank. This deposit raising activity maintained its momentum in 2025, with balances increasing by £437.9m at a growth rate of 11%. This is despite deposits being transferred into our Wealth Management division via the Direct Gilt service which is proving popular with clients who provided further inflows of £139.7m in the year.

 

In addition to the inflows into the Direct Gilt service, the Wealth Management division continued its good progress in 2025. Having achieved funds under management growth rates of approximately 30% during the two previous years, the business managed growth of 21% in 2025 to close at £2.7bn.

 

As previously indicated, the division has been focussing on an optimisation project and much of the planned implementation steps should be put in place during 2026. The most important part of this is the launch of Arbuthnot unitised funds which will provide an alternative to the discretionary management service that invests directly into the market. These funds are expected to be launched early in the second quarter of this year.

 

With all the actions complete, it is anticipated that the Wealth Management division will reach a profitable run rate towards the end of 2026. This would represent a very satisfactory turnaround for a business that was finding it difficult to reach scale and profitability given the industry's ever increasing compliance and regulatory burdens.

 

Our commercial vehicle leasing business has found the current market extremely challenging. Many of the major fleets that operate in the logistics market have delayed investment which has led to a lack of demand, particularly in the second hand truck market. As a result, the business experienced an overall loss on the sale of trucks for the first time in its history. This is despite its conservative policy in terms of setting residual values.

 

The business responded well to the adverse market conditions and has managed to reduce its stock of used vehicles to very low levels. Whilst market conditions resulted in the business posting a loss in 2025, subsequently, market conditions have returned to a normalised state and the business has made profits on the sale of assets in line with expectations in the first two months of the year.

 

Market Conditions

One of the most important requirements, when making business investment decisions, is some degree of certainty. During 2025, the economy found increasing levels of uncertainty particularly in the levels of taxation and in changes to legislation, such as the new Employment Rights Act.

 

As a result, lower levels of investment have resulted in an economy that is not growing and seeing increasing levels of unemployment. These conditions have filtered into the markets that the Group operates in, leading to increased competition with lenders competing for lower volumes.

 

As ever, this increased competition has led to lower prices offered to customers. In some cases, we have seen asset finance deals being offered at rates more akin to the residential secured market. Market price dislocation will inevitably lead to sub optimal returns on capital. This is something that we remain vigilant to, as capital allocation and maintaining acceptable returns is one of our most important principles. These cycles usually reverse and we expect the market will return in due course to allow us to increase our volumes once again in all our lending businesses.

 

Capital Framework

Early in 2025, the PRA announced it was delaying the introduction of the new Basel 3.1 capital rules until 2027, so that it could see how the new administration in the United States would develop its position in regard to bank regulation, particularly the implementation of Basel 3.1.

 

The Group has made good progress to be ready to implement the new rules. The Board is now minded to remain on the Basel rule book rather than adopt the Small Domestic Deposit Takers ("SDDT") regime. Although the Bank would qualify for these new simplified rules, they would result in a higher capital requirement. Both of these new rule books will see the withdrawal of the "Refined approach" which was designed to level the playing field between the large Internal Ratings Based ("IRB") banks and the smaller banks such as ourselves. This withdrawal will result in an increase in our capital requirement of approximately £20m, for which we had been planning and which was also a factor in our decision not to deploy capital at suboptimal rates.

 

As this is further developed, we will continue to adjust our business models to ensure that we achieve acceptable returns on capital after the adoption of the new regulations.

 

Board Changes and Personnel

In line with the Board's commitment to maintaining appropriate independence, Ian Dewar and Sir Alan Yarrow retired at the AGM having served the recommended maximum tenure. I would like to thank them for their significant contributions to both the Board and the Group. In July we welcomed Charlotte Crosswell to the Board, and I look forward to continue working with her.

 

As ever, the continued success of the Group reflects the hard work and commitment of our members of staff. On behalf of the Board, I extend our thanks to all of them for their contribution in 2025. Finally, I would like to thank my fellow Directors on both the Board of Arbuthnot Banking Group PLC and Arbuthnot Latham and Co., Ltd for their valuable help and advice during the year.

 

Dividend

The Board is recommending a final dividend in respect of 2025 of 31p per ordinary and ordinary non-voting share. This is an increase of 2p compared to the final dividend of 2024.

 

The final dividend, if approved at the 2026 AGM, will be paid on 29th May 2026 to shareholders on the register at the close of business on 17th April 2026.

 

Together with the interim dividend, this gives a total dividend of 53p per ordinary share and ordinary non-voting share, which compares to total dividend of 69p per share paid in 2024. However, the prior year dividend included a special dividend of 20p per share which gave a normal dividend in 2024 of 49p per share. Thus, in 2025 the total normal dividend has increased by 4p per share.

 

Outlook

It is clear that, despite the manifesto promises of the current Government, rather than seeing economic growth, which was the way the Country could afford to pay for the increased spending in public services, the economy has in fact ground to halt. In addition, the future direction of the economy has become more uncertain given recent events in the Middle East.

 

Despite this, our balance sheet remains robust and conservatively managed, and our business still sees good client growth opportunities. We remain positive that we can find ways to develop our business in the new regulatory environment. This is founded on our belief that we can continue to differentiate ourselves, due to the personal service we offer to our clients.

 

Strategic Report - Business Review

 

Group Key Metrics		2025	2024
Operating income		£169.5m	£179.5m
Other income		£4.4m	£1.7m
Operating expenses		£147.2m	£139.8m
Profit before tax		£24.2m	£35.1m
Customer loans1		£2.2bn	£2.4bn
Customer deposits		£4.6bn	£4.1bn
Total assets		£5.0bn	£4.7bn
Key Performance Indicators
Funds under management and administration		£2.7bn	£2.2bn
Average net margin 2		4.7%	5.1%
Loan to deposit ratio 3		49.1%	57.6%
1 This balance includes both customer loans and assets available for lease.
2 Average net margin: Gross interest income yield less average interest rate on customer deposits
3 Loan to deposit ratio: Customer loans (including both customer loans and assets available for lease) divided by customer deposits

 

The Group reported a profit of £24.2m compared to £35.1m for the prior year. The reduction in reported profit was expected, partly due to a lower base rate than the prior period resulting in reduced interest income from the Bank's liquidity balances held at the Bank of England. However, the Group continued to make good strategic progress, allocating capital to the lending proposals that offer the best returns on capital rather than using lending volumes themselves as an indicator of success.

 

The Group has continued to pursue its long-term strategic initiatives to attract profitable relationship-driven deposits whilst maintaining and diversifying its lending proposition throughout 2025. Despite a reduction in lending balances, significant progress was made in the Group's Deposit and Wealth Management balances which saw strong growth in the year. This was against a backdrop of continued geo-political turmoil and low economic growth with only a gradual easing of inflation in the UK economy.

 

Deposits grew steadily throughout 2025 to finish the year with balances of £4.6bn. The Wealth Management division continued to perform strongly with growth of over 20% in Funds under Management and Administration (FUMA), finishing the year at £2.7bn. Lending balances reduced during 2025 with the Group continuing to operate to a tightened credit appetite and reduced LTVs for new lending below the Bank's previous guidance of 60%.

 

In August 2025, after an uncertain period, the Supreme Court judgment with regard to unfair motor finance commissions was published. The Supreme Court overturned much of the lower court ruling on car loan sale practices. The Group noted the subsequent consultation by the Financial Conduct Authority ("FCA") with regard to compensation for customers who were unfairly treated as part of their regulated motor finance agreements. The Group however does not and has not provided regulated motor finance and therefore will not be within scope of any FCA compensation schemes.

 

Banking

2025 saw continued growth in client numbers across private and commercial banking.  Over 1,000 new clients joined the Bank, which given our entry criteria increased along with monthly fee increases, proves client advocacy is high for our human-scale relationship approach. These achievements reflect the collective effort and hard work of our teams, and the value and trust clients place in us to guide their financial journey.

 

Client satisfaction remained top quartile with an overall net promoter score of 68%, and 94% of our clients are delighted with the service from Arbuthnot Latham. This is as a result of the Bank's commitment to employing quality staff, and providing accessibility to expert advice, combined with our full service offering across Private and Commercial Banking. 

 

Deposits grew in 2025 despite low growth in the deposit market for households and SMEs which resulted in a more competitive landscape. Total deposits grew by £437.9m, equating to growth of 10.6% year on year to finish the year with balances of £4.57bn and an average cost of deposits of 2.65% compared to 3.15% for the prior year.

 

Lending reduced by £183.2m during the year to finish at £1.36bn.  Pricing pressure and increased competition resulted in limited opportunities for achieving desirable returns aligned to our risk appetite. We have always considered ourselves to be counter cyclical lenders and therefore refuse to be drawn into competing on price alone, so we remain content to preserve our capital for the future (including the changes from Basel 3.1), when these markets become firmer and the prices produce acceptable returns on our capital deployed.

 

The number of watchlist cases materially reduced in the year with a small number of legacy cases remaining, with a loss rate of 10bps for the year.

 

Wealth Management

Market repercussions resulting from the threats of a global trade war along with geo-political instability resulted in high levels of market volatility throughout 2025. However, despite the turbulence, Funds Under Management and Administration (FUMA) increased by 21% during 2025, reaching £2.68bn at the year end (2024: £2.21bn). The business received gross inflows totalling £501.4m, representing 23% of balances at the start of the year, offset by outflows of £238.9m, resulting in net inflows of £262.5m. The majority of inflows were allocated to our flagship Global Investment Service and the recently launched Direct Gilt Service which continues to perform strongly.

 

Wealth Planning issued advice on £324.3m of new assets, compared to £321.4m the prior year, representing 65% of discretionary asset inflows. A total of 218 clients were onboarded compared to 210 clients in 2024. Advice income of £566.1k was more than 67% higher than the prior year, supported by a broadening of advice mix including protection.

 

The business is progressing well with its optimisation project and will launch a new unitised fund range which is designed to offer greater accessibility and flexibility aligned to clients' needs whilst ensuring a platform for the sustainable growth of the business.

 

Arbuthnot Commercial Asset Based Lending ("ACABL")

ACABL reported a profit before tax for the year of £8.9m (2024: £11.9m) with a loan book at the year-end of £219.4m, a small reduction compared to the prior year-end balance of £228.2m. Despite lower lending volumes, a higher percentage of service based fees was generated from both current and exited clients.

 

The challenging macro-economic environment led to a reduced number of event-driven transactions and fewer Private Equity backed buy-outs in 2025. The business continues to focus on SME and lower mid-market transactional lending, secured on invoices, assets or stock of the borrower. Accredited by the British Business Bank, the business also provides loans under the Growth Guarantee Scheme. The amount extended to clients under this scheme represents a small proportion of overall lending but allows the business to support existing clients and to create innovative lending structures for new clients.

 

In the full year ACABL completed new lending facilities of £118m across 36 transactions to both new and existing clients (2024: £122m across 22 transactions)

In a challenging macro-economic environment the business continued to lend against high quality realisable assets with the expected credit provision on the book remaining low at 7bps.

 

Facility limits totalled £527.7m at the year end (2024: £542m) across a client base of 106 (2024: 112) operating across a broad range of sectors and the business processed £2.3 billion of invoices in the year, a reduction of £200m compared to the prior year.

 

Renaissance Asset Finance ("RAF")

RAF reported a record profit before tax for the year of £7.2m (2024: £5.6m) driven by an increase in margins on new business coupled with improved operational efficiencies and a low bad debt expense.  The loan book finished the year at £285.8m equating to an increase of 16% compared to the prior year balance of £248.8m.

 

The now established Block Discounting business which launched in late 2021 grew its loan book by 36% in 2025 and is now making a significant contribution to the profitability of the business.

 

RAF provides non-regulated asset finance facilities to SMEs and high net worth individuals. RAF does not and has not provided regulated facilities and so is out of scope of the current FCA Regulated Motor Finance Redress Scheme proposals which was confirmed in the FCA response to the Supreme Court's judgment.

 

Asset Alliance Group ("AAG")

AAG reported a loss in the year of £2.3m compared to a profit of £28k in the prior year.

 

The market for commercial vehicles was subdued throughout 2025, with registrations of new vehicles down 14% year on year and lead times for the procurement of new assets reduced significantly. Customers, facing the impact of tax increases and low economic growth, showed hesitancy in growing or renewing their fleets.

 

Conversely, the bus and coach market continued to perform well with strong demand for both shorter term rentals and longer-term operating leases. As nominated advisors to a number of the key operators within the Transport for London ("TfL") network, AAG continue to support the transition from diesel to electric buses.

 

At 31 December 2025, the business had assets available for lease and finance leases totalling £382.8m (2024: £363.0m), with growth in new lending equating to an increase of 5% over the year.

 

The market for end of lease commercial vehicles was particularly challenging, resulting in the company recording a loss on its residual value portfolio for the first time. The company took a strategic decision mid-year to accelerate the sale of assets and reduce both the volume and value of units held. By the end of the year this had been successfully accomplished, with the volume of assets reduced by circa 60%. This reduction was achieved, in part, by an increased use of trade and auction disposal channels, impacting margins.

 

Owned Properties

The Bank retains four assets in its property portfolio of which one is overseas. The Bank's property portfolio has performed in line with expectation, with limited movement in valuations when compared with the prior year.

 

Operations

The Bank's operations have continued to support growth in our target markets. 1,220 new banking clients were onboarded in 2025, of which 56% were non-personal clients, and over 200 new investment management clients, with an associated 375 portfolios opened. Growth has been underpinned by increased automation and process simplification delivered as part of the ongoing digital transformation programme.

 

The Bank successfully implemented PSR3 & ISO 20022 across the core banking and payments landscape. This milestone represents a major step forward in modernising and standardising how payments are processed. With the migration of CHAPS, SEPA and SWIFT transactions complete, the focus is now on extending ISO 20022 to Faster Payments which will further strengthen the Bank's payments capabilities. The Bank also installed a new financial crime platform for sanctions, AML, and fraud transaction monitoring, a significant step to improve resilience to financial crime risk.

 

Investment management has benefitted from the implementation of an electronic transfer platform to reduce onboarding times for the transfer of assets. Trading volumes continued to rise, with a 6.85% increase in the number of trades executed and a value of £2.64bn. Automation of trade flow has supported the increased volumes and ensured continued accurate, timely and efficient execution.

 

The Bank's digital programme is expected to run through 2027 with continued incremental deliveries in 2026 including client onboarding enhancements, operational and trading process improvements and upgrades to online and mobile banking and investment management services. These planned enhancements will improve operational efficiency, enable further operational scaling and provide enhanced client functionality.

 

The Bank continues to consider and respond to changing technologies, with specific focus on system stability and resilience, cyber risk and artificial intelligence. Service provision is subject to ongoing stress testing, with business and service continuity plans central to relationships with cloud and other technology partners. The use of artificial intelligence is being progressively tested and integrated into operational and servicing processes with benefits to service provision and delivery along with operational efficiency.

 

 

Strategic Report - Financial Review

 

Arbuthnot Banking Group adopts a pragmatic approach to risk taking and seeks to maximise long term revenues and returns on capital deployed. Given its relative size, it is nimble and able to remain entrepreneurial and capable of taking advantage of favourable market opportunities when they arise.

 

The Group provides a range of financial services to clients and customers in its chosen markets of Banking, Wealth Management, Asset Finance, Asset Based Lending, Specialist Lending and Commercial Vehicle Finance. The Group's revenues are derived from a combination of net interest income from lending, deposit taking and treasury activities, fees for services provided and commission earned on the sale of financial products. The Group also generates revenue from the sale of commercial vehicles and earns rental income on its properties and holds financial investments for income.

 

Highlights
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	118,126	125,867
Net fee and commission income	30,245	28,113
Operating income from banking activities	148,371	153,980
Revenue	118,569	110,832
Cost of goods sold	(97,466)	(85,301)
Operating income from leasing activities	21,103	25,531
Total group operating income	169,474	179,511
Other income	4,419	1,660
Operating expenses	(147,208)	(139,806)
Impairment losses - loans and advances to customers	(2,501)	(6,275)
Profit before tax	24,184	35,090
Income tax expense	(6,374)	(10,236)
Profit after tax	17,810	24,854
Basic earnings per share (pence)	109.1	152.3

 

The Group has reported a profit before tax of £24.2m (2024: £35.1m).

 

Net interest income reduced by £7.7m from the prior year as the Bank of England base rate was reduced by four separate cuts of 25 bps each during the year. As a result of the reducing interest rate environment, we continued to invest excess liquidity into short dated treasury assets such as gilts. By investing in these short-dated securities, the impact from reducing interest rates is reduced and delayed by 3 to 12 months. Net fee and commission income increased by £2.1m, as a result of an increase of £463m in FUMA in the Wealth Management division. Operating income from AAG leased assets decreased from £25.5m to £21.1m, mainly due to the subdued market for second hand commercial trucks.

 

The average net margin on client lending was 4.7% (2024: 5.1%).

 

Other income increased as a result of a settlement of £3.25m due to a property valuation issue on a property loan that was previously impaired.

 

The Group's operating expenses increased to £147.2m compared to £139.8m for the prior year, mainly due to higher inflationary staff costs.

 

Balance Sheet Strength
	2025	2024
Summarised Balance Sheet	£000	£000
Assets
Loans and advances to customers	1,960,542	2,094,212
Assets available for lease	285,327	285,953
Liquid assets	2,588,203	2,178,705
Other assets	163,766	170,357
Total assets	4,997,838	4,729,227
Liabilities
Customer deposits	4,570,365	4,132,493
Other liabilities	151,075	329,778
Total liabilities	4,721,440	4,462,271
Equity	276,398	266,956
Total equity and liabilities	4,997,838	4,729,227

 

Total assets increased by £0.3bn to £5.0bn (2024: £4.7bn). Loans and advances to customers together with assets available for lease decreased by 6% from the prior year. Customer deposits increased by 11% in the year and contributed to the 19% increase in liquid assets.

 

The net assets of the Group now stand at £16.94 per share (2024: £16.36).

 

Segmental Analysis

The segmental analysis is shown in more detail in Note 44. The Group is organised into seven operating segments as disclosed below:

 

1) Banking - Includes Private and Commercial Banking and the acquired mortgage portfolio. Private Banking - Provides

    traditional private banking services. Commercial Banking - Provides bespoke commercial banking services and tailored 

    secured lending against property investments and other assets.

2) Wealth Management - Financial planning and investment management services.

3) RAF - Specialist asset finance lender mainly in high value cars but also business assets.

4) ACABL - Provides finance secured on either invoices, assets or stock of the borrower.

5) AAG - Provides vehicle finance and related services, predominantly in the truck & trailer and bus & coach markets.

6) All Other Divisions - All other smaller divisions and central costs in Arbuthnot Latham & Co., Ltd (Investment property,

    Central costs and Arbuthnot Specialist Finance Ltd)

7) Group Centre - ABG Group management.

 

The analysis presented below, and in the business review, is before any consolidation adjustments to reverse the impact of the intergroup operating activities and also intergroup recharges and is a fair reflection of the way the Directors manage the Group.

Banking
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	98,673	97,410
Net fee and commission income	5,107	3,799
Operating income	103,780	101,209
Operating expenses - direct costs	(22,074)	(19,614)
Operating expenses - indirect costs	(51,905)	(47,901)
Impairment losses - loans and advances to customers	(1,275)	(5,571)
Profit before tax	28,526	28,123

 

Banking reported a profit before tax of £28.5m (2024: £28.1m). Net interest income increased by £1.3m. The Bank refused to be drawn into a pricing war, as the Bank of England base rate reduced during the year and competition in the market increased. Lending balances therefore reduced by 12% in the year as capital was preserved for future deployment at acceptable returns.  The growth of deposits as a valuable revenue source continued in the year as balances increased by 11%, despite low growth in the deposit market for households and SMEs and the transfer of funds into our Wealth Management division.

 

There was a net impairment charge of £1.3m compared to £5.6m for the prior year. The prior year included provisions on a small number of exposures in Stage 3.

 

Direct costs increased by £2.5m mainly as a result of higher staff costs. Indirectly allocated operating costs also increased by £4.0m, largely as a result of inflationary increases in staff costs in support departments and the higher costs relating to the new office building.

 

Customer loan balances reduced by £183m to close the year at £1.36bn and customer deposits increased to £4.57bn (2024: £4.13bn). The strategic decision was taken to deploy capital into the subsidiaries for higher returns and to further conserve capital until the Basel 3.1 rules are finalised. The average loan to value was 49.5% (2024: 48.9%).

 

Wealth Management
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	674	-
Net fee and commission income	16,498	13,665
Operating income	17,172	13,665
Operating expenses - direct costs	(11,744)	(11,368)
Operating expenses - indirect costs	(8,441)	(7,190)
Loss before tax	(3,013)	(4,893)

 

Wealth Management reported a loss of £3.0m (2024: loss of £4.9m). Net fee and commission income increased by £2.8m. Directly allocated costs increased by £0.4m, mainly due to an increase in professional fees. The contribution from the division before indirectly allocated costs increased from £2.3m to £5.4m. However, indirectly allocated costs from the support departments increased by £1.2m from the prior year. Despite high levels of market volatility throughout 2025, FUMA increased by £0.46bn to £2.68bn. The Direct Gilt Service launched in the prior year continued to perform well. The full year impact on income from the growth in FUMA will be seen in future years.

RAF
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	15,638	12,872
Net fee and commission income	92	239
Operating income	15,730	13,111
Operating expenses - direct costs	(7,612)	(6,981)
Impairment losses - loans and advances	(922)	(554)
Profit before tax	7,196	5,576

 

Renaissance Asset Finance returned a profit of £7.2m (2024: £5.6m). Interest income increased by £4.0m from higher balances, which was partly offset by higher funding costs of £1.2m. Operating expenses were £0.6m higher than in 2024, mainly due to higher inflationary staff costs.

 

Customer loan balances increased by 16% to £288.2m (2024: £248.8m), with the Block Discounting business growing by 36% in the year. The average yield for 2025 was 8.6% (2024: 8.7%).

 

ACABL
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	8,920	10,043
Net fee and commission income	7,182	9,922
Operating income	16,102	19,965
Operating expenses - direct costs	(7,241)	(7,993)
Impairment losses - loans and advances to customers	(3)	(32)
Profit before tax	8,858	11,940

 

ACABL recorded a profit before tax of £8.9m (2024: £11.9m).

 

Lower originations together with expected client attrition resulted in loan balances of £219.4m at the end of the year (2024: £228.2m). The business had issued facilities of £528m (2024: £542m). The challenging macro-economic environment resulted in a reduced number of transactions and lending volume. The lower balances resulted in lower interest income of £6.2m that was partially offset by lower internal funding costs of £5.1m, while fee and commission income also decreased by £2.7m. Operating expenses decreased by £0.8m, mainly due to a reduction in staff costs with lower variable remuneration awards as a result of the reduced profits.

AAG
	2025	2024
Summarised Income Statement	£000	£000
Net interest expense	(7,108)	(10,208)
Net fee and commission expense	425	(15)
Revenue	118,569	110,832
Cost of goods sold	(97,466)	(85,301)
Operating income	14,420	15,308
Other income	-	88
Operating expenses - direct costs	(16,758)	(15,308)
Impairment losses - loans and advances to customers	86	(60)
Profit / (loss) before tax	(2,252)	28

 

The business made a loss of £2.3m (2024: profit of £28k).  Interest income increased by £1.2m, while funding costs reduced by £1.9m as interest rates continued to fall. The reduction in revenue less cost of goods sold, was mainly due to the subdued market for second hand commercial trucks resulting in a £4.5m reduction in profits on sale.

 

Operating expenses increased by £1.4m from the prior year, mainly due to higher inflationary staff costs and the replacement of the operating platform by modernised technology. There was a write back on credit provisions of £0.1m (2024: provision of £0.1m).

 

As at 31 December 2025 the business had a total of £382.8m (2024: £363.0m) of assets available for lease and finance leases, which is a 5% increase on the prior year.

Other Divisions
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	1,325	15,755
Net fee and commission income	941	503
Operating income	2,266	16,258
Other income	5,536	2,473
Operating expenses - direct costs	(10,598)	(12,948)
Impairment losses - loans and advances to customers	(387)	(58)
Profit / (loss) before tax	(3,183)	5,725

 

The aggregated loss before tax of other divisions was £3.2m (2024: profit of £5.7m).

 

Operating income decreased by £14.0m to £2.3m (2024: £16.3m). Reported within the other divisions in other income was rental income on our property portfolio of £1.1m (2024: £1.0m). Other income also included the settlement of £3.25m due to a property valuation issue on a property loan that was previously impaired.

 

Operating expenses reduced £2.5m.

 

Group Centre
	2025	2024
Summarised Income Statement	£000	£000
Net interest income	3,755	4,174
Subordinated loan stock interest	(3,751)	(4,179)
Operating income	4	(5)
Other income	-	39
Operating expenses	(11,952)	(11,443)
Loss before tax	(11,948)	(11,409)

 

The Group costs increased by £0.5m to £11.9m (2024: £11.4m). Subordinated loan interest reduced by £0.4m due to interest rates falling in the year.

 

The increase in operating expenses of £0.5m is mainly due to higher staff costs.

 

Capital

The Group's capital management policy is focused on optimising shareholder value over the long term. There is a clear focus on delivering organic growth and ensuring capital resources are sufficient to support planned levels of growth. The Board regularly reviews the capital position.

 

The Group and the individual banking operation are authorised by the Prudential Regulation Authority ("PRA") and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. One of the requirements for the Group and the individual banking operation is that capital resources must be in excess of capital requirements at all times. 

 

In accordance with the parameters set out in the PRA Rulebook, the Internal Capital Adequacy Assessment Process ("ICAAP") is embedded in the risk management framework of the Group. The ICAAP identifies and assesses the risks to the Group, considers how these risks can be mitigated and demonstrates that the Group has sufficient resources, after mitigating actions, to withstand all reasonable scenarios.  

 

The Board determines the level of capital the Group needs to hold. The Group holds Pillar 1 capital for credit, market and operational risk as a starting point, and then considers whether each of the calculations delivers a sufficient amount of capital to cover risks to which the Group is, or could be, exposed. Where the Board considers that the Pillar 1 calculations do not adequately cover the risks, an additional Pillar 2A capital requirement is applied. The PRA will set a Pillar 2A capital requirement in light of the calculations included within the ICAAP. The Group's Total Capital Requirement, as issued by the PRA, is the sum of the Pillar 1 and the Pillar 2A capital requirements. The current Total Capital Requirement of the Group is 8.05%.

 

The ICAAP document is updated at least annually, or more frequently if changes in the business, strategy, nature or scale of the Group's activities or operational environment suggest that the current level of capital resources is no longer adequate. The ICAAP brings together the management framework (i.e. the policies, procedures, strategies, and systems that the Group has implemented to identify, manage and mitigate its risks) and the financial disciplines of business planning and capital management.  The Group's PRA regulated entity is also the principal trading subsidiary as detailed in Note 43.

 

The Group's regulatory capital is divided into two tiers:

·       Common equity Tier 1 ("CET1"), which comprises shareholder funds less regulatory deductions for intangible assets, including Goodwill and deferred tax assets that do not arise from temporary differences.

·       Tier 2 comprises qualifying subordinated loans.

 

Capital ratios are reviewed on a monthly basis to ensure that external requirements are adhered to. All regulated entities have complied with all of the externally imposed capital requirements to which they are subject.

 

 

	2025	2024
Capital ratios	£000	£000
CET1 Capital Instruments*	276,398	267,027
Deductions	(34,800)	(32,550)
CET1 Capital after Deductions	241,598	234,477
Tier 2 Capital	38,672	37,982
Own Funds	280,270	272,459
CET1 Capital Ratio (CET1 Capital/Total Risk Exposure)	13.3%	13.2%
Total Capital Ratio (Own Funds/Total Risk Exposure)	15.4%	15.3%
* Includes year-end audited result.

 

Risks and Uncertainties

The Group regards the monitoring and controlling of risks and uncertainties as a fundamental part of the management process.  Consequently, senior management are involved in the development of risk management policies and in monitoring their application.  A detailed description of the risk management framework and associated policies is set out in Note 6.

 

The principal risks inherent in the Group's business are reputational, macroeconomic and competitive environment, strategic, credit, market, liquidity, operational, cyber, residual value, conduct and, regulatory and capital.

 

Reputational risk

Reputational risk is the risk to the Group from a failure to meet reasonable stakeholder expectations as a result of any event, behaviour, action or inaction by ABG itself, its employees or those with whom it is associated. This includes the associated risk to earnings, capital or liquidity.

 

ABG seeks to ensure that all of its businesses act consistently with the seven corporate principles as laid out on page 3 of the Annual Report and Accounts. This is achieved through a central Risk Management framework and supporting policies, the application of a three-lines of defence model across the Group and oversight by various committees. Employees are supported in training, studies and other ways and encouraged to live out the cultural values within the Group of integrity, energy and drive, respect, collaboration and empowerment. In applying the seven corporate principles, the risk of reputational damage is minimised as the Group serves its shareholders, customers and employees with integrity and high ethical standards. 

 

Macroeconomic and competitive environment

The Group is exposed to risks that may arise from the macroeconomic and competitive environment.

 

In recent years there have been a number of global and domestic events which have had significant implications for the Group's operating environment, namely: The US-Israeli war with Iran, Russia's war in the Ukraine, the Israel-Hamas war in Gaza and Coronavirus. The culmination of these events has led to significant turmoil in both global and domestic markets. Geo-political volatility and uncertainty remains high with the potential to adversely affect the UK economy, as well as the Group's customers and assets.

 

Strategic risk

Strategic risk is the risk that the Group's ability to achieve its corporate and strategic objectives may be compromised. This risk is particularly important to the Group as it continues its growth strategy. However, the Group seeks to mitigate strategic risk by focusing on a sustainable business model which is aligned to the Group's business strategy. Also, the Directors normally meet once a year to ensure that the Group's strategy is appropriate for the market and economy.

 

Credit risk

Credit risk is the risk that a counterparty (borrower) will be unable to pay amounts in full when due. This risk exists in Arbuthnot Latham, which currently has a loan book of £2.0bn (2024: £2.1bn). The lending portfolio in Arbuthnot Latham is extended to clients, the majority of which is secured against cash, property or other high-quality assets. Credit risk is managed through the Credit Committee of Arbuthnot Latham.

 

Market risk

Market risk arises in relation to movements in interest rates, currencies, property and equity markets.

 

Interest rate and currency risk

The Group's treasury function operates mainly to provide a service to clients and does not take significant unmatched positions in any market for its own account. As a result, the Group's exposure to adverse movements in interest rates and currencies is limited to interest earnings on its free cash and interest rate re-pricing mismatches. The Group actively monitors its exposure to future changes in interest rates. However, at the current time the Group does not hedge the earnings from the free cash which currently totals £437m (2024: £912m). The cost of hedging is prohibitive. Normally the majority of cash is held at the Bank of England, but during 2025 with the general consensus in the market that rates were expected to fall, the Group shifted its focus to invest some of the excess liquidity into high quality short dated fixed income assets, such as gilts. As a result, these treasury assets increased by £920m in the year. By investing in these short-dated securities, the impact from reducing interest rates is delayed by 3 to 12 months.

 

Property and equity market risk

The Group is exposed to changes in the market value of its properties. The current carrying value of Investment Property is £5.3m (2024: £5.3m) and properties classified as inventory is £16m (2024: £17.4m). Any changes in the market value of the property will be accounted for in the Income Statement for the Investment Property and could also impact the carrying value of inventory, which is at the lower of cost and net realisable value. As a result, it could have a significant impact on the profit or loss of the Group. The Group is also exposed to changes in the value of equity investments. The current carrying value of financial investments is £2.1m (2024: £4.9m). Any changes in the value of financial investments will be accounted for in Other Comprehensive Income.

 

Liquidity risk

Liquidity risk is the risk that the Group, although solvent, either does not have sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure such resources at an excessive cost. The Group takes a conservative approach to managing its liquidity profile. The Bank is funded by retail deposits and capital. Additionally, Arbuthnot Latham maintains access to the Bank of England's Sterling Monetary Framework, including reserves account. The loan to deposit ratio is maintained at a prudent level, and consequently the Group maintains a high level of liquidity. The Arbuthnot Latham Board Risk Committee annually approves the Internal Liquidity Adequacy Assessment Process ("ILAAP"). The Directors model various stress scenarios and assess the resultant cash flows in order to evaluate the Group's potential liquidity requirements. The Directors firmly believe that sufficient liquid assets are held to enable the Group to meet its liabilities in a stressed environment.

 

Operational risk

Operational risk is the risk that the Group may be exposed to financial losses from conducting its business. The Group's exposure to operational risk include its Information Technology ("IT") and Operating platforms. There are additional internal controls in these processes that are designed to protect the Group from these risks. The Group's overall approach to managing internal control and financial reporting is described in the Corporate Governance section of the Annual Report.

 

In line with guidance issued by the Regulator, the Bank has continued to focus on ensuring that the design of systems and operational plans are robust to maintain operational resilience in the face of unexpected incidents.

 

Cyber risk

Cyber risk is an increasing risk for the Group within its operational processes. It is the risk that the Group is subject to some form of disruption arising from an interruption to its IT and data infrastructure. The Group regularly tests the infrastructure to ensure that it remains robust to a range of threats and has continuity of business plans in place including a disaster recovery plan.

 

Residual value risk

Residual value risk equals the difference in the residual value of a leased asset set at lease inception and the lower salvage value realised upon its disposal or re-lease at the end of the lease term. The Group is exposed to residual value risk in its AAG business. Normal residual value risk is managed through the process set out below, and it should be noted that the transition to greener technology may further impact residual values in two ways. Firstly, residual values could decrease due to assets becoming obsolete; climate related regulations might change, which could result in legal restrictions on the use of assets or technological advances could lead to preferred environmental technologies. Secondly, the lack of historical information on green vehicles could lead to inaccurate measurement of residual values at inception of leases.

 

The AAG business manages Residual Value setting through its Residual Value Committee that comprises representatives from its Asset Management, Procurement, Sales and Leasing divisions and is chaired by the Residual Value Manager. Assets are valued using either an approved Residual Value matrix or individually, dependent upon the nature of the asset and current market conditions. The strategy for Residual Value setting and oversight of the Residual Value Committee is conducted by the AAG Residual Risk Committee, which in turn reports into the Asset Alliance Group Holdings Limited board. The Residual Risk Committee, chaired by the AAG Group Risk Director, includes AAG CEO, AL Group Risk Director, AAG Managing Director, AAG Finance Director and heads of Asset Management, Sales and Leasing divisions in AAG.

 

Conduct risk

As a financial services provider the Group faces conduct risk, including selling products to customers which do not meet their needs, failing to deal with clients' complaints effectively, not meeting clients' expectations, and exhibiting behaviours which do not meet market or regulatory standards.

 

The Group adopts a low risk appetite for any unfair customer outcomes. It maintains clear compliance guidelines and provides ongoing training to all employees. Periodic spot checks, compliance monitoring and internal audits are performed to ensure these guidelines are followed. The Group also has insurance policies in place to provide some cover for any claims that may arise.

 

Financial Crime

The Group is exposed to risk due to financial crime including money laundering, sanctions evasion, bribery and corruption, market abuse, tax evasion and fraud.  The Group operates policies and controls which are designed to ensure that financial crime risks are identified, appropriately mitigated and managed.

 

Regulatory and capital risk

Regulatory and capital risk includes the risk that the Group will have insufficient capital resources to support the business and/or does not comply with regulatory requirements. The Group adopts a conservative approach to managing its capital. The Board of Arbuthnot Latham approves an ICAAP annually, which includes the performance of stringent stress tests to ensure that capital resources are adequate over a three year horizon. Capital and liquidity ratios are regularly monitored against the Board's approved risk appetite as part of the risk management framework.

 

Regulatory change also exists as a risk to the Group's business. Notwithstanding the assessments carried out by the Group to manage regulatory risk, it is not possible to predict how regulatory and legislative changes may alter and impact the business. Significant and unforeseen regulatory changes may reduce the Group's competitive situation and lower its profitability.

 

Strategic Report - Non-Financial and Sustainability Statement

 

The table below sets out where stakeholders can find information on non-financial matters, as required by Sections 414CA and 414CB of the Companies Act 2006, enabling them to understand the impact of the Group's key policies and activities.
Reporting Requirement	Policies and Standards	Information Necessary to   Understand Impact of Activities and   Outcome of Policies
Environmental Matters	•  Credit Policy •  Managing Financial Risks of Climate Change Framework •  Environmental Management Policy	•  Stakeholder Engagement and S. 172 (1) Statement, pages 20 and 21 •  Sustainability Report, pages 23 to 35 •  Corporate Governance Report page 46
Employees	•  Agile Working Policy •  Board Suitability & Diversity Policy •  Flexible Working Policy •  Health and Safety Policy •  Inclusivity and Respect Policy •  Long Service Awards Policy •  Parental Leave Policy •  Personal Appearance Policy •  Remuneration Policy •  Training & Development Policy •  Whistleblowing Policy	•  Stakeholder Engagement and S. 172 (1), pages 22 and 21 •  Sustainability Report, pages 23 to 35 •  Directors Report, page 40 •  Corporate Governance Report, page 45
Social Matters	•  Complaints Handling Policy •  Fraud Policy •  Tax Strategy •  Vulnerable Clients Policy	•  Arbuthnot Principles, page 3 •  Stakeholder Engagement and S. 172 (1) Statement, pages 20 and 21 •  Sustainability Report, pages 23, 26 and 27
Respect for Human Rights	•  Anti-Modern Slavery Policy •  Dignity at Work Policy •  Inclusivity and Respect Policy •  Personal Data Protection Policy	•  Stakeholder Engagement and s.172 (1) Statement, pages 20 and 21 •  Sustainability Report, pages 23 to 35
Anti-Corruption and Anti-Bribery	•  Anti-Bribery and Corruption Policy •  Anti-Money Laundering Policy •  Client Acceptance policy •  Cyber Strategy •  Group Market Abuse and Insider Dealing Policy •  Physical Security Policy	•  Sustainability Report, pages 23 and 26
Description of Principal Risks and Impact of Business Activity		•  Strategic Report, pages 15 to 18
Description of the Business Model		•  Business Overview
Non-Financial Key Performance Indicators		•  Sustainability Report, page 23

 

Strategic Report - Stakeholder Engagement and s.172 Report

 

Stakeholder Engagement and S. 172 (1) Statement

This section of the Strategic Report describes how the Directors have had regard to the matters set out in section 172 (1) (a) to (f) of the Companies Act 2006 when making decisions. It forms the Directors' statement required by ABG as a large-sized company under section 414CZA of the Act.

 

The Directors have acted in a way that they considered, in good faith, to be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so had regard, amongst other matters, to:

•      the likely consequences of any decision in the long term;

•      the interests of the Company's employees;

•      the need to foster the Company's business relationships with suppliers, customers and others;

•      the impact of the Company's operations on the community and the environment;

•      the desirability of the Company maintaining a reputation for high standards of business conduct; and

•      the need to act fairly as between members of the Company.

 

The Arbuthnot Principles and Values set out on page 3 explain the Board's approach to its stakeholders. Details of how the Directors had regard to the interests of its key stakeholders during the year are set out below, in the Group Directors Report on page 40 and in the Corporate Governance Report on page 46.

 

The Board has regard to the interests of all its key stakeholders in its decision making since the Directors are conscious that their decisions and actions have an impact on them. The stakeholders we consider in this regard are our shareholders, employees, customers, suppliers, regulators and the environment in which we operate.

 

Likely consequences of any decision in the long term

The Directors make their decisions to ensure that long-term prospects are not sacrificed for short term gain, reflecting the values and support of Sir Henry Angest, Chairman and Chief Executive and majority shareholder, which have proved successful in creating and maintaining value for all shareholders for over 40 years. This was demonstrated in the year by a number of Board decisions including investment in a number of major projects.

 

In February 2025, the Board reviewed the concept of Commitment to Clients and Colleague Promises, i.e. what the business aims to deliver to clients and to employees, built on Arbuthnot's Seven Principles and five cultural values, which was launched to the business. These Principles are central to the way the Company works, summarising its corporate philosophy and ethics, and it seeks to ensure that all of its businesses act consistently with them.

 

During the year, the Board appointed Charlotte Crosswell as a new non-executive Director, subject to completion of regulatory and compliance requirements which were subsequently met. The Board was also kept fully informed of a number of senior management retirements with the respective roles of the MD Specialist Finance and Head of HR being transferred to two existing AL executive directors. This approach will help to empower existing employees as well as reducing costs.

 

Interests of the Company's employees

Overall the Board's intention is to hire the best people and to provide the right environment for them to perform to the best of their ability. 

 

The Board receives an update on human resource matters at each of its meetings. It is also kept informed of the results of employee surveys. In November 2025 it considered the results of the engagement survey, launched in October 2025 to assess how engaged employees felt with the business, obtaining feedback on key areas that affect engagement. The engagement survey received an 87% response rate from employees, with an 83% engagement score including 92% agreeing with the statement of being proud to work for the Group and 85% would recommend the Group as a great place to work. There were also increases in scores for external client and employee experience, as well as inclusive culture and wellbeing. The Board agreed that this was a good overall result considering the prevailing economic climate and employment market. It regards the maintenance of a high level of employee engagement as key to the Company's future success as an organisation on every level and each business will be analysing its results and establishing action plans to address key issues raised.

 

Executive Directors and senior management are fully engaged with the workforce, most of whom interact on a daily basis. Employees are also able to raise concerns in confidence with the AL HR Team, with grievances followed up in line with a specified process which satisfies all legal requirements. As explained in the section 172 (1) Statement of Arbuthnot Latham, the Company's banking subsidiary, Jayne Almond one of its non-executive directors, has been designated by its board as the director to engage with Arbuthnot Latham group's workforce whereas the Company itself has fewer than 20 employees, all of whom have direct access to Board members.

 

As set out in the Whistleblowing Policy, Richard Gabbertas is the Company's Whistleblowing Champion is available at all times in this role. There is an anonymous whistleblowing service via an external provider. There is also protection for employees deriving from the Public Interest Disclosure Act 1998. Any material whistleblowing events are notified to the Board and to the applicable regulator.

 

Company's business relationships with suppliers, customers and others

The Directors attach great importance to good relations with customers and business partners. In particular, our clients are integral to our business and forging and maintaining client relationships are core to AL's business and crucial for client retention. As regards customers, the Directors considered the formal submission of a Consumer Duty annual assurance report from the Chief Compliance Officer.

 

The Company is committed to following agreed supplier payment terms. There is a Supplier Management Framework in place covering governance around the Company's procurement and supplier management activities. For due diligence and compliance purposes, suppliers are assessed through an external registration system. The Modern Slavery Statement, approved by the Board in March as part of its annual review of the Company's stance and approach to the Modern Slavery Act, explains the risk-based approach that the Company has taken to give assurance that slavery and human trafficking are not taking place in its supply chains or any part of its business. The Board requires that AL implements an Anti-Modern Slavery Policy, procedures and processes in relation to the AL Group, which reflects the commitment to act ethically and with integrity, in all their respective business relationships and additionally, to ensure that slavery and human trafficking are not taking place anywhere in the AL Group or in the AL Group's supply chain.

 

Balancing stakeholder interests

An illustration of the balancing of the interests of our stakeholders in their long-term interest was the Board's decision in July 2025 to continue its progressive dividend policy, resolving to pay an interim dividend of 22p per Ordinary share and Ordinary Non-Voting share to shareholders. This was an increase of 2p per share from the interim dividend paid in 2024. The Board has decided to recommend a final dividend of 31p per share; this is an increase of 2p per Ordinary share and Ordinary Non-Voting share compared to the final dividend of 2024. This represents total dividends for the year of 53p per Ordinary share and Ordinary Non-Voting share. It compares with 69p per Ordinary share and Ordinary Non-Voting share which also included a special dividend of 20p per Ordinary share and Ordinary Non-Voting share.

 

Impact of the Company's operations on the community and the environment

As part of the management information reviewed at its regular meetings, the Board receives a Risk Management report, containing a report on Sustainability / Environmental, Social and Governance ("ESG") matters which includes a Climate Change Dashboard, monitoring climate change measures in place including Scope 1, 2 and 3 GHG emissions. This dashboard sets out climate-change measures and actions.

 

The Board is updated on the steps the Group is taking to become more sustainable, given its exposure to climate change transition risk as the UK evolves to a low carbon economy. It is also kept informed of the formal approach to ESG established to develop over time, which will underpin the Arbuthnot Principles and Values within the workplace under five 'pillars of sustainability' - governance, clients, employees, community and environment (ESG Pillars). The ESG actions taken are in recognition of the Group's responsibility to make a positive societal impact and the political, regulatory and legal pressure with clients and investors interested in the Group's ESG stance.

 

In September 2025 the Board approved the enterprise-wide climate change risk appetite, risk assessments, and stress test scenarios and results. It has also approved an energy and carbon report meeting the requirements of the Streamlined Energy and Carbon Reporting standards, as set out in the Sustainability Report on pages 34 to 36.

 

Desirability of the Company maintaining a reputation for high standards of business conduct

The Directors believe that the Arbuthnot culture set out in the Arbuthnot Principles and Values manifests itself at Board level and in the external view of the Group as a whole. The importance of the Group's reputation is considered at each Board meeting. These Principles are encapsulated in five Group cultural values, embedded into day-to-day activities. These values are integrity, respect, empowerment, energy and drive, and collaboration.

 

Acting fairly as between members of the Company

The majority shareholder, Sir Henry Angest, is the Company's Chairman and Chief Executive. There is continuing engagement with other major shareholders and the Directors make their decisions on behalf of all shareholders. The Board welcomes engagement with them and will continue to maintain communications via one-to-one meetings as appropriate. The Directors treat all shareholders equally, albeit that holders of non-voting shares do not have the right to vote in shareholder meetings.

 

Strategic Report - Sustainability Report

 

Introduction

The Group has continued to embed sustainable practices across its business and remains committed to ensuring that its activities have a positive impact on clients, shareholders, employees, society and the environment. Two of our key business principles, reciprocity and stability, rely on recognising our responsibility to make a positive societal impact.

 

Climate change is an important topic for consumers and investors alike. In parallel, inclusive growth and the impact organisations have on society are increasingly a focus. Organisations are being held accountable for their impact. We focus on how we can improve to build a future that delivers growth, sustainability and inclusion.

 

Our responsible business initiatives enable us to monitor and measure our social impact by considering the impact of our practices and outputs across five pillars: governance, clients, community, environment and employees as explained on pages 26 to 28 below.

 

Governance

The Group has a solid system of governance in place, endorsing the principles of openness, integrity, and accountability that underpin good corporate governance. The Group operates to high standards of corporate accountability with an effective Board and Board committees. This, together with the role and overall holding of Sir Henry Angest, the ultimate majority shareholder, and compliance with PRA and FCA regulations and with those of the London Stock Exchange Alternative Investment Market and the Aquis Exchange, is fundamental to our success as a business.

 

Policies

The Group has adopted a wide range of policies that straddle the five pillars to ensure that employees and management are aware of their responsibilities towards our clients and comply with all regulatory requirements. Some of the key policies are set out below and in the Non-Financial and Sustainability Statement on page 19. 

 

Human Rights commitments

The Group is committed to operating in an ethical manner and ensuring the relationships we have with all our stakeholders adhere to high standards. These are reflected in both our Anti-Modern Slavery Policy and in our Supplier Code of Conduct.

 

The Group is committed to finding and reducing the risk of slavery or human trafficking in every part of our supply chain.

 

Clients

Relationships with our clients are at the heart of what we do. In June 2025, 625 clients across private and commercial banking shared their views through our internal client feedback survey. With 13% of invited clients responding, this encouraging level of engagement reflects both the dedication of our frontline teams and the benefit of a more streamlined survey. Overall, client sentiment remains strong with 94% of respondents saying they are satisfied or very satisfied with Arbuthnot Latham. Our new Net Promoter Score stands at 68, similar to that in the last survey in 2024.

 

Client support

As a relationship-led bank, our purpose is to help our clients go further. This means ensuring that they receive a bespoke service, tailored to their needs, helping them achieve their financial goals. As part of our focus on excellent service, we increased the minimum banking criteria and account tariff charges from February 2025. Higher minimum levels allow us to limit the number of relationships each banker manages, ensuring that the level of advice and access that every client receives is not diluted as we grow. This decision has enabled us to maintain our high quality of service, leading to better long-term outcomes for our clients.

 

Vulnerable clients

The term 'vulnerability' captures a range of circumstances our clients can face. To ensure we are treating vulnerable clients fairly, we have implemented vulnerable client guidance focused on identifying and supporting vulnerable clients.

 

We have a Vulnerable Client Committee to support our staff with vulnerable clients. In 2025, we welcomed the British Dyslexia Association and hosted a session on the legal and financial implications of divorce.

 

Employees

We continue to focus on maintaining an outstanding culture and workplace for all our employees. Once again our high engagement scores are a testament to this. We achieved an 87% response rate in our latest employee engagement survey (Non-Financial Key Performance Indicator), conducted by WorkBuzz in October 2025, and an overall engagement score of 83. These strong scores remain well above external benchmarks. Standout results include: 92% of employees are proud to work here and 85% would recommend Arbuthnot Latham as a great place to work. We also saw increases in scores for external client and colleague experience, inclusive culture and wellbeing: "I would feel proud to recommend our products and services to clients (+2%), I feel comfortable to be my true self at work (+3%), and Speak up and challenge processes (+3%)".

 

Employees were recently informed of a change in the Group's agile working policy whereby all full time staff will be required five years on from the pandemic to work a minimum of four days a week in the office, up from three days. Working together in the office enables the Group to fulfil its objective of being a service and relationship-led business. Having the advantage of human scale and concentrating on building relationships is enhanced by interacting regularly and frequently.

 

Wellbeing

Our wellbeing strategy focuses on mental, physical, social and financial pillars. Through these pillars, we provide our employees with a range of resources and tools to support their wellbeing, including resources provided by BUPA, Hargreaves Lansdown, ActiveHub, and our Employee Assistance Programme.

 

Initiatives include the AL Run Club to encourage staff to meet up and become active, weekly fruit baskets, free mortgage services for employees, Macmillan Coffee Morning, and the 721 programme culminating in 20 Arbuthnot Latham employees conquering the Brecon Beacons as part of the Atlantic Team Challenge inspired by world-renowned adventurer Nick Hollis.

 

Early Careers and Young Professionals

During 2025 47 young adults participated in work experience events, 70 A-level students attended our annual female student event, ten summer interns and 29 more young adults joined across our 2025 1-year placements and graduate and apprentice programmes. Additionally, in partnership with Young Professionals, we provided a six-week mentoring programme for 13 A-level students. Throughout 2025 we delivered 105 training sessions attended by 2,253 individuals. Our Learning at Work weeks saw us travelling across the country to Exeter, Basildon, Manchester and Wolverhampton, as well as hosting sessions in London linked to our 2025 theme of communication and collaboration.

 

The Group offers five different Early Careers Programmes, including work experience, summer internships, one-year placements, graduate placements, and apprenticeships.

 

We partner with Young Professionals, an organisation which works with schools across the UK from different socio-economic backgrounds to provide an insight and introduction to different industries, in order to grow the quality and diversity of our Early Careers talent pool.

 

Employee development

As a business with growth ambition, we encourage career progression and seek to develop our people's skills to help them grow within the organisation.

 

Mentoring

We support our employees' continued development through our internal mentoring programme. We partner with Pushfar, an internal mentoring platform to ensure mentees can find a suitable mentor to assist them in their careers.

 

Benefits

We offer eligible employees an annual opportunity to enhance an array of benefits at favourable rates including life assurance. In 2025, we introduced Salary Extras, our benefits platform designed to give access to a wide range of benefits and options.

 

Workplace pension scheme

The Group offers all eligible employees membership of a contributory defined contribution plan, which is operated by Hargreaves Lansdown who present annually to the Pension Scheme Governance Committee. The matters discussed at this Committee's meetings are communicated to employees, continuing the focus on their financial wellbeing.

 

Employee networking forum: Connect

Our colleague network, Connect, launched a new strategy with agency Flying Iguana. We introduced the Listening Lounge podcast series, hearing from employees on topics like mental health, retirement, cancer, and domestic abuse. We also hosted lunch and learn events and panels on discovering your superstrength and finding balance.

 

The purpose of Connect is to:

·      To promote an environment which enables everyone to perform to the best of their potential.

·      Encourage behaviours aligned with our values, particularly our value of respect. To create a long-term sustainable approach to ensure Connect remains at the heart of our organisation. 

 

Inclusivity

In 2025, we continued to strengthen our commitment to inclusivity by embedding our cultural values of respect and collaboration into everyday behaviour and leadership practices. Throughout the year we enhanced integration of our cultural values into our performance management processes and conversations to drive accountability and reinforce a culture of respect. A new Inclusivity and Respect Policy came into effect in November 2025, aligning our former Equity, Diversity & Inclusion and Dignity at Work policies into a single framework to simplify our approach and expectations for all employees. We also introduced Tell Jane, a confidential external platform for raising concerns about inappropriate behaviour in the workplace, providing employees with a safe and anonymous way to seek support. In Q4 2025 we began interactive workshops for senior leaders and team briefings for all employees, ensuring that respect and inclusivity remain at the heart of our culture and are translated into everyday actions and behaviour. We will continue to provide workplace demographic data to support transparency and inclusive workforce planning and host Connect events to deepen understanding and mutual respect across the organisation.

 

Community

The Group recognises that we need to commit to driving positive community impact within the communities in which we exist and operate, and connecting the dots between the charities we support and the social initiatives we run.

 

In 2025, we continued to support communities and charities through our expanded corporate responsibility strategy. Through our CSR Steering Committee we ensured that our activities remained aligned with the Group's goals. Our strategy continued to focus on quality education and eradicating poverty, reinforcing our commitment to making a positive societal impact.

 

Volunteering and Philanthropy

Over 250 volunteers engaged across teams, supporting Hackney City Farm, Hackney Foodbank, Bow Food Bank, The Switch, Trees for Cities, and Hospiscare. This represents approximately 30% of all employees.

 

To assist with our skills-based volunteering and to ensure we support education and financial education, The Switch, offers our employees the opportunity to volunteer in schools in Tower Hamlets. Sessions here included CV-writing workshops, Money Matter workshops and interview preparation.

 

We donated 60 laptops to Halley Primary School, which will enhance students' learning and technology access.

 

Pound for Pound and Payroll giving

In 2025, we supported 46 colleague fundraising activities through pound-for-pound matching and payroll giving, including £3,500 raised for the Chief Operating Office Trio Masters Challenge.

 

We also offer our employees the opportunity to donate regularly from their gross pay to charities of their choice.

 

Environment

We have made a commitment to reduce our environmental impact and to improve our environmental performance as an integral part of our business strategy. We are committed to achieving net-zero by 2050 and effective management of our carbon footprint is an important part of our strategy.

 

As a consequence, we have in place an Environmental Management policy which sets out our high-level approach to managing environmental issues and provides requirements to help the Bank to achieve its commitments. Enhancing transparency within our own supply chains is part of our mission to work closely with our third-party relationships. In doing so, working together will help us establish how we can better engage and be held accountable.

 

Due to the nature of the Group's business, we are primarily a consumer of services rather than goods and materials. However, we are still committed to reducing the impact of our supply chain. As a minimum, we expect our suppliers to provide evidence towards their environmental status, where relevant and appropriate.

 

The Bank's Credit Policy sets out the Group's limited appetite for financial and reputational risk emanating from climate change, which includes physical risk (extreme weather, flooding etc.) and transitional risk (changes to law, policy, regulation and culture). The Bank adopts a favourable stance towards a low carbon economy and lending propositions that have a neutral or positive impact on the environment/climate. The Bank will also consider the impact on public perception and potential impact on continuing demand for clients' products and services, as well as any impact on its underlying security. These factors are assessed as part of the credit application and on-going review processes.

 

In December 2025, we submitted an action plan under the Energy Savings Opportunity Scheme (ESOS), a Government-mandated requirement to identify tailored and cost-effective measures to save energy and achieve carbon and cost savings. We continue to build employee awareness on environmental matters and energy efficiencies.

 

20 Finsbury Circus

At 20 Finsbury Circus, our BREEAM-rated Excellent office into which we moved in the summer of 2024, we continue to focus on sustainability and operational efficiency, sourcing renewable energy and implementing recycling initiatives to reduce our carbon footprint.

 

By investing in technologies like building management systems and LED lighting, we significantly reduce energy consumption and improve our Energy Performance Certificate (EPC) ratings. At 20 Finsbury Circus, we source renewable energy to power our operations, which further reduces our carbon footprint and supports sustainable energy practices. Additionally, we have implemented efficient air conditioning systems to optimise energy use and enhance the comfort of our building occupants. Using onsite shredders and compactors to compress waste reduces transport costs and further reduces our carbon footprint.

 

We are continuously working to reduce our Scope 1 and Scope 2 emissions by decarbonising our buildings and increasing their energy efficiency. These efforts are essential steps towards our sustainability goals.

 

Summary across our five pillars

We are taking steps, guided by our five pillars of governance, clients, community, environment and employees, to help us become more sustainable.

 

Governance	Current status
Ensure responsible and transparent corporate governance which aligns to business goals while making a positive societal impact.	We have been embedding sustainability into our business practices by recording, monitoring, and publishing performance.
	We have policies in place, such as our: Anti-Money Laundering Policy Board Suitability & Diversity Policy Anti-Bribery and Corruption Policy Client Acceptance Policy Group Market Abuse and Insider Dealing Policy Whistleblowing Policy Anti-Modern Slavery Policy
	We have a published Tax Strategy, which sets out the Group's commitment to compliance with tax law and practice in the UK, which includes paying the correct amount of tax at the right place and right time and having a transparent and constructive relationship with the tax authority.
	We have effective risk management which underpins our strong risk culture supporting the Group's vision.
	We have a Supplier Code of Conduct that promotes equal opportunities and diversity, acting with integrity, endorsement of sustainable procurement within the supply chain, safe working practices, and data, cyber and privacy protection.
Clients	Current status
Ensuring best outcomes for our clients.	We seek regular feedback from our clients to reinforce our proposition and service.
	We also have a new complaints team and take dissatisfaction seriously, remediating issues promptly.
	We take the protection of our client data seriously and have robust measures in place to protect client data in line with our legal and regulatory requirements.
	We make regular anti-fraud communications to clients, alerting them to the different techniques used by criminals to unlawfully obtain people's data and money.
	We have continued to invest in the Bank's core banking system, demonstrating that operational resilience and the ability to make services available to our clients is of the utmost importance.
	We continue to invest in our risk management capabilities across Credit, Compliance, Operational Risk and Financial Crime with a view to ensuring good client outcomes through the continuing stability of the Bank.
	We continue to embed the FCA's Consumer Duty requirements for all relevant products and services. We continue to consider ways that we can improve outcomes for our customers.
	We have initiated a Digital Transformation Project to further enhance the Bank's services to clients.
	We have policies in place, such as our: Complaints Handling Policy Fraud Policy Personal Data Protection Policy Physical Security Policy Vulnerable Clients Policy
	We seek regular feedback from our clients to reinforce our proposition and service.
	We also have a new complaints team and take dissatisfaction seriously, remediating issues promptly.
	We take the protection of our client data seriously and have robust measures in place to protect client data in line with our legal and regulatory requirements.
Community	Current status
Having a positive impact on the community in which we operate.	We support philanthropy through matching charity donations, payroll giving, and volunteer days. In 2025 we supported The Felix Project, The Switch, Bow Foodbank, Hackney Foodbank and Surrey Docks Farm.
	We will continue to encourage skills-based and team-based volunteering, increasing our focus on education and financial literacy.
	We continue to encourage employees fundraising and challenges.
	We donated 157 laptops to schools in Tower Hamlets through Business2Schools.
	Our regional offices supported charities. Our Exeter office supported YMCA and our Manchester office supported The Seashell Trust and The Christie.
Environment	Current status
Ensuring that our business practices have a positive impact on the environment.	We will set goals and progress against these with a view to reaching net-zero carbon emissions as a business by 2050.
	We have reported in line with the requirements of the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.
	We assess both direct and indirect climate-related risks and opportunities.
	We incorporate annual sustainability reporting into our annual report and accounts.
	We have an Environmental Management Policy to help us achieve our commitments.
	We have established a Sustainable investment Service (SPS).
	Energy and Waste ·      We have moved the London head office to 20 Finsbury which is a BREEAM-rated excellent office ·      Invested in building management systems and LED lighting to reduce energy consumption and improve EPC ratings. ·      Implemented efficient air conditioning systems to optimize energy use and enhance occupant comfort. ·      Sourced renewable energy at 20 Finsbury Circus to power operations, reducing carbon footprint and supporting sustainable energy practices. ·      Shredded waste materials onsite to cut down on emissions from transportation. ·      Introduced new recycling bins and signage. ·      Used compactors onsite to compress waste, reducing the number of collections needed and saving on transport costs.
	We have a Supplier Management Framework which reflects the Environmental Management Policy.
	We ensure the responsible disposal of computer equipment and have a waste recycling programme in place.
	Transport Our benefits include a cycle to work scheme and season ticket loan. We continue to finance and lease electric vehicles through our RAF and AAG subsidiaries.
	We will set goals and progress against these with a view to reaching net-zero carbon emissions as a business by 2050.
Employees	Current status
Creating a supportive and diverse workplace in which employees can thrive.	We promote a working environment that seeks to develop employee skills, and ensures employees are treated fairly and supports their wellbeing. Policies to support this include: Agile Working Policy Flexible Working Policy Health and Safety Policy Parental Leave Policy Remuneration Policy Training & Development Policy Dignity at Work Policy Inclusivity & Respect Policy
	We have invested in new offices and working environments in Bristol and in our London headquarters.
	We operate an internal recognition scheme: Arbuthnot Achievers.
	We conduct annual employee surveys (conducted anonymously) with 91% response rate and employee engagement scores of 85%.
	We have adopted agile and flexible working policies.
	We pay all employees a living wage and have market aligned job families.
	All eligible employees may receive a bonus, in addition to pension contribution, absence pay and other core and flex benefits. We also offered eligible employees the opportunity to enhance at favourable rates their cover for life assurance and related cover.
	We publish details of our gender pay gap annually.
	We have an internal staff networking forum: Connect.
	We have an internal colleague wellbeing programme and wellbeing support resources.
	We provide all our staff access to our extensive Learning and Development Programme. We also have a Leadership Development Academy and Early Careers Programme.
	We have a Pension Governance Committee to manage and communicate our workplace pension scheme.

 

Metrics

Disclosures around metrics are given in the section on Climate-related Financial Disclosures below.

 

Climate-related Financial Disclosures

This section of the Strategic Report describes how the Directors have implemented the requirements of the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 which amended the Companies Act 2006 to introduce Task Force on Climate-related Financial Disclosures' ("TCFD") aligned disclosure requirements into the existing non-financial information requirements.

 

This report covers how climate related risks and opportunities are managed; and on the performance measures and targets applied in managing these issues.

 

The Board considers the Group's business model to be resilient to the financial risks from climate-related risks based on the risk assessments and stress test scenario results.

 

 

Area	Our Response
Governance   Describe the board's oversight of climate-related risks and opportunities.   Describe management's role in assessing and managing climate-related risks and opportunities.	The Board Risk Committee annually review and approve the enterprise-wide climate change •  Risk appetite, •  Risk assessments, and •  Stress test scenarios and results.   The Executive Risk Committee review the ESG dashboard (that includes Climate Change) at each meeting. This dashboard details climate-change measures and actions. The tolerances are partly based on the climate change stress test scenarios outputs.   Climate change risk is considered as falling within two categories:   ·      Physical Risk: Arising from longer-term changes in the climate and weather-related events, rising average temperatures, heatwaves, droughts, floods, storms, sea-level rise, coastal erosion and subsidence. ·      Transition Risk: Arising from the adjustment towards a low-carbon economy and could lead to changes in risk appetite, strategy, policy, technology and sentiment.   The Board also consider climate change risk in major change decisions, most recently in the case of the 2024 London premises relocation.   The Senior Management Function ("SMF") accountability for the financial risks of climate change sits with Stephen Kelly, the AL CRO.   Climate change is managed within the Group's governance and risk management frameworks which includes the consideration of both current and emerging risks.
Strategy     Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.   Describe the impact of climate-related risks and opportunities on the organisation's businesses, strategy, and financial planning.   Describe the resilience of the organisation's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.	The Board considers the Group's business model to be resilient to the financial risks from climate-related risks based on the risk assessments and stress test scenario results.   The existing income streams are not materially impacted by either transitional or physical risks.     The business strategy is also positioned to capture opportunities and support the transition to a low carbon economy.   The key risks and opportunities are:   Short and medium term (0-5 years) •  Growing investor, client, and employee preference to work with, or for companies promoting a    low-carbon economy •  AL Core transition risk and opportunity on the rising EPC expectations for buy to let residential    property •  RAF transition risk and opportunity from the demise of combustion engines and switch to electric    engines. •  AAG transition risk and opportunity from the demise of combustion engines and switch to    alternatives.   Long term (5-30 years) •  AL Core physical risk (flood risk) on residential property.   These risks are mitigated and the financial impact is not considered significant in relation to AL's revenue •  Residential property loan risks are mitigated by the loan durations (typically less than 5 years) and    strong loan to values. •  RAF combustion engine risks are mitigated by the short loan durations (typically less than five    years).  •  AAG heavy goods vehicles combustion engine risks are mitigated by the short leasing durations    (typically less than five years), lack of viable alternate technologies and by the strategic objective to    keep the fleet focused on latest Euro 6 models and as young as possible. Asset residual values and    lifespans are monitored considering possible technology changes. •  The Group exposure to the Energy or Utility sectors is less than 1% of the portfolio.    The Group is positively minded toward supporting the transition to a low carbon economy and seeks to capitalise on opportunities as follows: •  For new lending, AL requires considerations on how properties can get to EPC C (unless exempt/RMC). For existing client portfolios, AL finance EPCs improvements. •  RAF is supporting clients by financing leases on electric and hybrid vehicles. It has had success in    financing hybrid London taxis and smaller electric vehicles.  •  AAG finances electric buses and is working with the industry on transition pathways to cleaner    technology alternatives for heavy goods vehicles.  •  AL has offered clients the option to invest funds in a Sustainable Investment Service since 2021.    This service seeks to incorporate environmental, social and governance ("ESG") factors to achieve    a positive impact without sacrificing long-term financial returns.
Risk Management   Describe the organisation's processes for identifying and assessing climate-related risks.   Describe the organisation's processes for managing climate-related risks.   Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation's overall risk management.	The Board Risk Committee annually review and approve the enterprise-wide climate change •  Risk appetite, •  Risk assessments, and •  Stress test scenarios and results.   The Board Risk Committee consider climate change within the Enterprise and Strategic risk category of the approved Risk Appetite Framework.   The risk assessments identify and assesses the transition and physicals risk to the business model and lending book. They consider the existing and emerging regulatory requirements and other relevant factors, as well as the potential size and scope of climate-related risks.   The stress test scenarios are refreshed annually and inform the risk assessments. The scenarios are tailored versions of the 2021 Climate Biennial Exploratory Scenario ("CBES") as outlined in the BOE "Key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change".   Three scenarios are considered which are plausible representations of what might happen based on different future paths of governments' climate policies. They cover the period to 2050 and assume either early action (in current year), late action (ten years' time) or no additional action. Two scenarios consider routes to net-zero carbon dioxide emissions globally by 2050: an Early Action scenario and a Late Action scenario. These scenarios primarily explore transition risks from climate change:   •  Early Action: Under this scenario, climate policy is ambitious from the beginning, with a gradual    intensification of carbon taxes and other policies over time. Global carbon dioxide emissions are    reduced to net-zero by around 2050 and global warming (relative to pre-industrial levels) is    successfully limited to 1.8°C by the end of the scenario, falling to around 1.5°C by the end of    century. The required adjustment in the economy creates a temporary headwind to growth but this    dissipates in the latter half of the scenario once a significant portion of the required transition has    occurred, and the productivity benefits of green technology investments begin to be realised. •  Late Action: The implementation of policy to drive the transition to a net-zero economy is    assumed to be delayed by a decade under this scenario. Policy measures are then more sudden and    disorderly because of the delay. Global warming is limited to 1.8°C by the end of the scenario    (2050) relative to pre-industrial levels, but then remains around this level at the end of the century.    The more compressed nature of the reduction in emissions also results in material short-term    macroeconomic and financial markets disruption. UK unemployment rises to 8.5% and the    economy goes into recession for a short period. Falls in output are particularly concentrated in    emissions-intensive sectors.   The third scenario is based on the physical risks that would begin to materialise if governments around the world fail to enact policy responses to global warming and no additional action is taken to address climate change.  This is considered a severe scenario, being based on climate outcomes that would only occur later this century under the assumption that no additional action is taken to address climate change, and represents a worse than expected outcome even under such conditions. The absence of transition policies in this scenario leads to a growing concentration of greenhouse gas emissions in the atmosphere and, as a result, global temperature levels continue to increase, reaching 3.3°C higher relative to pre-industrial levels by the end of the scenario. This leads to chronic changes in precipitation, ecosystems and sea-levels, which are unevenly distributed globally, and in some cases irreversible. There is also a rise in the frequency and severity of extreme weather events. There are permanent impacts on living and working conditions, buildings and infrastructure. As a result, UK and global GDP growth is permanently lower and macroeconomic uncertainty increases. Reflecting the fact that the future looks materially worse at the end of the scenario, with the adverse effects of climate change set to worsen further, UK and US equity prices are respectively just under 20 and 25% lower than they might otherwise be. Climate change is managed within the Group's governance and risk management frameworks.  Specifically, the  •  AL Board Risk Committee oversees ESG and the financial risks of climate change. •  AL Credit Committee considers implications of climate change on new and existing lending. •  AL Investment Committee considers implications of climate change on investment decisions. •  AL Product Governance Committee considers climate change on propositions.   Reference to Climate Change is made in key documents including the: •  ICAAP, •  Risk Appetite Framework, •  AL Risk Hierarchy, •  Credit policy.
Metrics and Targets   Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.   Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.   Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas ("GHG") emissions and the related risks.	Aspirations All Buy to Let lending properties to be either EPC C or have valid exemption by 2035.   AL lend against high quality residential collateral. Typically these properties are EPC C. AL also support Landlords to improve the quality of their collateral, including EPC gradings, where they are currently beneath C.	Metrics •   Buy to Let Lending EPC C (as % BTL Lending).
	All leases to be for electric, or clean alternative, vehicles by 2050 with exception of classic and high value cars.   AL want to support clients as they transition to the low carbon economy and recognise the transition will occur at different speeds. However, AL will cease providing financing on petrol and diesel cars and vans from 2030/2025, and non-zero emission heavy goods vehicles from 2040.	•  RAF electric/hybrid vehicle financing as % of RAF vehicle financing (excluding classic and supercars).
	Energy & utility exposure to be maintained at less than 1% of AL lending portfolio (0.51%, December 2025).	•  Energy and Utility Exposure (% of future state AL lending portfolio).
	Be operationally Net Zero by 2050   By reducing carbon emissions and minimising waste •  AL switched to a new London    building in 2024. The building    is Breeam rated "Excellent" •  Company car fleet to be fully electric    or hybrid by 2035 •  Company heavy goods fleet (AAG)    to be powered by zero emission    engines by 2040   Improve recycling rates to 60%.	•   Scope 1 and 2 intensity ratios   •  % General waste recycled   •  % Electric / hybrid company cars (as % of total    company cars)
	Scope 1,2 and 3 emissions are reported on page 34 below.   (Scope 3 emissions will remain as per 2024. We have investigated and decided against extending Scope 3 emissions reporting to the lending and investment portfolios. The Scope 3 emissions methodology and data would not be reliable and would give an illusion of accuracy that would not help decision making.)

 

Streamlined Energy & Carbon Reporting (SECR)

The Group continues to work with a specialist energy management consultancy, Carbon Decoded, to gather the information required to be reported by large unquoted companies under the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, which includes:

 

·      All energy in line with Greenhouse Gas Reporting (GHG) Scope One - gas and owned transport, Scope Two - electricity and Scope Three - non-owned transport. 

·      Intensity metrics to enable year on year improvements to be tracked.

 

The report covers data from 1 January to 31 December 2025. The Group has reported all sources of environmental impact, as required in SECR, over which it has financial control, being the Company and its subsidiaries.

 

Base Year

The Base Year for the organisation is a rolling annual comparison.

 

Reporting Methodology

·      Data has been collected for electricity, gas and transport. Data was collected specifically for the purpose of SECR.

·      GHG Protocol Corporate Accounting and Reporting Standard has been followed where relevant.

·      Data was collected specifically for the purpose of SECR.

·      The 2024 and 2025 UK Government Conversion Factors for Company Reporting were used for all calculations of Carbon emissions.

·      Data was estimated where necessary, as set out below.

 

Methodology changes in 2025

Transport calculations for the AAG HGV fleet have historically been based on vehicle mileage. In 2025 more accurate litre data was collected for the majority of the fleet, this change has impacted on the tCO2e and the intensity metric. This improvement to the methodology will now be applied moving forward.

 

Portfolio changes in 2025

The figures for 2025 show improvement on the previous year in natural gas and electricity. This is because in 2024 there were three offices in the City of London operating concurrently up until September 2024 after operations moved over from 7 Wilson Street and 10 Dominion Street to the new head office at 20 Finsbury Circus from July 2024.

 

Estimated Data

The following data was estimated in 2025:

 

HGV Fleet	The change in the source data from mileage to litres could not be applied to all vehicles. Where mileage has been used this has been considered an estimate.
Bristol and Gatwick	Energy is included in the rent and sub-metering for the office is not available, calculated estimates are therefore based on floor area using industry recognised benchmarks.

 

Operational Scopes

The report contains all Scope One and Two energy use and Scope Three Grey Fleet for the whole Group as required by SECR.

 

Reporting Summary
	2025					2024
	Measure	kWh	Carbon Tonnes   tCO2e	Intensity    Ratio tCO2e		Measure	kWh	Carbon Tonnes   tCO2e	Intensity    Ratio tCO2e	% Change on Previous Year
	Scope One					Scope One
Natural Gas - Intensity Ratio tCO2e/m2	8,612	66,373	12	0.0014		14,391	340,896	62	0.0040	-81%
Kerosene - Intensity Ratio tCO2e/m2	1,545	54,772	14	0.0088		1,545	31,910	8	0.0050	75%
Diesel - Mixed Onsite Use No Metric Available		265,345	65				230,379	55		18%
Company HGVs Intensity Ratio tCO2e/miles	69,450	430,521	105	0.0015		69,926	294,331	70	0.0010	50%
Company Cars Intensity Ratio tCO2e/miles	347,512	203,504	47	0.0001		348,117	254,935	59	0.0002	-20%
Total Scope One		1,020,515	243				1,152,451	254		-4%
	Scope Two					Scope Two
Electricity - Intensity Ratio tCO2e/m2	15,886	1,733,302	307	0.0193		19,422	2,235,188	463	0.0240	-34%
Company Cars Intensity Ratio tCO2e/miles	167,935	59,127	11	0.0001		93,508	31,778	7	0.0001	57%
Total Scope Two		1,792,429	318				2,266,966	470		-32%
	Scope Three					Scope Three
Grey Fleet Vehicles Intensity Ratio tCO2e/miles	223,371	226,413	52	0.0002		247,558	277,450	64	0.0003	-19%
Total Scope Three	223,371	226,413	52	0.0002		247,558	277,450	64	0.0003	-19%
Total of all Scopes		3,039,357	613				3,696,867	788
Estimated Data		3%					6%

 

Corrective Actions

There are no corrective actions for 2025.

 

Intensity Ratios

Intensity ratios are used to enable year on year comparison. As Arbuthnot is an office-based business the recognised standard measure is kilowatt-hour per square metre (kWh/m²). This enables the energy use to be compared to industry standard benchmarks. Similarly for transport, the metric is kilowatt-hour per mile (kWh/mile). The metrics have been reported as required by the Regulations.

 

Energy Efficiency Actions

To summarise the energy efficiency actions for 2025:

·      The AAG fleet has increased in numbers with the growth in the sales force. AAG remain committed to investing in plug-in hybrid vehicles. 2025 saw higher fleet mileage but vehicle changes have seen Scope One tCO2e emissions fall by 11.5 tCO2e compared to 2024, this is balanced with an increase in Scope Two emissions of 4 tCO2e.

·      Optimisation work has been undertaken at Finsbury Circus and ESOS audits undertaken to ensure further efficiencies can be identified and planned for the building.

               

Group Directors' Report

 

The Directors present their report for the year ended 31 December 2025.

 

Business Activities

The principal activities of the Group are banking and financial services. The business review and information about future developments, key performance indicators and principal risks are contained in the Strategic Report on pages 7 to 35.

 

Corporate Governance

The Corporate Governance report on pages 43 to 50 contains information about the Group's corporate governance arrangements, including in relation to the Board's application of the UK Corporate Governance Code.

 

Results and Dividends

The results for the year are shown on page 62 of the financial statements. The profit after tax for the year of £17.8m (2024: £24.9m) is included in reserves. The Directors recommend the payment of a final dividend of 31p (2024: 29p) per Ordinary share and Ordinary Non-Voting share which, together with the interim dividend of 22p (2024: 20p) per Ordinary share and Ordinary Non-Voting share paid on 30 May 2025 represents total dividends for the year of 53p (2024: 69p which also included a special dividend of 20p) per Ordinary share and Ordinary Non-Voting share. The final dividend, if approved by Ordinary shareholders at the 2026 Annual General Meeting ("AGM"), will be paid on 29 May 2026 to shareholders on the register at close of business on 17 April 2026.

 

Directors

The names of the Directors of the Company at the date of this report, together with biographical details, are given on pages 36 and 37 of this Annual Report. Ms C.L.B Crosswell was appointed to the Board on 16 July 2025. All the other Directors listed on those pages were directors of the Company throughout the year.  Mr. I.A. Dewar and Sir Alan Yarrow were also Directors during the year prior to their retirement from the Board on 21 May 2025.

 

Ms Crosswell offers herself for election under Article 75 of the Articles of Association. Sir Nigel Boardman, Mr. F.A. H. Angest and Ms A.A. Knight being eligible, offer themselves for re-election under Article 78 of the Articles of Association. Sir Nigel, Ms Almond and Mr. Angest each has a letter of appointment terminable on three months' notice. Mr. Angest also has a service agreement as an employee terminable on three months' notice.

 

Articles of Association

The Company's articles of association may only be amended by a special resolution of the Ordinary shareholders. They were last amended at the AGM in May 2017 and can be viewed at www.arbuthnotlatham.co.uk/group/investor-relations/announcements.

 

Viability Statement

In accordance with the UK Corporate Governance Code, the Directors confirm that there is a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, for the three-year period up to 31 December 2028. A period of three years has been chosen because it is the period covered by the Group's strategic planning cycle and also incorporated in the Individual Capital Adequacy Assessment Process ("ICAAP"), which forecasts key capital requirements, expected changes in capital resources and applies stress testing over that period.

 

The Directors' assessment has been made with reference to:

• the Group's current position and prospects - please see the Financial Review on pages 10 to 18;

• the Group's key principles - please see Corporate Philosophy on page 3; and

• the Group's risk management framework and associated policies, as explained in Note 6 to the financial statements.

 

The Group's strategy and three-year plan are evaluated and approved by the Directors annually. The plan considers the Group's future projections of profitability, cash flows, capital requirements and resources, and other key financial and regulatory ratios over the period. The ICAAP is embedded in the risk management framework of the Group and is subject to continuing updates and revisions when necessary. The ICAAP process is used to stress the capital position of the Group over the three-year planning period. It is updated at least annually as part of the business planning process.

 

Going Concern

In assessing the Company's and the Group's Going Concern position, the Directors have made appropriate enquiries which assessed the following factors:

• the Group's strategy, profitability and funding;

• the Group's risk management (see Note 6 to the financial statements) and capital resources (see Note 7);

• the results of the Group's capital and liquidity stress testing;

• the results of the Group's reverse stress testing and the stress levels that have the potential to cause its business plan failure; and

• the Group's recovery plan and potential management actions to mitigate stress impacts on capital and liquidity.

 

The key Macro-Economic Risks for the stress testing included:

• Property market falls of up to 35% in property values;

• Stock market falls of up to 28% in UK equity prices;

• Interest rate rise/fall; and

• Regulation change.

 

The key Idiosyncratic Risks for the stress testing included:

• Credit losses;

• Operational events (i.e. fraud, cyber event, etc.);

• Decline in profitability; and

• Liquidity event (i.e. significant deposit outflow).

 

As a result of the assessment, the Directors are satisfied that the Company and the Group have adequate resources to continue in operation for a period of at least twelve months from when the financial statements are authorised for issue. The financial statements are therefore prepared on the going concern basis.

 

Share Capital

The Company has in issue two classes of shares, Ordinary shares and Ordinary Non-Voting shares, each with a nominal value of 1p. The Non-Voting shares rank pari passu with the Ordinary shares, including the right to receive the same dividends as the Ordinary shares, except that they do not have the right to vote in shareholder meetings.

 

Authority to Purchase Shares

Shareholders will be asked to approve a Special Resolution renewing the authority of the Directors to make market purchases of shares not exceeding 10% of the issued Ordinary and Ordinary Non-Voting share capital. The Directors will keep the position under review in order to maximise the Company's resources in the best interests of shareholders. Details of the resolutions renewing this authority are included in the Notice of Meeting on pages 156 and 157. No shares were purchased during the year. The maximum number of Treasury shares held at any time during the year was 390,274 Ordinary shares and 19,040 Ordinary Non-Voting shares of 1p each.

 

Financial Risk Management

Details of how the Group manages risk are set out in in the Strategic Report and in Note 6 to the financial statements.

 

Directors' Interests

The interests of current Directors and their families in the shares of the Company at the dates shown, together with the percentage of the current issued share capital held (excluding treasury shares), were as follows:

 

Beneficial Interests - Ordinary shares	1 January 2025	31 December 2025	3 March 2026	%
Sir Henry Angest	9,392,185	9,392,185	9,392,185	58.0
Sir Nigel Boardman	26,062	26,062	26,062	0.2
J.D. Almond	11,617	11,617	11,617	0.1
J.R. Cobb	6,000	6,000	6,000	-
A.A. Salmon	51,699	51,699	51,699	0.3
Beneficial Interests - Ordinary Non-Voting shares	1 January 2025	31 December 2025	3 March 2026	%
Sir Henry Angest	86,674	86,674	86,674	64.9
J.R. Cobb	60	60	60	-
A.A. Salmon	516	516	516	0.4

Substantial Shareholders

The Company was aware at 3 March 2026 of the following substantial holdings in the Ordinary shares of the Company, other than those held by one director shown above:

 

Holder		Ordinary Shares	%
Liontrust Asset Management		1,375,156	8.5
Slater Investments		825,919	5.1

 

Significant Contracts

No Director, either during or at the end of the financial year, was materially interested in any contract with the Company or any of its subsidiaries, which was significant in relation to the Group's business. At 31 December 2025, one director had loans from Arbuthnot Latham & Co., Limited amounting to £0.9m (2024: £2.8m) and four directors had deposits amounting to £5.6m (2024: £3.9m), all on normal commercial terms as disclosed in Note 42 of the financial statements.

 

Directors' Indemnities

The Company's Articles of Association provide that, subject to the provisions of the Companies Act 2006, the Company may indemnify any Director or former Director in respect of liabilities (and associated costs and expenses) incurred in connection with the performance of their duties as a Director of the Company or any subsidiary and may purchase and maintain insurance against any such liability. The Company maintained directors and officers liability insurance throughout the year.

 

Employee Engagement

The Company gives due consideration to the employment of disabled persons and is an equal opportunities employer. It also regularly provides employees with information on matters of concern to them, consults on decisions likely to affect their interests and encourages their involvement in the performance of the Company through regular communications and in other ways. Further information on employee engagement is given in the Strategic Report on pages 23 to 25.

 

The Company has a policy in place to ensure that it applies the Equality Act 2010 which makes it unlawful to discriminate inter alia on the grounds of disability. At the recruitment stage, reasonable adjustments are made to ensure that no candidate is put at a disadvantage because of their disability. Should existing employees become disabled, every effort is made to retain them within the workforce wherever reasonable and practicable. The Group also endeavours to provide equal opportunities in the training, promotion and general career development of disabled employees.

 

Engagement with Suppliers, Customers and Others

Information on engagement with suppliers, customers and other stakeholders is given in the Strategic Report on page 21.

 

Streamlined Energy & Carbon Reporting

The information required by the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 is set out in the Sustainability Report on page 34. These Regulations implement the Government's policy on Streamlined Energy and Carbon Reporting (SECR) to support business in understanding its responsibility for carbon emissions and to help establish plans to become Net Zero by 2050.

 

Political Donations

The Company made political donations of £23,000 during the year (2024: £16,000), being principally payment for attendance at political functions, as permitted by the Ordinary Resolution of Ordinary shareholders passed on 22 May 2024.

 

Events after the Balance Sheet Date

There were no material post balance sheet events.

 

AGM

The Company's AGM will be held on Tuesday 19 May 2026 at which Ordinary Shareholders will be asked to vote on a number of resolutions. Shareholders are encouraged to submit their votes in respect of the business to be discussed via proxy, appointing the Chairman of the meeting as their proxy. This will ensure that votes will be counted if shareholders are unable to attend the meeting in person. The resolutions, together with explanatory notes about voting arrangements, are set out on pages 156 to 159.

 

Auditor

A resolution for the re-appointment of Forvis Mazars LLP as auditor will be proposed at the forthcoming AGM in accordance with section 489 of the Companies Act 2006.

 

Disclosure of Information to the Auditor

Each of the persons who are Directors at the date of approval of this Annual Report confirm that:

•      so far as each director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

•      they have taken all the steps they ought to have taken as a director to make themselves aware of any relevant audit

•      information and to establish that the Company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

 

Statement of Directors' Responsibilities in Respect of the Strategic Report and the Directors' Report and the Financial Statements

The Directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable law and regulations. Company Law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. As required by the AIM Rules for Companies and in accordance with the Rules of the AQSE Growth Market, they are required to prepare the Group Financial Statements in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and have elected to prepare the Parent Company Financial Statements on the same basis.

 

Financial Statements

Under Company Law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the Group profit or loss for that period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable, relevant and reliable;

·      state whether they have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006;

·      assess the Group and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

·      use the going concern basis of accounting unless they intend either to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and Parent Company and to prevent and detect fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

 

The Directors confirm that the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and Parent Company's position, performance, business model and strategy.

 

Corporate Governance

Introduction and Overview

The Company has a strong and effective corporate governance framework. The Board endorses the principles of openness, integrity and accountability which underlie good governance and applies the principles of the UK Corporate Governance Code, published by the Financial Reporting Council ("the FRC Code"), and complies with its provisions in so far as they are considered appropriate for the Company, given its size and circumstances, and the role and overall shareholding of its majority shareholder. The Group operates to the high standards of corporate accountability and regulatory compliance. The Company has been approved by the Prudential Regulation Authority (PRA) as a parent financial holding company of its banking subsidiary, Arbuthnot Latham & Co., Limited. Arbuthnot Latham is authorised by the PRA and regulated by the Financial Conduct Authority (FCA) and by the PRA. One of its subsidiaries, Asset Alliance Leasing Limited, is authorised and regulated by the FCA.

 

The Board decided in 2018 to report against the FRC Code. This decision was made in light of the requirement in the AIM Rules for Companies that AIM listed companies state which corporate governance code they have decided to apply, how the company complies with that code, and where it departs from its chosen code an explanation of the reasons for doing so. The Rules of the AQSE Growth Market also require the Company to adopt, as far as possible, the principles and standards set down in a recognised UK corporate governance code. This information is published on the Company's website and the Company reviews it each year as part of its annual reporting cycle.

 

In January 2024 the FRC made limited revisions to its 2018 Code, publishing a UK Corporate Governance Code 2024 ("the 2024 Code"). The 2024 Code has been applicable to the Company throughout its year ended 31 December 2025 other than for one provision, number 29. This provision amends that concerning the monitoring of the risk management and internal control framework, which is not applicable until its year beginning 1 January 2026 with the provision from the 2018 Code continuing to apply until then. This section of the Annual Report summarises how the Company applies the FRC Code and in broad terms how it has complied with its provisions throughout the 2025 financial year, giving explanations where it has chosen not to do so.

 

Leadership and Purpose

The Company is led by the Board which comprises ten members: Sir Henry Angest, the Chairman and Chief Executive; two other executive directors, Andrew Salmon and James Cobb; six independent non-executive directors, Jayne Almond, Sir Nigel Boardman, Charlotte Crosswell, Angela Knight, Richard Gabbertas and Lord Sassoon; and one non-independent non-executive Director, Frederick Angest. This means that more than half of the Board, excluding the Chairman, comprises independent non-executive directors.

 

The Board sets the long-term focus and customer-oriented culture of the Group. The responsibilities of Sir Henry Angest as Chairman include leading the Board, ensuring its effectiveness in all aspects of its role, ensuring effective communication with shareholders, setting the Board's agenda and ensuring that all Directors are encouraged to participate fully in the activities and decision-making process of the Board.

 

The Board has for many years led a company which focuses on sustainable growth over the longer-term with a culture to match. Investment in resources has been strong and has continued where and as appropriate, with the focus on the benefit this will bring to bear for stakeholders over time. The aim continues to be for a culture of openness among the workforce which combines with the prudent and effective technological and individual controls in place across the business to ensure strong risk management in the Company's continued long-term success.

 

The Group's cultural values are reflected in a brand values document linking the Arbuthnot Principles to the Group's culture as a way of communicating culture across the business. These cultural Principles are encapsulated in five Group values which are fully embedded into day-to-day activities. These are integrity, respect, empowerment, energy and drive, and collaboration. A formal approach to Environmental, Social and Governance (ESG) is in place to develop over time under five 'pillars of sustainability' - governance, employees, community, environment and clients.

 

The Board

The Board held seven scheduled meetings during the year, six of which were held jointly with the Board of Arbuthnot Latham with the other one being held to approve the Interim Report. The Directors also held a separate strategy meeting, together with the AL Directors, in September. Substantive agenda items have briefing papers, which are circulated in a timely manner before each meeting. The Board ensures that it is supplied with all the information that it requires and requests in a form and of a quality to fulfil its duties. 

 

In addition to overseeing the management of the Group, the Board has determined certain items which are reserved for decision by itself, as set out in the Schedule of Matters Reserved to the Board which is reviewed annually and is published on the Company's website at https://www.arbuthnotlatham.co.uk/group/about/corporate-governance. These matters include approval of the Group's long-term objectives and commercial strategy, ensuring a sound system of internal control, risk management strategy, approval of major investments, acquisitions and disposals, any changes to the capital structure and the overall review of corporate governance.

 

The Company Secretary is responsible for ensuring that the Board processes and procedures are appropriately followed and support effective decision making. All directors have access to the Company Secretary's advice and services. There is an agreed procedure for directors to obtain independent professional advice in the course of their duties, if necessary, at the Company's expense.

 

New directors receive induction training upon joining the Board, with individual listed company training provided by the Company's AIM Nominated Adviser and AQSE Corporate Adviser. Regulatory and compliance training is provided by the AL Chief Compliance Officer or by an external firm of lawyers, accountants and other subject matter experts. Risk management training is provided, including that in relation to the ICAAP and ILAAP, by the AL Chief Risk Officer with an overview of credit and its associated risks and mitigation by the AL Chief Credit Officer and a session with the MLRO and Enterprise Risk covering Financial Crime Prevention.

 

Review of Board Effectiveness

The annual Board Effectiveness Review was conducted internally. In March 2025, the Board considered an action plan, arising from the review conducted in November 2024 and agreed to implement a number of changes in terms of management information and business presentations, arising from the various comments and observations received from Directors. The 2025 evaluation took the form of a communication, seeking any comments Directors might have on the Effectiveness of the Board and its Committees and any ways in which they thought the Board process could be improved further.  A summary was discussed by the Board in November 2025 with responses positive, confirming that the Board was of the view that it receives the correct level of insight into and oversight of the Company, both directly to it and in terms of management information and oral updates provided during meetings. Directors also agreed that the Arbuthnot culture set out in the Arbuthnot Principles and Values manifests itself at Board level and in the external view of the Group as a whole. 

 

Overview of Compliance with the FRC Code, together with Exceptions

The Board focuses not only on the provisions of the Code but on its principles, ensuring as follows:

•      The Company's purpose, values and strategy as a prudently managed organisation align with its culture, with a focus on fairness and long-term shareholder returns.

•      The Board has an appropriate combination of executive and non-executive directors, who have both requisite knowledge and understanding of the business and the time to commit to their specific roles.

•      The Board comprises directors with the necessary combination of skills to ensure the effective discharge of its obligations, with an annual evaluation of the capability and effectiveness of each director as well as the Board as a whole; appropriate succession plans are also in place and reviewed annually, or more frequently if appropriate.

•      The Board and Audit Committee monitor the procedures in place to ensure the independence and effectiveness of both external and internal auditors, and the risk governance framework of the Company, with all material matters highlighted to the relevant forum (Board/Committee).

•      Remuneration policies and practices are designed to support strategy and promote long-term sustainable success, with a Remuneration Committee in place to oversee director and senior management pay.

 

In respect of the Code's specific provisions, an annual review is carried out, comparing the Company's governance arrangements and practices against them. Any divergences are noted, with relevant rationale considered carefully to determine whether it is appropriate. Consideration is also given to guidance issued. In line with the FRC's Guidance on Board Effectiveness, the Board additionally takes into account its suggestions of good practice when applying the Code focusing on the five key principles specified in the Code.

 

Where the Company's governance does not align completely with the Code, it is generally as a result of the role of its overall majority shareholder, itself adding a level of protection to long-term shareholder interests, which has had a positive impact on the Company.

 

All divergences from the Code, with an explanation of the reasons for doing so are set out below:

 

Provision 5 - The Board has regard to the interests of all its key stakeholders in its decision making. Executive Directors and senior management are fully engaged with the workforce, all of whom interact on a daily basis. Mr. Gabbertas is the Company's Whistleblowing Champion and is available at all times in this role. It has not been deemed necessary to appoint an employee representative to the Board since the Company has fewer than 20 employees, each of whom has direct access to the Board including its Non-Executive Directors. Given its size, as stated in the s.172 Statement on page 21, Jayne Almond, a non-executive director of Arbuthnot Latham, has been designated by its board as the director to engage with the Arbuthnot Latham Group's workforce.

 

Provision 9 - The Chairman was not independent on appointment, though he was appointed prior to the introduction of the provision. Sir Henry Angest carries out the role of Chairman and Chief Executive, given his long-term interest as majority shareholder, itself aligning with the interests of other shareholders. The Company follows the US model that is successful in ensuring commercial success with strong corporate governance and stakeholder awareness, having a shared Chairman and CEO, with a separate, empowered, Chief Operating Officer. In his role as CEO, Sir Henry Angest is responsible for the effective operation and delivery of the business and ensures that he is surrounded by an exceptional management team which ensures the strong leadership required. In particular, ABG has a strong Group Chief Operating Officer and Group Finance Director ensuring challenge and independence from a business perspective, against the stakeholder focus of the Chairman carrying out his Chairman's role.

 

Provision 10 - The Board considers Ms Knight, who joined the Board in September 2023, to be independent, notwithstanding the fact that she has served on the Board of Arbuthnot Latham for more than nine years since October 2016, since her views and any challenge to executive management remain firmly independent. 

 

Provision 12 - The Board has not appointed a Senior Independent Director, as the main shareholder is the Chairman and other large independent shareholders communicate frequently with the Chairman, the Group Chief Operating Officer and the Group Finance Director and with the Company's stockbroker, Shore Capital.

 

Provision 14 - Attendance at meetings is not reported. In the event that a Director is unable to attend a meeting, that Director receives relevant papers in the normal manner and relays any comments in advance of the meeting to the Chairman. The same process applies in respect of the Board Committees.

 

Provision 18 - Directors retire by rotation every three years in accordance with the Company's Articles of Association and company law. The Directors seeking re-election at the 2026 AGM are Sir Nigel Boardman, Frederick Angest and Angela Knight who have served on the Board for almost seven, 3½ and 2½ years respectively. The contribution of each of them has been invaluable in the successful development of the Company. Charlotte Crosswell, appointed to the Board by the Directors on 16 July 2025, will be seeking election by Ordinary shareholders. The Board fully supports the resolutions for the respective reappointment and appointment of these Directors.

 

Provision 19 - Sir Henry Angest's role as Chairman is critical to and reflective of the overall group structure. It is through the responsibilities that derive from this role that he is able to consider and protect not only the interests of other shareholders, but also his own interests as a majority shareholder as their interests are aligned. It is for this reason that he surrounds himself with notably strong directors who individually, and as a group, ensure the protection of not only his investments, but also those of other shareholders. As such, he remains as Chairman notwithstanding the length of his tenure. 

 

Provision 23 - The Nomination Committee takes into account the provisions of the Board Suitability & Diversity Policy and, in terms of succession planning, the Inclusivity & Respect Policy which promotes equality of opportunity for all staff. Further information on diversity and inclusion is given in the Sustainability Report on pages 24, 25 and 28, though the gender balance of senior management and their direct reports has not been given.

 

Provision 32 - Sir Henry Angest is Chairman of the Remuneration Committee, as is appropriate in the context of his majority shareholding.  

 

Provisions 37 and 38 - Directors' contracts do not include malus and clawback provisions which would enable the Company to recover and/or withhold sums or share awards. This is because, as explained in the Remuneration Report on page 51, the Company's Remuneration Policy reflects the proportionality thresholds set by the FCA and PRA in their joint policy statement on remuneration and enhancing proportionality for level 3 firms (small firms), published in December 2023. These changes exempted firms that meet these thresholds from requirements relating inter alia to malus and clawback.

 

Internal Control and Financial Reporting

The Board of directors has overall responsibility for the Group's system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against the risk of material misstatement or loss.

 

The Directors and senior management of the Group review and approve the Group's Risk Management Policy and Risk Appetite framework. The Risk Management Policy describes and articulates the risk management and risk governance framework, methodologies, processes and infrastructure required to ensure due attention to all material risks for the Group, including compliance with relevant regulatory requirements.

 

The Risk Appetite framework sets out the Board's risk attitude for the principal risks through a series of qualitative statements and quantitative risk tolerance metrics. These guide decision-making at all levels of the organisation and form the basis of risk reporting. The key business risks and emerging risks are continuously identified, evaluated and managed by means of limits and controls at an operational level by management, and are governed through AL committees.

 

There are well-established budgeting procedures in place and reports are presented regularly to the Board detailing the results, results of each principal business unit, variances against budget and prior year, and other performance data.

 

Any risk matters are reported to the Board by the Chair of the AL Board Risk Committee, Mr. Gabbertas, at each of its regular meetings, held jointly with the board of AL since the AL Board Risk Committee is responsible for monitoring the status of the AL group against its principal risks. Furthermore, each of the Directors either attends or, in the case of each of the independent Non-Executive Directors, is a member of the AL Board Risk Committee, in their role as a Non-Executive Director or in the case of Sir Nigel Boardman Chair of AL, which meets five times a year. Material items are presented to the AL Board Risk Committee in the Risk Report, which includes a risk dashboard, from the AL Chief Risk Officer. Significant risks identified in connection with the development of new activities are subject to consideration by the Directors. The risk dashboard covers key management actions which have included the climate change agenda and its potential longer-term impact on property and other asset classes and on management's approach to sustainability.

 

In November 2025, the Board received a separate report from the AL CRO who attends the Board meetings held concurrently with those of AL enabling it to monitor the company's risk management and internal control systems and to carry out its annual review of the effectiveness of the Group's risk management and internal control systems. The report explained the Risk Management Policy, together with principal risks, risk appetite, policies, three lines of defence, systems, processes, procedures and controls and the risk board dashboard. Following its review, the Board confirms the effectiveness of the Company's risk management and internal control systems.

 

The Board also reviewed the analysis and consideration of material controls, set out in the report, in place at the year end. This will enable the Company to report against the new element of Provision 29 in the 2024 Code, regarding the monitoring of the risk management and internal control framework, in its next Annual Report for the year ending 31 December 2026.

 

Shareholder Communications

The majority shareholder is Sir Henry Angest, Chairman and Chief Executive. The Company maintains communications with its major external shareholders via one-to-one meetings, as appropriate, by the Chairman and Chief Executive, the Group Chief Operating Officer or the Group Finance Director on governance and other matters. When practicable it also makes use of the AGM to communicate with shareholders in person. The Company aims to present a balanced and understandable assessment in all its reports to shareholders, its regulators, other stakeholders and the wider public. Key announcements and other information can be found at www.arbuthnotgroup.com.  

 

Board Committees

The Board has Audit, Nomination, Remuneration, Donations and Policy Committees, each with formally delegated duties and responsibilities and with written terms of reference, which require consideration of the committee's effectiveness. The Board keeps the governance arrangements under review. Further information in relation to these committees is set out below and the terms of reference of the Audit, Nomination and Remuneration Committees are published on the Company's website. The Board maintains direct responsibility for issues of Risk without the need for its own Risk Committee, since responsibility for large lending proposals is a direct responsibility of its subsidiary, AL.

 

Audit Committee

Membership and meetings

Membership of the Audit Committee comprises Lord Sassoon (as Chairman), Jayne Almond, Sir Nigel Boardman, Charlotte Crosswell (since 16 July 2025), Angela Knight and Richard Gabbertas. All of the Committee's members are independent non-executive Directors. Ian Dewar and Sir Alan Yarrow were members until their retirement as Directors on 21 May 2025. Lord Sassoon and Mr. Gabbertas have recent and relevant financial experience and the Committee as a whole has competence relevant to the financial sector in which the Company operates. The Company Secretary acts as its Secretary.

 

The Audit Committee oversees, on behalf of the Board, financial reporting, the appropriateness and effectiveness of systems and controls, the work of Internal Audit and the arrangements for and effectiveness of the external audit. The ultimate responsibility for reviewing and approving the Annual Report and Accounts and the Interim Report lies with the Board. The Committee also reviews procedures for detecting fraud and preventing bribery, reviews whistleblowing arrangements for employees to raise concerns in confidence, and reviews, as necessary, arrangements for outsourcing significant operations.

 

External Audit

The external auditors, Forvis Mazars LLP, have held office since their appointment in 2019 following a competitive tender. The Committee assesses the independence and objectivity, qualifications and effectiveness of the external auditors on an annual basis as well as making a recommendation to the Board on their reappointment. The Committee received a report showing the level of non-audit services provided by the external auditors during the year and members were satisfied that the extent and nature of these did not compromise auditor independence. The Committee has concluded that Forvis Mazars are independent and that their audit is effective.

 

Activity in 2025

The Audit Committee held four meetings during the year, each of which was held jointly with the Audit Committee of Arbuthnot Latham.

 

Internal Audit

On behalf of the Board, the Audit Committee monitors the effectiveness of systems and controls. To this end, Internal Audit provides the Committee and the Board with detailed independent and objective assurance on the effectiveness of governance, risk management and internal controls. It additionally provides assurance to the Board that the culture throughout the business is aligned with the Group's values, incorporating within each internal audit an assessment of culture in the area under review.

 

The Audit Committee approves the Internal Audit risk-based programme of work and monitors progress against the annual plan. The Committee reviews Internal Audit resources and the arrangements that: ensure Internal Audit faces no restrictions or limitations to conducting its work; that it continues to have unrestricted access to all personnel and information; and that Internal Audit remains objective and independent from business management.

 

The Head of Internal Audit, who was appointed in 2023, reports directly to the Chairman of the Audit Committee, Lord Sassoon. He provides reports on the outcomes of Internal Audit work directly to the Committee which monitors progress against actions identified in these reports. 

 

The Committee received a self-assessment report on Internal Audit from the Head of Internal Audit in November 2025 and is satisfied with Internal Audit arrangements during the year.

 

Integrity of Financial Statements and oversight of external audit

 

The Committee:

 

•      Received and agreed the Audit Plan prepared by the external auditors;

•      Considered and formed a conclusion on the critical judgements underpinning the Financial Statements, as presented in papers prepared by management. In respect of all of these critical judgements, the Committee concluded that the treatment in the Financial Statements was appropriate.

•      Received reports from the external auditors on the matters arising from their work, the key issues and conclusions they had reached; and

 •     Reviewed closely the detailed work carried out by management in respect of Going Concern and Viability.

 

The reports from the external auditors include details of internal control matters that they have identified as part of the annual statutory financial statements audit. Certain aspects of the system of internal control are also subject to regulatory supervision, the results of which are monitored closely by the Committee and the Board. In addition, the Committee receives by exception reports on the ICAAP and ILAAP which are key control documents that receive detailed consideration by the board of Arbuthnot Latham.

 

The Committee approved the terms of engagement and made a recommendation to the Board on the remuneration to be paid to the external auditors in respect of their audit services.

 

Significant areas of judgement and estimation

The Audit Committee considered the following significant issues and accounting judgements and estimates in relation to the Financial Statements:

 

Impairment of financial assets

The Committee reviewed presentations from management detailing the provisioning methodology across the Group as part of the full year results process. The Committee considered and challenged the provisioning methodology applied by management, including timing of cash flows, valuation and recoverability of supporting collateral on impaired assets.  The Committee concluded that the impairment provisions, including management's judgements and estimates, were appropriate.

 

The charge for impaired financial assets totalled £6.3m for the year ended 31 December 2025. The disclosures relating to impairment provisions are set out in Note 4.2(a) to the financial statements.

 

Property Portfolio

The Group owns two commercial office properties and two repossessed properties. Of these properties, three are held as inventory and one as an investment property. The properties held as inventory are valued at the lower of cost and net realisable value on the basis of internal discounted cash flow models and external valuation reports. The investment property is valued at fair value on the basis of an external valuation report. The Committee discussed the bases of valuation with management and with the auditors who had engaged an internal expert to review management's valuations.

 

As at 31 December 2025, the Group's total property portfolio totalled £21.2m. The disclosures relating to the carrying value of the investment property and the properties held as inventory and for sale are set out in Notes 4.2(c), 4.2(d), 24 and 30 to the financial statements.

 

Residual Value Risk

The Committee discussed the annual review of the residual values across the portfolio of leased assets of Asset Alliance Group, taking comfort from the management oversight of its Residual Value Committee, chaired by the AAG Group Risk Director, which is attended by the Group's Chief Risk Officer. 

 

Going Concern and Viability Statement

The financial statements are prepared on the basis that the Group and Company are each a going concern for a period of at least twelve months from when the financial statements are authorised for issue. The Audit Committee reviewed management's assessment, which incorporated analysis of the ICAAP and ILAAP approved by the Board of Arbuthnot Latham and of relevant metrics, focusing on liquidity, capital, and the stress scenarios. It is satisfied that the going concern basis and assessment of the Group's longer-term viability is appropriate.

 

Other Committee activities

The Audit Committee reviewed and discussed a summary of the minutes of meetings of the Financial Regulatory Reporting Committee whose main responsibility is to ensure that the Group meets the PRA's regulatory reporting expectations. The Committee performs this role since it is concerned with financial reporting as well as with external reporting. During the year, it also carried out an assessment of External Auditor Performance and a review of all work being performed by potential audit firms in accordance with the FRC Publication: Audit Committees and the External Audit: Minimum Standard which is included in the Committee terms of reference. In November 2025, the Committee considered a report from the FRC, setting out their findings following an inspection of the quality of Forvis Mazars LLP's audit of the financial statements of Arbuthnot Latham for the year ended 31 December 2024. The FRC's audit quality assessment was good and there were no key or other findings arising from the inspection.

 

In November 2025, the Committee also reviewed its performance and agreed that it continued to operate effectively. In March 2026, the Committee met separately with each of the Head of Internal Audit and the Senior Statutory Auditor without any other executives present. There were no concerns raised by them in regard to discharging their responsibilities.

 

On behalf of the Board, the Audit Committee reviewed the financial statements as a whole in order to assess whether they were fair, balanced and understandable. The Committee discussed and challenged the balance and fairness of the overall report with the executive directors and also considered the views of the external auditor. The Committee was satisfied that the Annual Report could be regarded as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. It proposed that the Board approve the Annual Report in that respect.

 

Nomination Committee

Membership and meetings

The Nomination Committee is chaired by Sir Henry Angest and its other members are Sir Nigel Boardman and since 31 March 2025 Ms Knight and Mr. Gabbertas. A majority of the Committee's members are therefore independent non-executive Directors. Sir Alan Yarrow was a member until his retirement as a Director. The Company Secretary acts as its Secretary. The Committee meets once a year and otherwise as required.

 

The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of the Board. The Nomination Committee is responsible for and evaluates on a regular basis the balance of skills, experience, independence and knowledge on the Board, its size, structure and composition, retirements and appointments of additional and replacement directors and will make appropriate recommendations to the Board on such matters. The Nomination Committee also considers performance, training requirements and succession planning, taking into account the skills and expertise that will be needed on and beneficial to the Board in the future.

 

Activity in 2025

The Nomination Committee met three times during the year including in March 2025 to recommend to the Board changes in membership of certain Board Committees as a consequence of the impending retirement of Sir Alan Yarrow. In May 2025, it met to assess and recommend the appointment of Charlotte Crosswell as a new independent Non-Executive Director of the Company, Ms Crosswell is an experienced executive and non-executive director within the financial services sector. She has a breadth of experience from roles in high growth sectors including financial technology, life sciences as well as financial services. It was not considered appropriate to widen the search to include other banking and financial services experts for this role, given that Ms Crosswell's knowledge and skillset covered many of the necessary bases expected of a potential Board appointee, including financial markets, the regulatory framework, risk management and remuneration and legal and governance requirements. She also has extensive technology experience. It was also regarded that, from her meetings with Directors and past experience, Ms Crosswell seemed a good cultural fit with the Group and its Principles, Values and ESG Pillars. For all of these reasons, she was approached directly, and so neither advertising nor an external consultancy was used for this appointment.

 

The Nomination Committee also met to assess and confirm the collective and individual suitability of the existing Board members.  In terms of individual performance, the Chairman confirmed that his assessment of all Directors was that they were performing well, with the Executive Directors additionally being formally reviewed in the context of the Senior Managers' Regime applicable to Arbuthnot Latham which confirmed continued strong performance. The Committee agreed with this assessment individually in relation to all members of the Board. Collectively, it was agreed that the Board has operated effectively with a wide range of experience and knowledge. The Committee also agreed that the Executive had performed well and the Non-Executive Directors had provided appropriate challenge and guidance.

 

In terms of the performance of the Company's Board generally, the Committee noted that it takes into account the provisions of the Board Suitability & Diversity Policy. It reviewed the summary of training carried out by each Director during the year and noted that Directors had been able to carry out sufficient training. In terms of diversity and inclusion, the Committee noted this had been considered by the AL HR department during the year with a view to understanding and addressing the gender balance of senior management and their direct reports. The current mix continues to emphasise the need for the Group to develop internal talent to enable internal progression, whilst continuing to attract diverse talent into roles at all levels. The Committee agreed that the key strategy of the business is to appoint the best person for the position into a role to take into account their experience, expertise in line with the company's strategy. The Nomination Committee takes into account the provisions of the Board Suitability & Diversity Policy and the Inclusivity and Respect Policy which promotes equality of opportunity for all staff with the objective of creating a working environment in which there is no unlawful discrimination and where all decisions are based on merit.

 

In November 2025, the Nomination Committee confirmed that the Board's current composition provides the Company with a balanced, knowledgeable, diverse and informed group of directors, bringing strategic acumen, foresight and challenge to the executive, commensurate with the size of the business. The Committee reviewed succession planning and agreed that a sensible and strong plan remained in place. It also agreed that it continued to operate effectively and, as such, no further changes to its membership, composition or activities were proposed to the Board. It also agreed to recommend the appointment and re-appointment of Directors due to stand for respective election and re-election at the forthcoming AGM.

 

Remuneration Committee

Membership and meetings

Membership is detailed in the Remuneration Report on page 51. The Committee meets once a year and otherwise as required. The Remuneration Report on pages 51 to 53 gives information on the Committee's responsibilities, together with details of each Director's remuneration.

 

Donations Committee

Membership and meetings

The Donations Committee is chaired by Sir Henry Angest and its other members are Andrew Salmon and since 31 March 2025 Ms Knight and Mr. Gabbertas. Sir Alan Yarrow was a member until his retirement as a Director. The Company Secretary acts as its Secretary. The Committee considers any political donation or expenditure as defined within sections 366 and 367 of the Companies Act 2006. It meets as necessary.

 

Activity in 2025

The Donations Committee met once during the year. It agreed that the Committee was constituted and continued to operate efficiently with its overall performance and the performance of its individual members effective throughout the year. As such, no changes to its membership or activities were proposed to the Board. 

 

Policy Committee

Membership and meetings

The Policy Committee, which is a joint Committee with Arbuthnot Latham, is chaired by Andrew Salmon. Its other members are James Cobb, Sir Nigel Boardman, the AL Chief Risk Officer, and the AL Chief Compliance Officer. A member of the AL Operational Risk team acts as its Secretary. Amongst its responsibilities, the Committee reviews the content of policy documentation (other than credit policy documentation which is reviewed by the AL Credit Committee) to ensure that it meets legal and regulatory requirements and approves it on behalf of the Board.  The Committee met five times during the year. Going forward, it is expected normally to meet three times a year.

 

Remuneration Report

 

Remuneration Committee

Membership of the Remuneration Committee is limited to independent non-executive directors together with Sir Henry Angest as Chairman. The other members of the Committee are Sir Nigel Boardman and since 31 March 2025 Ms Knight and Mr. Gabbertas. As such, a majority of the Committee's members are independent non-executive Directors. Sir Alan Yarrow was a member until his retirement as a Director. The Company Secretary acts as its Secretary. The Committee normally meets twice a year and otherwise, as required.

 

The Remuneration Committee has responsibility for approving the overall remuneration policy for directors for review by the Board. The Committee is also responsible for remuneration more generally including, inter alia, in relation to the Company's policy on executive remuneration determining, the individual remuneration and benefits package of each of the Executive Directors and the fees for Non-Executive Directors. Members of the Committee do not vote on their own remuneration.

 

The Committee also deals with remuneration-related issues, taking into account the requirements established by the PRA and the FCA.

 

Remuneration Policy

The Remuneration Committee determines the remuneration of individual directors having regard to the size and nature of the business; the importance of attracting, retaining and motivating management of the appropriate calibre without paying more than is necessary for this purpose; remuneration data for comparable positions, in particular at challenger banks; the need to align the interests of executives with those of shareholders; and an appropriate balance between current remuneration and longer-term performance-related rewards. The remuneration package can comprise a combination of basic annual salary and benefits (including pension), a discretionary annual bonus award related to the Committee's assessment of the contribution made by the executive during the year and longer-term incentives, including executive share options. Pension benefits take the form of contributions paid by the Company to individuals in the form of cash allowances, and, where applicable, to individual money purchase schemes. The Committee reviews salary levels each year based on the performance of the Group during the preceding financial period. This review does not necessarily lead to increases in salary levels. For the purposes of the requirements established by the PRA and the FCA, the Company and its subsidiaries are all considered to be Tier 3 institutions.

 

The Remuneration Policy reflects the changes made to proportionality thresholds by the FCA and PRA in the joint policy statement on remuneration and enhancing proportionality for level 3 firms (small firms), published in December 2023. These changes exempted firms that meet these thresholds from requirements relating to malus, clawback and buyout (i.e. firms buying out outstanding deferred bonus awards for staff that have been cancelled by their previous employer). The Company continues to meet the criteria relating to firms in Proportionality Level 3 of the remuneration rules. Moreover, variable remuneration awards are conditional, discretionary, and contingent upon a sustainable and risk-adjusted performance, in excess of that required to fulfil the employees job description as part of the terms of employment. The Group reserves the discretionary right to pay no variable remuneration at all where appropriate.

 

The Remuneration Policy retains the internal requirement that all bonuses in excess of 33% of total remuneration and/or any annual remuneration package in excess of £660,000 (increased from £500,000) in relation to the Company must be specifically approved in advance by the Ultimate Majority Shareholder who has an express right of veto in relation to all such remuneration packages. Current regulatory remuneration requirements also establish that the Company must report to the PRA any material changes to its remuneration structure. This includes disclosing changes to: the ratio of the maximum payout of bonus and executive incentive schemes when compared to fixed remuneration; and the performance measures and the risk adjustment used to determine whether and how much these bonus schemes and executive incentive schemes will pay out.

 

Activity in 2025

The Remuneration Committee met three times during the year. It undertook its regular activities including reviewing the operation of the Remuneration Policy, having regard to the performance of the Company during the year. It reviewed the level of fees for non-executive Directors which reflect the appropriate level of fee to continue to secure the services of a high level non-executive director, increasing the fee for the additional fee payable for chairing the Audit Committee. It also reviewed and approved the Executive Directors' remuneration.

 

In November 2025, the Committee reviewed the joint policy statement on remuneration for dual-regulated firms published by the PRA and the FCA, the rules for which came into effect on 16 October 2025. The implications for the Company as a Small Capital Requirement Regulation Firm concern the Material Risk Takers (MRT) Identification Process where the Committee noted the need for the Remuneration Policy and the MRT identification methodology to be reviewed in due course.

 

In November 2025, the Committee also reviewed its own performance and agreed that it had continued to operate effectively.

 

Since the year end, the Committee has met to review Directors' remuneration. It approved the award of bonuses to Messrs Salmon and Cobb for exceptional performance in the year. It also determined not to increase the salaries of the executive Directors. This decision was made after due consideration of comparable market rates and in view of an average salary rise in low single digits for employees, due to the cost pressures on the business. As in previous years, Sir Henry Angest waived his right to be considered for receipt of a bonus. The Committee decided not to increase the fees for acting as a non-executive director.

 

Directors' Service Contracts

Sir Henry Angest, Mr. Salmon and Mr. Cobb each have service contracts terminable at any time on 12 months' notice in writing by either party.

 

Long Term Incentive Schemes

Grants were made to Messrs Salmon and Cobb on 23 July 2021 under the Phantom Option Scheme to subscribe for 200,000 and 100,000 ordinary 1p shares respectively in ABG at 990p. 50% of each director's individual holding of phantom options is exercisable at any time since 23 July 2024 and the other 50% is exercisable at any time after 23 July 2026 when a cash payment would be made equal to any increase in market value. All share options awarded on 23 July 2021, regardless of first exercise date, may not be exercised later than 23 July 2028, being the day before the seventh anniversary of the date of grant. The fair value of the options as at 31 December 2025 was £0.3m (2024: £0.2m). As at 31 December 2025 the initial 50% of each director's holding had reached the strike date of 24 July 2024 but have not been exercised.

 

Details of outstanding options are set out below.

 

Phantom Options	At 1 January 2025	At 31 December 2025	Exercise Price           £	Date from which exercisable	Expiry
AA Salmon	100,000	100,000	£9.90	23-Jul-24	23-Jul-28
	100,000	100,000	£9.90	23-Jul-26	23-Jul-28
	200,000	200,000
JR Cobb	50,000	50,000	£9.90	23-Jul-24	23-Jul-28
	50,000	50,000	£9.90	23-Jul-26	23-Jul-28
	100,000	100,000
	300,000	300,000

 

Directors' Emoluments
	2025	2024
	£000	£000
Fees (including benefits in kind)	638	600
Salary payments (including benefits in kind)	6,452	6,309
Pension contributions	77	74
	7,167	6,983

 

						Total	Total
	Salary	Bonus	Benefits	Pension	Fees	2025	2024
	£000	£000	£000	£000	£000	£000	£000
Sir Henry Angest	1,300	-	72	-	-	1,372	1,327
JR Cobb	1,000	1,000	18	35	-	2,053	1,980
AA Salmon	1,500	1,400	25	35	-	2,960	2,935
JD Almond	-	-	-	-	70	70	70
FAH Angest*	96	40	1	7	50	194	152
The Hon Sir Nigel Boardman	-	-	-	-	175	175	171
CLB Crosswell (appointed 16 July 2025)	-	-	-	-	32	32	-
IA Dewar	-	-	-	-	29	29	76
RK Gabbertas	-	-	-	-	90	90	45
AA Knight	-	-	-	-	73	73	75
Lord Sassoon	-	-	-	-	90	90	82
Sir Alan Yarrow	-	-	-	-	29	29	70
	3,896	2,440	116	77	638	7,167	6,983

 

 

* Mr. F. Angest received a bonus as an employee of the Company and not in his role as a non-executive director.

 

Details of any shares or options held by directors are presented above.

 

The emoluments reported above for Mr Gabbertas in the prior year were pro-rated from the date he became a Directors of the Company. 

 

Retirement benefits are accruing under money purchase schemes for three directors who served during the year (2024: three directors).

 

 

Independent Auditor's Report

 

Opinion

We have audited the  financial statements of Arbuthnot Banking Group PLC (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2025 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows, and notes to the financial statements, including material accounting policy information.

 

The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

In our opinion, the financial statements:

·       give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 December 2025 and of the Group's profit for the year then ended;

·      have been properly prepared in accordance with UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006; and

·       have been prepared in accordance with the requirements of the Companies Act 2006.

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's ("FRC") Ethical Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Our audit procedures to evaluate the directors' assessment of the Group's and the Parent Company's ability to continue to adopt the going concern basis of accounting included but were not limited to:

·      Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant doubt on the Group's and the Parent Company's ability to continue as a going concern;

·      Obtaining an understanding of the relevant controls relating to the directors' going concern assessment;

·      Obtaining the directors' going concern assessment including the cash flow forecast for the going concern period covering 12 months from the date of signing this audit opinion;

·      Making enquiries of the directors to understand the period of assessment considered by them, the assumptions they considered and the implication of those when assessing the Group's and the Parent Company's future financial performance;

·      Evaluating management's going concern assessment of the Group and the Parent Company and challenging the appropriateness of the key assumptions used in and mathematical accuracy of management's forecasts, including assessing the historical accuracy of management's forecasting and budgeting;

·      Reviewing the relevant period within management forecasts for the following three periods of account;

·      Assessing the sufficiency of the Group's and Parent Company's capital and liquidity taking into consideration the most recent Internal Capital Adequacy Assessment Process ('ICAAP') and Internal Liquidity Assessment Process ('ILAAP') performed by Arbuthnot Latham & Co., Ltd, a wholly owned subsidiary within the Group which is a bank regulated by the Prudential Regulation Authority ('PRA'), and evaluating the results of management's scenarios and reverse stress testing which includes sensitivity analysis, and including consideration of principal and emerging risks on liquidity and regulatory capital;

·      Assessing the accuracy of management's forecast through a review of post year-end performance;

·      Evaluating the Group's Resolution and Recovery plans which include possible cost saving measures that could be taken in the event circumstances prevent the forecast results from being achieved;

·      Reading regulatory correspondence, minutes of meetings of the Audit Committee and the Board of Directors up to the date of signing the financial statements;

·      Considering whether there are events subsequent to the balance sheet date which could have an impact on the Group's and the Parent Company's ability to continue as a going concern;

·      Considering the consistency of management's forecasts with other areas of the financial statements and our audit; and

·      Evaluating the adequacy and appropriateness of the disclosures in the financial statements related to going concern.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's and the Parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

 

In relation to Arbuthnot Banking Group PLC's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.

 

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

 

We summarise below the key audit matter in forming our opinion above, together with an overview of the principal audit procedures performed to address the matter and our key observations arising from those procedures.

 

This matter, together with our findings, were communicated to those charged with governance through our Audit Completion Report.

 

Key Audit Matter

How our scope addressed this matter

Valuation of allowance for impairment of loans and advances   As at the reporting date, the Group had £1,983m (2024: £2,094m) gross exposure to loans and advances held at amortised cost with an allowance for Expected Credit Loss (ECL') of £12.7m (2024: £11.6m). Refer to notes 4, 22, and 23.   The determination of Expected Credit Loss ('ECL') under IFRS 9 is an inherently judgmental area due to the use of subjective assumptions and a high degree of estimation. The allowance for ECL relating to the Group's loans and advances requires the Directors to make judgements over the ability of the Groups' counterparties to make future loan repayments.   ECL is measured using a three-stage model. For loans with no significant deterioration in credit risk since origination (stage l), ECL is determined through the use of a model and collective portfolio assumptions. For loans that have experienced a significant deterioration in credit risk since origination (stage 2) or have defaulted (stage 3), key assumptions are determined on a case-by-case basis.   The model used by the Group to determine the ECL allowance requires judgement to be applied to the input parameters and assumptions.   The most significant areas where we identified greater levels of management judgement and estimation are:   •       Staging of loans and advances to customers and the identification of significant increase in credit risk ("SICR") over the Renaissance Asset Finance ("RAF") portfolio; •       Stage 3 impairment assessments within the Core AL and RAF models; and •       Adjustments to security valuations within the LGD calculation, including collateral haircuts within the Core AL model and the RAF portfolio.   Further detail on the key judgements and estimates involved are set out within the critical accounting estimates and judgements in applying accounting policies note 4 and in notes 22 and 23 to the financial statements.

Our audit procedures included but were not limited to:   Staging of loans   We have: ·      Assessed the methodology of identifying significant increase in credit risk to ensure compliance with IFRS 9; ·      Tested the design and implementation and tested the operating effectiveness of the key controls in relation to credit monitoring and missed payments monitoring; ·      Tested management's controls to allocate loans to the respective staging categories; ·      Tested the appropriateness of staging classifications and movements; ·      Back tested the staging criteria to assess previous effectiveness of the criteria; and ·      Assessed loans that have cured during the year, including ensuring the curing is in line with management's SICR policy and IFRS 9.   Stage 3 impairment assessments   We have: ·      Performed credit file reviews to verify data and evaluate key assumptions used in the determination of LGD assumptions; ·      Recalculated the ECL provision for a sample of loans, including consideration of multiple economic recovery scenarios and alternative scenarios; ·      Developed a point estimate based on independent assumptions for certain material stage 3 exposures; and ·      Involved our in-house valuation specialists to independently assess the underlying collateral used in the ECL calculations for a sample of collateral selected on a risk assessment basis. For a number of cases sampled we relied on management's external valuation experts, and, in these cases, we assessed the capabilities, professional competence, and objectivity of the experts.   Adjustments to security valuations within LGD   We have: ·      Tested and challenged the key assumptions applied by management when calculating LGD; ·      Reviewed and challenged key LGD assumptions and collateral valuations with the assistance of internal valuation experts; ·      Challenged the appropriateness of key data used when calculating LGD; and ·      Back tested key assumptions to assess appropriateness.     Stand back assessment   We have performed a qualitative and quantitative stand back analysis to assess the overall adequacy of the ECL coverage. In performing this procedure, we considered the credit quality of the portfolio and performed benchmarking across similar banks considering both staging percentages and provision coverage ratios. We have also performed univariate and multivariate analysis for the risk parameters to assess further risk of material misstatement.   Disclosures   We have assessed the adequacy and appropriateness of the disclosures in the financial statements in relation to ECL.   Our observations   We found management's approach taken in respect to ECL is in accordance with the requirements of IFRS 9 and determined that the allowance for impairment of loans and advances is not materially misstated at 31 December 2025.

 

Our application of materiality and an overview of the scope of our audit

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

 

Group materiality

 

Overall materiality	£2.2m (2024: £1.8m)
How we determined it	0.8% of net assets (2024: 5% of profit before tax)
Rationale for benchmark applied	For the Group, the materiality benchmark has been revised to Net Assets in the period.   This change reflects the Group's strategic focus on preserving capital for the future rather than maximizing short-term profit. Additionally, the regulator's primary focus is the Group's ability to meet capital requirements.
Performance materiality	Performance materiality is set to reduce, to an appropriately low level, the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole.   We set performance materiality at £1.5m (2024: £1.2m), which represents 70% of overall materiality (2024: 70%). In determining the performance materiality, we considered a number of factors, including the level and nature of uncorrected and corrected misstatements in the prior year and the robustness of the control environment, and concluded that an amount toward the upper end of our normal range was appropriate.
Reporting threshold	We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £65k (2024: £53k) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

 

Parent company materiality

 

Overall materiality	£1.3m (2024: £1.6m)
How we determined it	0.8% of net assets - aligned with the group thresholds (2024: 1% of net assets)
Rationale for benchmark applied	Given that the Parent Company's primary purpose is to be an investment holding entity, we consider net assets to be the most appropriate benchmark to apply in our determination of materiality. The Parent Company does not have significant revenue generating activities and therefore a profit-based measure was not considered to be appropriate.
Performance materiality	Performance materiality is set to reduce, to an appropriately low level, the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole.   We set performance materiality at £0.7m - capped at component aggregate materiality thresholds (2024: £0.7m), which represents 70% of overall materiality (2024: 70%). In determining the performance materiality, we considered a number of factors, including the level and nature of uncorrected and corrected misstatements in the prior year and the robustness of the control environment, and concluded that an amount toward the upper end of our normal range was appropriate.
Reporting threshold	We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £39k (2024: £50k) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

 

As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the directors made subjective judgements, such as assumptions on significant accounting estimates.

 

We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of our risk assessment, our understanding of the Group and the Parent Company, their environment, controls and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items.

 

Our Group audit scope included an audit of the Group and the Parent Company financial statements. Based on our risk assessment, six components of the Group, including the Parent Company, were subject to full scope audit. We used a Forvis Mazars UK component audit team as component auditor for one component (2024: one component). All other components were audited by the Group audit team.

 

Our component performance materiality ranged from £0.01m to £1.5m (2024: £0.01m to £1.2m). Full scope audits carried out on five components (2024: five components), including the Parent Company, account for 100% of interest income (2024: 100%), 100% of profit before tax (2024: 100%), 100% of net assets (2024: 100%) and 100% of total assets (2024: 100%).  

 

At the Parent Company level, the Group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information.

 

Working with our component audit team

We determined the level of involvement we needed as the Group team in the work of the component audit team to be able to conclude whether sufficient and appropriate audit evidence was obtained to provide a basis for our opinion on the financial statements as a whole. We maintained oversight of the component audit team, directing and supervising their activities related to our audit of the Group. The Group team maintained frequent communications to monitor progress. The Senior Statutory Auditor and senior members of the Group team attended component meetings, which were held via video conference. We issued instructions to our component audit team and interacted with them throughout the audit process. In the absence of component visits, we reviewed electronic work papers remotely which were prepared by the component audit team and held meetings with component management.

 

Other information

The other information comprises the information included in the Annual report & Accounts, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

 

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

 

In our opinion, based on the work undertaken in the course of the audit:

·      the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

·      the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.

 

Matters on which we are required to report by exception

In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

·      adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been  received from branches not visited by us; or

·      the Parent Company financial statements and the part of the Directors' remuneration report to be audited are not in  agreement with the accounting records and returns; or

·      certain disclosures of directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit; or

·      a corporate governance statement has not been prepared by the parent company.

 

Corporate governance statement

We have reviewed the directors' statement in relation to going concern, longer term viability and that part of the Corporate Governance Statement relating to the Group and the Parent Company's voluntary compliance with the provisions of the UK Corporate Governance Code.

 

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

·      Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any  material uncertainties identified, set out on pages 38 and 39;

·      Directors' explanation as to its assessment of the entity's prospects, the period this assessment covers and why they  period is appropriate, set out on page 38;

·      Directors' statement on whether it has reasonable expectation that the group will be able to continue operations and  meet its liabilities, set out on pages 38 and 39;

·      Directors' statement on fair, balanced and understandable, set out on page 42;

·      Board's confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 46;

·      The section of the annual report that describes the review of effectiveness of risk management and internal control    systems, set out on page 46; and;

·      The section describing the work of the audit committee, set out on page 47.

 

Responsibilities of Directors

As explained more fully in the 'Statement of Directors' Responsibilities in Respect of the Strategic report and the Directors' report and the Financial Statements' set out on page 42, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.

 

Based on our understanding of the Group and the Parent Company and their industry, we considered that non-compliance with the following laws and regulations might have a material effect on the financial statements: regulations and supervisory requirements of the PRA and the Financial Conduct Authority ('FCA'), Alternative Investment Market ('AIM') rules, Aquis Stock Exchange ('AQSE') rules, Streamlined Energy and Carbon Reporting ('SECR') requirements, Anti Money Laundering regulations ('AML'), General Data Protection Regulation ('GDPR') and the UK Corporate Governance Code.

 

To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:

·      Gaining an understanding of the legal and regulatory framework applicable to the Group and the Parent Company, the industry in which they operate, and the structure of the Group, and considering the risk of acts by the Group and the Parent Company which were contrary to the applicable laws and regulations, including fraud;

·      Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether the Group and the Parent Company are in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations;

·      Inspecting correspondence with relevant licensing or regulatory authorities including the PRA and FCA, in addition to holding a bilateral meeting with the Group's PRA supervisor;

·      Reviewing minutes of meetings of the Board of Directors and the Audit Committee held during the year and up until the date of approval of the financial statements;

·      Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of non-compliance throughout the audit; and

·      Focusing on areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussions with those charged with governance and senior management, review of regulatory and legal correspondence, and review of minutes of meetings of the Board of Directors and the Audit Committee during the year and up until the date of the approval of the financial statements.

 

We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as UK tax legislation, pension legislation and the Companies Act 2006.

 

In addition, we evaluated the directors' and management's incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, cut-off in revenue recognition at Asset Alliance Group, and significant one-off or unusual transactions.

Our procedures in relation to fraud included but were not limited to:

·      Making enquiries of the Directors and management on whether they had knowledge of any actual, suspected or alleged fraud;

·      Inspecting the regulatory and legal correspondence and reviewing the minutes of the Board of Directors meeting in the year;

·      Gaining an understanding of the internal controls established to mitigate risks related to fraud;

·      Discussing amongst the engagement team the risks of fraud;

·      Addressing the risks of fraud through management override of controls by performing journal entry testing on a sample basis; and

·      Being sceptical to the potential of management bias through judgements and assumptions in significant accounting estimates.

 

The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.

 

The risks of material misstatement that had the greatest effect on our audit are discussed in the "Key Audit Matters" section of this report.

 

A further description of our responsibilities is available on the FRC's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

 

Other matters which we are required to address

Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 6 December 2019 to audit the financial statements for the year ended 31 December 2019 and subsequent financial periods. The period of total uninterrupted engagement is seven years, covering the years ended 31 December 2019 to 31 December 2025.

 

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Group or the Parent Company and we remain independent of the Group and the Parent Company in conducting our audit.

 

Our audit opinion is consistent with our additional report to the Audit Committee.

 

Use of the audit report

This report is made solely to the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body for our audit work, for this report, or for the opinions we have formed.

 

 

Tim Hudson (Senior Statutory Auditor)

for and on behalf of Forvis Mazars LLP Chartered Accountants and Statutory Auditor

30 Old Bailey

London

EC4M 7AU

25 March 2026

 

 

Company statement of financial position

			At 31 December
			2025	2024
	Note		£000	£000
ASSETS
Loans and advances to banks	18		4,760	920
Debt securities at amortised cost	19		38,781	38,103
Deferred tax assets	26		486	515
Property, plant and equipment	28		194	221
Other assets	24		1,739	3,355
Interests in subsidiaries	43		164,354	164,354
Total assets			210,314	207,468
EQUITY AND LIABILITIES
Equity
Share capital	37		167	167
Share premium account	37		11,606	11,606
Other reserves	38		(1,280)	(1,280)
Retained earnings*	38		150,006	149,238
Total equity			160,499	159,731
LIABILITIES
Current tax liability			5,391	4,288
Other liabilities	33		5,752	5,467
Debt securities in issue	35		38,672	37,982
Total liabilities			49,815	47,737
Total equity and liabilities			210,314	207,468
*The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company profit and loss account. The Parent Company recorded a profit after tax for the year of £9,091k (2024: £11,363k).

 

Consolidated statement of changes in equity

 

	Attributable to equity holders of the Group
	Share capital	Share premium	Capital redemption reserve	Fair value reserve	Treasury shares	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 31 December 2024	167	11,606	19	1,888	(1,299)	254,575	266,956
Total comprehensive income for the period
Profit for 2025	-	-	-	-	-	17,810	17,810
Other comprehensive income, net of tax
Changes in fair value of equity investments at fair value through other comprehensive income (FVOCI)	-	-	-	(59)	-	-	(59)
Sale of financial assets carried at FVOCI	-	-	-	(1,677)	-	1,677	-
Tax on other comprehensive income	-	-	-	15	-	-	15
Total other comprehensive income	-	-	-	(1,721)	-	1,677	(44)
Total comprehensive income for the period	-	-	-	(1,721)	-	19,487	17,766
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2024	-	-	-	-	-	(4,734)	(4,734)
Interim dividend relating to 2025	-	-	-	-	-	(3,590)	(3,590)
Total contributions by and distributions to owners	-	-	-	-	-	(8,324)	(8,324)
Balance at 31 December 2025	167	11,606	19	167	(1,299)	265,738	276,398

 

	Attributable to equity holders of the Group
	Share capital	Share Premium	Capital redemption reserve	Fair value reserve	Treasury shares	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 31 December 2023	167	11,606	19	1,341	(1,299)	240,606	252,440
Total comprehensive income for the period
Profit for 2024	-	-	-	-	-	24,854	24,854
Other comprehensive income, net of tax
Changes in fair value of equity investments at fair value through other comprehensive income (FVOCI)	-	-	-	778	-	-	778
Sale of financial assets carried at FVOCI				(49)		49
Tax on other comprehensive income	-	-	-	(182)	-	-	(182)
Total other comprehensive income	-	-	-	547	-	49	596
Total comprehensive income for the period	-	-	-	547	-	24,903	25,450
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2023	-	-	-	-	-	(4,406)	(4,406)
Special dividend relating to 2024	-	-	-	-	-	(3,264)	(3,264)
Interim dividend relating to 2024	-	-	-	-	-	(3,264)	(3,264)
Total contributions by and distributions to owners	-	-	-	-	-	(10,934)	(10,934)
Balance at 31 December 2024	167	11,606	19	1,888	(1,299)	254,575	266,956

 

Company statement of changes in equity

 

	Attributable to equity holders of the Company
	Share capital	Share premium	Capital redemption reserve	Treasury shares	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
Balance at 1 January 2024	167	11,606	19	(1,299)	148,809	159,302
Total comprehensive income for the period
Profit for 2024	-	-	-	-	11,363	11,363
Other comprehensive income, net of income tax
Total comprehensive income for the period	-	-	-	-	11,363	11,363
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2023	-	-	-	-	(4,406)	(4,406)
Special dividend relating to 2024	-	-	-	-	(3,264)	(3,264)
Interim dividend relating to 2024	-	-	-	-	(3,264)	(3,264)
Total contributions by and distributions to owners	-	-	-	-	(10,934)	(10,934)
Balance at 31 December 2024	167	11,606	19	(1,299)	149,238	159,731
Total comprehensive income for the period
Profit for 2025	-	-	-	-	9,091	9,091
Other comprehensive income, net of income tax
Total comprehensive income for the period	-	-	-	-	9,091	9,091
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Final dividend relating to 2024	-	-	-	-	(4,734)	(4,734)
Interim dividend relating to 2025	-	-	-	-	(3,589)	(3,589)
Total contributions by and distributions to owners	-	-	-	-	(8,323)	(8,323)
Balance at 31 December 2025	167	11,606	19	(1,299)	150,006	160,499

Consolidated statement of cash flows

			Year ended 31 December	Year ended 31 December
			2025	2024
	Note		£000	£000
Cash flows from operating activities
Profit before tax			24,184	35,090
Adjustments for:
- Depreciation and amortisation	28,27,29		10,843	11,834
- Impairment loss on loans and advances	23		1,576	4,782
- Net interest expense			3,205	598
- Elimination of exchange differences on debt securities			11,349	(3,157)
- Other non-cash or non-operating items included in profit before tax			31	(79)
- Tax paid			(6,377)	(6,976)
Cash flows from operating profits before changes in operating assets and liabilities			44,811	42,092
Changes in operating assets and liabilities:
- net decrease in derivative financial instruments			1,572	212
- net decrease/(increase) in loans and advances to customers			132,094	(34,777)
- net decrease/(increase) in assets held for leasing			626	(18,362)
- net decrease in other assets			1,454	9,430
- net increase in amounts due to customers			437,872	372,926
- net increase/(decrease) in other liabilities			7,105	(2,362)
Net cash inflow from operating activities			625,534	369,159
Cash flows from investing activities
Acquisition of financial investments			(131)	(215)
Disposal of financial investments			2,958	84
Purchase of intangible assets	27		(6,425)	(4,739)
Purchase of property, plant and equipment	28		(1,102)	(23,204)
Proceeds from sale of property, plant and equipment	28		-	53
Purchase of debt securities			(3,273,055)	(1,621,196)
Proceeds from redemption of debt securities			2,428,998	1,366,350
Dividends received			18	-
Net cash outflow from investing activities			(848,739)	(282,867)
Cash flows from financing activities
Decrease in borrowings			(191,522)	(238)
Repayment of principal portions of lease liabilities			(762)	(2,202)
Dividends paid			(8,324)	(10,934)
Net cash outflow from financing activities			(200,608)	(13,374)
Net (decrease)/increase in cash and cash equivalents			(423,813)	72,918
Cash and cash equivalents at 1 January			978,858	905,940
Cash and cash equivalents at 31 December	41		555,045	978,858
Interest received was £249.1m (2024: £266.2m) and interest paid was £133.8m (2024: £144.8m).

 

Company statement of cash flows

			Year ended 31 December	Year ended 31 December
			2025	2024
	Note		£000	£000
Cash flows from operating activities
Profit before tax			13,346	16,260
Adjustments for:
- Depreciation and amortisation	27, 28		30	27
- Net interest (income)			-	(1)
- Other non-cash or non-operating items included in profit before tax			(13)	(25)
- Tax paid			(3,101)	(2,826)
Cash flows from operating profits before changes in operating assets and liabilities			10,262	13,435
Changes in operating assets and liabilities:
- net decrease/(increase) in group company balances			1,612	(1,889)
- net decrease/(increase) in other assets			4	(12)
- net increase/(decrease) in other liabilities			285	(493)
Net cash inflow from operating activities			12,163	11,041
Cash flows from investing activities
Issue of subordinated debt to Arbuthnot Latham			-	(545)
Disposal of property, plant and equipment			-	39
Purchase of property, plant and equipment	28		-	(118)
Net cash outflow from investing activities			-	(624)
Cash flows from financing activities
Issue subordinated debt			-	814
Dividends paid			(8,323)	(10,934)
Net cash (outflow)/inflow from financing activities			(8,323)	(10,120)
Net increase in cash and cash equivalents			3,840	297
Cash and cash equivalents at 1 January			920	623
Cash and cash equivalents at 31 December	41		4,760	920

 

Notes to the Consolidated Financial Statements

 

1.  Reporting entity

Arbuthnot Banking Group PLC is a company domiciled in the United Kingdom. The registered address of Arbuthnot Banking Group PLC is 20 Finsbury Circus, London, EC2M 7EA. The consolidated financial statements of Arbuthnot Banking Group PLC as at and for the year ended 31 December 2025 comprise Arbuthnot Banking Group PLC and its subsidiaries (together referred to as the "Group" and individually as "subsidiaries"). The Company is the holding company of a group primarily involved in banking and financial services.

 

2.  Basis of preparation

(a) Statement of compliance

The Group's consolidated financial statements and the Company's financial statements have been prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006. 

 

The consolidated financial statements were authorised for issue by the Board of Directors on 25 March 2026.

 

(b) Basis of measurement

The consolidated and company financial statements have been prepared under the historical cost convention, as modified by investment property and derivatives, financial assets and financial liabilities at fair value through profit or loss or other comprehensive income.

 

(c) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Pounds Sterling, which is the Company's functional and the Group's presentational currency.

 

(d) Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

 

(e) Going concern

After making appropriate enquiries which assessed strategy, profitability, funding, risk management (see Note 6), capital resources (see Note 7) and the potential impact of climate-related risks, the directors are satisfied that the Company and the Group have adequate resources to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. The Audit Committee reviewed management's assessment, which incorporated analysis of the ICAAP and ILAAP approved by the Board of AL and of relevant metrics, focusing on liquidity, capital, and the stress scenarios. It is satisfied that the going concern basis and assessment of the Group's longer-term viability is appropriate. The financial statements are therefore prepared on the going concern basis.

 

(f) Accounting developments

The accounting policies adopted are consistent with those of the previous financial year.

 

3.  Material accounting policies

 

The accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

3.1.  Consolidation

(a)  Subsidiaries

Subsidiaries are all investees (including special purpose entities) controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's shares of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Statement of Comprehensive Income as a gain on bargain purchase. Contingent consideration related to an acquisition is initially recognised at the date of acquisition as part of the consideration transferred, measured at its acquisition date fair value and recognised as a liability. The fair value of a contingent consideration liability recognised on acquisition is remeasured at key reporting dates until it is settled, changes in fair value are recognised in the profit or loss.

 

The Company's investments in subsidiaries are recorded at cost less, where appropriate, provisions for impairment in value.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(b) Special purpose entities

Special purpose entities ("SPEs") are entities that are created to accomplish a narrow and well-defined objective such as the securitisation of particular assets or the execution of a specific borrowing or lending transaction. SPEs are consolidated when the investor controls the investee. The investor would only control the investee if it had all of the following:

 

•      power over the investee;

•      exposure, or rights, to variable returns from its involvement with the investee; and

•      the ability to use its power over the investee to affect the amount of the investor's returns.

 

The assessment of whether the Group has control over an SPE is carried out at inception and the initial assessment is only reconsidered at a later date if there were any changes to the structure or terms of the SPE, or there were additional transactions between the Group and the SPE.

 

3.2.  Foreign currency translation

Foreign currency transactions are translated into the functional currency using the spot exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. Foreign exchange differences arising from translation of equity instruments, where an election has been made to present subsequent fair value changes in Other Comprehensive Income ("OCI"), will also be recognised in OCI.

 

3.3.  Financial assets and financial liabilities

IFRS 9 requires financial assets and liabilities to be measured at amortised cost, fair value through other comprehensive income ("FVOCI") or fair value through the profit and loss ("FVPL"). Liabilities are measured at amortised cost or FVPL. The Group classifies financial assets and financial liabilities in the following categories: financial assets and financial liabilities at FVPL; FVOCI, financial assets and liabilities at amortised cost and other financial liabilities. Management determines the classification of its financial instruments at initial recognition.

 

A financial asset or financial liability is measured initially at fair value plus, transaction costs that are directly attributable to its acquisition or issue with the exception of financial assets at FVPL where these costs are debited to the income statement.

 

(a) Financial assets measured at amortised cost

Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A basic lending arrangement results in contractual cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding. Financial assets measured at amortised cost are predominantly loans and advances and debt securities.

 

Loans and advances

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable and the business model assessment and SPPI criteria are met. Loans are recognised when cash is advanced to the borrowers inclusive of transaction costs. Loans and advances, are carried at amortised cost using the effective interest rate method.

 

Debt securities at amortised cost

Debt securities at amortised cost are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has determined meets the SPPI criteria. Certain debt securities are held by the Group Central Treasury in a separate portfolio for long-term yield. These securities may be sold, but such sales are not expected to be more than infrequent. The Group considers that these securities are held within a business model whose objective is to hold assets to collect the contractual cash flows. Debt security investments are carried at amortised cost using the effective interest rate method, less any impairment loss.

 

(b) Financial assets and financial liabilities at FVPL

Financial assets and liabilities are classified at FVPL where they do not meet the criteria to be measured at amortised cost or FVOCI or where financial assets are designated at FVPL to reduce an accounting mismatch. They are measured at fair value in the statement of financial position, with fair value gains/losses recognised in the income statement.

 

Financial assets that are held for trading or managed within a business model that is evaluated on a fair value basis are measured at FVPL, because the business objective is neither hold-to-collect contractual cash flows nor hold-to-collect-and-sell contractual cash flows.

 

This category comprises derivative financial instruments and financial investments. Derivative financial instruments utilised by the Group include structured notes and derivatives used for hedging purposes.

 

Financial assets and liabilities at FVPL are initially recognised on the date from which the Group becomes a party to the contractual provisions of the instrument, including any acquisition costs. Subsequent measurement of financial assets and financial liabilities held in this category are carried at FVPL until the investment is sold.

 

(c) Financial assets at FVOCI

These include investments in special purpose vehicles and equity investments. They may be sold in response to liquidity requirements, interest rate, exchange rate or equity price movements. Financial investments are initially recognised at cost, which is considered as the fair value of the investment including any acquisition costs. The securities are subsequently measured at fair value in the statement of financial position.

 

Fair value changes in the securities are recognised directly in equity (OCI).

 

There is a rebuttable presumption that all equity investments are FVPL, however on initial recognition the Group may make an irrevocable election to present the fair value movement of equity investments that are not held for trading within OCI. The election can be made on an instrument by instrument basis.

 

For equity instruments, there are no reclassifications of gains and losses to the profit or loss statement on derecognition and no impairment recognised in the profit or loss. Equity fair value movements are not reclassified from OCI under any circumstances.

 

(d)  Financial guarantees and loan commitments

Financial guarantees represent undertakings that the Group will meet a customer's obligation to third parties if the customer fails to do so. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. The Group is exposed to loss in an amount equal to the total guarantees or unused commitments, however, the likely amount of loss is expected to be significantly less; most commitments to extend credit are contingent upon customers maintaining specific credit standards, where the amount of loss exceeds the total unused commitments an ECL is recognised. Liabilities under financial guarantee contracts are initially recorded at their fair value, and the initial fair value is amortised over the life of the financial guarantee. Subsequently, the financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative amortisation, and the ECL of the obligations.

 

(e) Financial liabilities at amortised cost

Financial liabilities at amortised cost are non-derivative financial liabilities with fixed or determinable payments. These liabilities are recognised when cash is received from the depositors and carried at amortised cost using the effective interest rate method. The fair value of these liabilities repayable on demand is assumed to be the amount payable on demand at the Statement of Financial Position date.

 

Basis of measurement for financial assets and liabilities

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest rate method of any difference between the initial amount recognised and the maturity amount, less any reduction for impairment.

 

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.

 

If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis.

 

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or when the Group has transferred substantially all risks and rewards of ownership. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability in the Statement of Financial Position. In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partially derecognised.

 

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, expire, are modified or exchanged.

 

Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

 

Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group of similar transactions such as the Group's trading activity.

 

Modification of financial assets

If the terms of financial assets are modified, then the Group evaluates whether the cash flow of the modified asset are substantially different.

 

If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value plus any eligible transaction costs. Any fees received as part of the modification are accounted as follows:

•      fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction costs are included in the initial measurement of the asset; and

•      other fees are included in profit or loss as part of gain or loss on derecognition.

 

3.4 Impairment for financial assets at amortised cost and lease receivables

IFRS 9 impairment model adopts a three stage expected credit loss approach ("ECL") based on the extent of credit deterioration since origination.

 

The three stages under IFRS 9 are as follows:

•      Stage 1 - if, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, an entity shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.

•      Stage 2 - a lifetime loss allowance is held for financial assets where a significant increase in credit risk has been identified since initial recognition for financial assets that are not credit impaired. The assessment of whether credit risk has increased  significantly since initial recognition is performed for each reporting period for the life of the loan.

•      Stage 3 - a lifetime ECL allowance is required for financial assets that are credit impaired at the reporting date.

 

Measurement of ECL

The assessment of credit risk and the estimation of ECL are unbiased and probability weighted. ECL is measured on either a 12 month (Stage 1) or lifetime (Stage 2) basis depending on whether a significant increase in credit risk has occurred since initial recognition or where an account meets the Group's definition of default (Stage 3).

 

The ECL calculation is a product of an individual loan's probability of default ('PD'), exposure at default ('EAD') and loss given default ('LGD') discounted at the effective interest rate ('EIR').

 

Significant increase in credit risk ("SICR") (movement to Stage 2)

The Group's transfer criteria determines what constitutes a significant increase in credit risk, which results in a financial asset being moved from Stage 1 to Stage 2. The Group has determined that a significant increase in credit risk arises when an individual borrower is more than 30 days past due or in other circumstances such as forbearance measures.

 

The Group monitors the ongoing appropriateness of the transfer criteria, where any proposed amendments will be reviewed and approved by the Group's Credit Committees at least annually and more frequently if required.

 

A borrower will move back into Stage 1 conditional upon a period of good account conduct and the improvement of the Client's situation to the extent that the probability of default has receded sufficiently and a full repayment of the loan, without recourse to the collateral, is likely.

 

Definition of default (movement to Stage 3)

The Group uses a number of qualitative and quantitative criteria to determine whether an account meets the definition of default and as a result moves into Stage 3. The criteria are as follows:

•      The rebuttable assumption that more than 90 days past due is an indicator of default. The Group therefore deems more than 90 days past due as an indicator of default except for cases where the customer is already within forbearance. This will ensure that the policy is aligned with the Basel/Regulatory definition of default.

•      The Group has also deemed it appropriate to classify accounts into Stage 3 where there has been a breach in agreed forbearance arrangements, recovery action is in hand or bankruptcy proceedings or a similar insolvency process of a client, or director of a company have been initiated.

 

A borrower will move out of Stage 3 when their credit risk improves such that they are no longer past due and remain up to date for a minimum period of six months and the improvement in the borrower's situation to the extent that credit risk has receded sufficiently and a full repayment of the loan, without recourse to the collateral, is likely.

 

Forward looking macroeconomic scenarios

IFRS 9 requires the entity to consider the risk of default and impairment loss taking into account expectations of economic changes that are reasonable.

 

The Group uses bespoke macroeconomic models to determine the most significant factors which may influence the likelihood of an exposure defaulting in the future. At present, the most significant macroeconomic factors relate to property prices, UK real GDP growth and unemployment rate. The Group currently consider five probability weighted scenarios: baseline; extreme downside; downside 2; downside 1 and upside. The Group has derived an approach for factoring probability weighted macroeconomic forecasts into ECL calculations, adjusting PD and LGD estimates.

 

Expected life

IFRS 9 requires lifetime expected credit losses to be measured over the expected life. Currently the Group considers the loans' contractual term as the maximum period to consider credit losses. This approach will continue to be monitored and enhanced if and when deemed appropriate.

 

Government guarantees

During March and April 2020, the UK government launched a series of temporary schemes designed to support businesses and deal with the impact of Covid-19. The BBLS, CBILS, CLBILS and RLS lending products were originated by the Group but are covered by government guarantees. These are to be set against the outstanding balance of a defaulted facility after the proceeds of the business assets have been applied. The government guarantee is 80% for CBILS, CLBILS and RLS and 100% for BBLS. Arbuthnot Latham recognises lower LGDs for these lending products as a result, with 0% applied to the government guaranteed part of the exposure.

 

3.5 Derivatives held for risk management purposes and hedge accounting

The Group has elected, as an accounting policy choice permitted under IFRS 9 'Financial Instruments', to continue to apply the hedge accounting rules set out in IAS 39 'Financial Instruments - Recognition and measurement'. However, additional hedge accounting disclosures introduced by IFRS 9's consequential amendments to IFRS 7 are provided.

 

Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. All derivatives are measured at fair value in the Statement of Financial Position.

 

The Group designates certain derivatives held for risk management as hedging instruments in qualifying hedging relationships.

 

Policy applicable generally to hedging relationships

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instrument(s) is (are) expected to be highly effective in offsetting the changes in the fair value of the respective hedged item(s) during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125%.

 

Fair value hedges

When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss. The change in fair value of the hedged item attributable to the hedged risk is recognised in profit or loss. If the hedged item would otherwise be measured at cost or amortised cost, then its carrying amount is adjusted accordingly.

 

If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if the derivative is novated to a central counterparty by both parties as a consequence of laws or regulations without changes in its terms except for those that are necessary for the novation, then the derivative is not considered expired or terminated.

 

Any adjustment up to the point of discontinuation to a hedged item for which the effective interest method is used is amortised to profit or loss as an adjustment to the recalculated effective interest rate of the item over its remaining life.

 

On hedge discontinuation, any hedging adjustment made previously to a hedged financial instrument for which the effective interest method is used is amortised to profit or loss by adjusting the effective interest rate of the hedged item from the date on which amortisation begins. If the hedged item is derecognised, then the adjustment is recognised immediately in profit or loss when the item is derecognised.

 

3.6.  Impairment of non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Impairment for goodwill is discussed in more detail under Note 27.

 

3.7.  Fiduciary activities

The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group.

 

3.8.  Standards issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2025 and earlier application is permitted; however, the Group has not early adopted the new and amended standards in preparing these consolidated financial statements.

 

IFRS 18 will replace IAS 1 Presentation of Financial Statements and applies for annual reporting periods beginning on or after 1 January 2027. The new accounting standard introduces the following key new requirements.

•      Entities are required to classify all income and expenses into 5 categories in the statement of comprehensive income, namely the operating, investing, financing, discontinued operations and income tax categories. Entities are also required to present a newly defined operating profit subtotal. Entities' net profit will not change.

•      Management-defined performance measures (MPMs) are disclosed in a single note in the financial statements.

•      Enhanced guidance is provided on how to group information in the financial statements.

 

In addition, all entities are required to use the operating profit subtotal as the starting point for the statement of cash flows when presenting operating cash flows under the indirect method.

 

The Group is still in the process of assessing the impact of the new accounting standard, particularly with respect to the Group's statement of comprehensive income, the statement of cash flows and the additional disclosures required for MPM's. The Group is also assessing the impact of how information is grouped in the financial statements, including for items currently labelled as 'other'.

 

Other standards

The following new and amended standards are not expected to have a significant impact on the Group's consolidated financial statements.

•      Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7) (effective for annual periods beginning on or after 1 January 2026).

•      IFRS 18 Presentation and Disclosures in Financial Statements (effective for annual periods beginning on or after 1 January 2027).

•      IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective for annual periods beginning on or after 1 January 2027).

•      Contracts Referencing Nature-dependent Electricity (Amendments to IFRS 9 and IFRS 7); and

•      Annual Improvements to IFRS Accounting Standards - Volume 11.

 

The Group is currently assessing the impact of these amendments.

 

4.  Critical accounting estimates and judgements in applying accounting policies

 

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

4.1 Critical accounting judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes:

•      Notes 3.4 and 6(a): establishing the criteria for determining whether credit risk on a financial asset has increased significantly since initial recognition.

•      Notes 3.4 and 6(a): establishing the criteria to determine whether an account meets the definition of default and as a result moves into Stage 3.

•      Notes 3.3 and 6(f): classification of financial assets: assessment of the business model within which the assets are held and assessment of whether the contractual terms of financial assets are SPPI on the principal amount outstanding.

 

4.2 Estimation uncertainty

(a) Expected credit losses ("ECL") on financial assets

The Group reviews its loan portfolios and debt security investments to assess impairment at least on a quarterly basis. The basis for evaluating impairment losses is described in Note 11. The measurement of ECL required by the implementation of IFRS 9, necessitates a number of significant judgements. Specifically, judgements and estimation uncertainties relate to assessment of whether credit risk on the financial asset has increased significantly since initial recognition, incorporation of forward-looking information ("FLI") in the measurement of ECLs and key assumptions used in estimating recoverable cash flows. These estimates are driven by a number of factors that are subject to change which may result in different levels of ECL allowances.

 

The Group incorporates FLI into the assessment of whether there has been a significant increase in credit risk. Forecasts for key macroeconomic variables that most closely correlate with the Bank's portfolio are used to produce five economic scenarios, comprising of a base case, which is the central scenario, developed internally based on consensus forecast, and four less likely scenarios, one upside and three downside scenarios (downside 1, downside 2 and extreme downside), and the impacts of these scenarios are then probability weighted. The estimation and application of this FLI will require significant judgement supported by the use of external information.

 

12-month ECLs on loans and advances (loans within Stage 1) are calculated using a statistical model on a collective basis, grouped together by product and geographical location. The key assumptions are the probability of default, the economic scenarios and loss given default having consideration to collateral. Lifetime ECLs on loans and advances (loans within Stage 2 and 3) are calculated based on an individual valuation of the underlying asset and other expected cash flows.

 

For financial assets in Stage 2 and 3, ECL is calculated on an individual basis and all relevant factors that have a bearing on the expected future cash flows are taken into account. These factors can be subjective and can include the individual circumstances of the borrower, the realisable value of collateral, the Group's position relative to other claimants, and the likely cost to sell and duration of the time to collect. The level of ECL is the difference between the value of the recoverable amount (which is equal to the expected future cash flows discounted at the loan's original effective interest rate), and its carrying amount.

 

Five economic scenarios were modelled. A probability was assigned to each scenario to arrive at an overall weighted impact on ECL. Management judgment is required in the application of the probability weighting for each scenario.

 

The Group considered the impact of various assumptions on the calculation of ECL (changes in GDP, unemployment rates, inflation, exchange rates, equity prices, wages and collateral values/property prices) and concluded that collateral values/property prices, UK GDP and UK unemployment rate are key drivers of credit risk and credit losses for each portfolio of financial instruments.

 

Using an analysis of historical data, management has estimated relationships between macro-economic variables and credit risk and credit losses. The Group estimates each key driver for credit risk over the active forecast period of between two and five years. This is followed by a period of mean reversion of five years.

 

The five macroeconomic scenarios modelled on future property prices and macroeconomic variables were as follows:

 

•      Baseline

•      Upside

•      Downside 1

•      Downside 2

•      Extreme downside

 

The table below reflect the expected probability weightings applied for each macroeconomic scenario:

				Probability weighting
Group				2025	2024
Economic Scenarios
Baseline				49.0%	46.0%
Upside				19.0%	21.0%
Downside 1				15.0%	15.0%
Downside 2				9.0%	9.0%
Extreme downside				8.0%	9.0%

 

The tables below show the five-year forecasted average growth for property prices, the UK unemployment rate and UK real GDP:

		31 December 2025
		Base	Upside	Downside 1	Downside 2	Extreme downside
Five-year summary
UK House price index - average growth		3.2%	5.4%	1.1%	-1.0%	-3.1%
UK Commercial real estate price - average growth		1.3%	2.7%	-0.3%	-2.0%	-3.7%
UK Unemployment rate - average		4.8%	4.2%	5.6%	6.4%	7.2%
UK GDP - average growth		1.3%	2.0%	0.9%	0.4%	0.0%
		31 December 2024
		Base	Upside	Downside 1	Downside 2	Extreme downside
Five-year summary
UK House price index - average growth		3.0%	4.2%	0.8%	-1.4%	-3.6%
UK Commercial real estate price - average growth		1.4%	3.4%	-0.4%	-2.3%	-4.2%
UK Unemployment rate - average		4.4%	3.9%	5.3%	6.2%	7.1%
UK GDP - average growth		1.4%	2.0%	0.9%	0.5%	0.1%

 

The tables below list the macroeconomic assumptions at 31 December 2025 used in the base, upside and downside scenarios over the five-year forecast period. The assumptions represent the absolute percentage unemployment rates and year-on-year percentage change for GDP and property prices.

UK House price index - four quarter growth
Year	Baseline	Upside	Downside 1	Downside 2	Extreme downside
2026	2.8%	6.0%	(0.2%)	(3.1%)	(6.0%)
2027	2.6%	4.6%	(2.5%)	(7.6%)	(12.8%)
2028	3.1%	5.1%	(1.6%)	(6.3%)	(11.0%)
2029	3.8%	5.9%	5.0%	6.2%	7.4%
2030	3.7%	5.4%	4.8%	5.8%	6.9%
5 year average	3.2%	5.4%	1.1%	(1.0%)	(3.1%)
UK Commercial real estate price - four quarter growth
Year	Baseline	Upside	Downside 1	Downside 2	Extreme downside
2026	1.7%	6.3%	(5.5%)	(12.8%)	(20.0%)
2027	2.0%	3.8%	(5.0%)	(11.9%)	(18.8%)
2028	0.9%	1.1%	2.9%	4.8%	6.8%
2029	0.8%	0.8%	2.8%	4.8%	6.9%
2030	1.3%	1.3%	3.1%	4.8%	6.6%
5 year average	1.3%	2.7%	(0.3%)	(2.0%)	(3.7%)
UK Unemployment rate - annual average
Year	Baseline	Upside	Downside 1	Downside 2	Extreme downside
2026	5.0%	4.3%	5.2%	5.4%	5.6%
2027	4.8%	4.2%	5.7%	6.6%	7.5%
2028	4.7%	4.2%	5.9%	7.1%	8.4%
2029	4.7%	4.1%	5.7%	6.6%	7.6%
2030	4.7%	4.2%	5.4%	6.1%	6.8%
5 year average	4.8%	4.2%	5.6%	6.4%	7.2%
UK GDP - annual growth
Year	Baseline	Upside	Downside 1	Downside 2	Extreme downside
2026	1.1%	2.5%	(0.7%)	(2.5%)	(4.3%)
2027	1.4%	2.4%	0.9%	0.5%	-
2028	1.4%	1.8%	1.4%	1.4%	1.4%
2029	1.4%	1.7%	1.4%	1.4%	1.4%
2030	1.4%	1.6%	1.4%	1.4%	1.4%
5 year average	1.3%	2.0%	0.9%	0.4%	0.0%

 

The graphs below plot the historical data for HPI, Commercial real estate price, unemployment rate and GDP growth rate in the UK as well as the forecasted data under each of the five scenarios.

 

 

The table below compares the 31 December 2025 ECL provision derived using the 2025 and 2024 economic scenarios.

	Economic scenarios as at
	2025	2024
Group	£000	£000
ECL Provision
Stage 1	708	887
Stage 2	172	174
Stage 3	12,284	12,430
At 31 December 2025	13,163	13,491
Additionally, management have assessed the impact of assigning a 100% probability to each of the economic scenarios, which would have the following impact on the Profit or Loss of the Group:
	2025	2024
Group	£m	£m
Impact of 100% scenario probability
Baseline	0.4	0.5
Upside	2.6	1.8
Downside 1	(1.1)	(1.9)
Downside 2	(5.4)	(5.2)
Extreme downside	(19.6)	(21.4)

 

(b) Effective Interest Rate

Loans and advances to customers are initially recognised at fair value. The fair value of a loan on initial recognition is generally its transaction price. Subsequently, they are measured under the effective interest rate method. Management review the expected cash flows against actual cash flows to ensure future assumptions on customer behaviour and future cash flows remain valid. If the estimates of future cash flows are revised, the gross carrying value of the financial asset is recalculated as the present value of the estimated future contractual cash flows discounted at the original effective interest rate. The adjustment to the carrying value of the loan book is recognised in the Statement of Comprehensive Income.

 

The accuracy of the effective interest rate is affected by unexpected market movements resulting in altered customer behaviour, inaccuracies in the models used compared to actual outcomes and incorrect assumptions.

 

In 2025 the Group recognised £42k (2024: £325k) additional interest income to reflect a revision in the timing of expected cash flows on the originated book, reflecting a shortening of the expected life of originated loan book.

 

If customer loans repaid 6 months earlier than anticipated on the originated loan book, interest income would increase by £0.6m (2024: £0.5m), due to acceleration of fee income.

 

In 2025 the Group recognised £33k additional (2024: £45k additional) interest income to reflect actual cash flows received on the acquired mortgage book being less than forecast cash flows.

 

The key judgements in relation to calculating the net present value of the acquired mortgage book relate to the timing of future cash flows on principal repayments. Management have considered an early and delayed 6-month sensitivity on the timing of repayment and a 10% increase and decrease of principal repayments to be reasonably possible.

 

If the acquired loan book was modelled to accelerate cash flows by 6 months, it would increase interest income in 2025 by £0.14m (2024: £0.18m) while a 10% increase in principal repayments will increase interest income in 2025 by £0.3m (2024: £0.4m) through a cash flow reset adjustment.

 

(c) Investment property

The valuation that the Group places on its investment property is subject to a degree of uncertainty and is calculated on the basis of assumptions in relation to prevailing market rents and effective yields. These assumptions may not prove to be accurate, particularly in periods of market volatility.

 

The uncertainty in current market conditions has resulted in less market evidence being available for Management in making its judgement on the key assumptions of property yield and market rent. The Group currently owns one (2024: one) investment property, as outlined in Note 30.

 

Management valued the investment property utilising externally sourced market information and property specific knowledge.

 

Crescent Office Park in Bath with value of £5.3m (2024: £5.3m)

In December 2017, the office building was acquired with the intention to be included within a new property fund initiative that the Group had planned to start-up. The property had tenants in situ with the Fund recognising rental income.

 

The property was initially recognised as held for sale under IFRS 5. In 2018 the launch of the property fund was placed on hold and as a result it was reclassified as an investment property as the property no longer met the IFRS 5 criteria. The property remained occupied as at 31 December 2025 with the Group receiving rental income.

 

In accordance with IAS 40, the property is measured at fair value, with its carrying value at year end of £5.25m equal to its fair value.

 

The valuation of the property has the following key inputs:

•      yield: 8.5%

•      total rental income per annum: £0.48m

 

The external valuation that the Group places on its investment property is subject to a degree of uncertainty and is calculated on the basis of assumptions in relation to prevailing market conditions and subject to comparable properties for sale. This valuation is therefore susceptible to uncertainty particularly where there is a limited level of activity in the property market.

 

Management have assessed that should the fair value of the investment property reduce by 5% this would impact profit or loss by a reduction of £0.3m (2024: £0.3m) and a reduction of 10% would impact profit or loss by a reduction of £0.5m (2024: £0.5m).

 

(d) Inventory

The Group owns one commercial property (2024: one property) and two repossessed properties (2024: two repossessed properties), classified as inventory and presented as part of other assets in the Statement of Financial Position. The properties are assessed at the reporting date for impairment.

 

The valuations for the Group's properties are subject to a degree of uncertainty and are calculated on the basis of assumptions in relation to prevailing market conditions, including effective yields and comparable properties for sale. These valuations are therefore susceptible to uncertainty particularly where there is a limited level of activity in the property market and may not prove to be accurate, particularly in periods of market volatility.

 

Similarly to investment property, the uncertainty in current market conditions resulted in less market evidence being available for Management in making its judgement on the key assumptions of property yield and market rent.

 

Management have assessed that should the net realisable value less cost to sell of each of the combined property inventory reduce by 5% this would impact profit or loss by a reduction of £0.8m (2024: £0.9m) and a reduction of 10% would impact profit or loss by a reduction of £1.6m (2024: £1.7m) (or 10% of cost).

 

(e) Residual value

At the end of lease terms, assets may be sold to third parties or leased for further terms. Rentals are calculated to recover the cost of assets less their residual value ("RV"), and earn finance income. RV's represent the estimated value of the leased asset at the end of lease period. Residual values are calculated after analysing the market place and the company's own historical experience in the market. Expected residual values of leased assets are prospectively adjusted for through the depreciation adjustments which are charged to the income statement each year. The key estimates and judgements that arise in relation to RV's are timing of lease terminations and expected residual value of returned vehicles.

 

The profitability of the Group's operating lease contracts is highly dependent on the RV of the vehicle at the end of the agreement. On inception of the lease, the Group uses its knowledge and experience of the market and industry to estimate the final RV of the vehicle. The Group is exposed to the risk that the RV of the vehicle may be less than anticipated at the outset of the contract impacting profitability. The Group manages the risk through effective and robust procedures by continually monitoring historic, current and forecast RV performance.

 

Management have assessed that a residual value decrease of 5% as at 31 December 2025 would impact profit or loss by a reduction of £2.3m (2024: £2.4m) and a residual value decrease of 10% would impact profit or loss by reduction of £4.6m (2024: £4.9m). Expected residual values underlying the calculation of depreciation of leased assets are kept under review to take account of any change in circumstances. Refer to Note 28 for further detail.

5.  Maturity analysis of assets and liabilities
The table below shows the maturity analysis by expected maturity date of assets and liabilities of the Group as at 31 December 2025:
	Due within one year	Due after more than one year	Total
At 31 December 2025	£000	£000	£000
ASSETS
Cash and balances at central banks	437,548	-	437,548
Loans and advances to banks	117,497	-	117,497
Debt securities at amortised cost	1,745,794	287,364	2,033,158
Derivative financial instruments	-	1,398	1,398
Current tax asset	1,619	-	1,619
Loans and advances to customers	560,072	1,400,470	1,960,542
Other assets	34,254	15,993	50,247
Financial investments	-	2,061	2,061
Intangible assets	3,388	30,060	33,448
Property, plant and equipment	136,354	174,215	310,569
Right-of-use assets	4,074	40,427	44,501
Investment property	-	5,250	5,250
	3,040,600	1,957,238	4,997,838
LIABILITIES
Deposits from banks	1,389	-	1,389
Deposits from customers	4,534,879	35,486	4,570,365
Other liabilities	42,489	-	42,489
Deferred tax liability	-	10,258	10,258
Lease liabilities	3,964	54,303	58,267
Debt securities in issue	-	38,672	38,672
	4,582,721	138,719	4,721,440

 

The table below shows the maturity analysis by expected maturity date of assets and liabilities of the Group as at 31 December 2024:
	Due within one year	Due after more than one year	Total
At 31 December 2024	£000	£000	£000
ASSETS
Cash and balances at central banks	911,887	-	911,887
Loans and advances to banks	66,971	-	66,971
Debt securities at amortised cost	1,037,497	162,350	1,199,847
Derivative financial instruments	-	2,970	2,970
Loans and advances to customers	537,467	1,556,745	2,094,212
Other assets	26,380	25,321	51,701
Financial investments	-	4,947	4,947
Intangible assets	2,590	27,975	30,565
Property, plant and equipment	156,997	156,369	313,366
Right-of-use assets	4,385	43,126	47,511
Investment property	-	5,250	5,250
	2,744,174	1,985,053	4,729,227
LIABILITIES
Deposits from banks	180,511	12,400	192,911
Deposits from customers	4,087,650	44,843	4,132,493
Current tax liability	3,001	-	3,001
Other liabilities	35,384	-	35,384
Deferred tax liability	-	5,671	5,671
Lease Liabilities	1,086	53,743	54,829
Debt securities in issue	-	37,982	37,982
	4,307,632	154,639	4,462,271

 

The table below shows the maturity analysis by expected maturity date of assets and liabilities of the Company as at 31 December 2025:
	Due within one year	Due after more than one year	Total
At 31 December 2025	£000	£000	£000
ASSETS
Loans and advances to banks	7	-	7
Loans and advances to banks - due from subsidiary undertakings	4,753	-	4,753
Debt securities at amortised cost	-	38,781	38,781
Deferred tax asset	-	486	486
Property, plant and equipment	-	194	194
Other assets	1,739	-	1,739
Interests in subsidiaries	-	164,354	164,354
	6,499	203,815	210,314
LIABILITIES
Current tax liability	5,391	-	5,391
Other liabilities	5,752	-	5,752
Debt securities in issue	-	38,672	38,672
	11,143	38,672	49,815
The table below shows the maturity analysis by expected maturity date of assets and liabilities of the Company as at 31 December 2024:
	Due within one year	Due after more than one year	Total
At 31 December 2024	£000	£000	£000
ASSETS
Loans and advances to banks	7	-	7
Loans and advances to banks - due from subsidiary undertakings	913	-	913
Debt securities at amortised cost	-	38,103	38,103
Deferred tax asset	-	515	515
Property, plant and equipment	-	221	221
Other assets	3,355	-	3,355
Interests in subsidiaries	-	164,354	164,354
	4,275	203,193	207,468
LIABILITIES
Current tax liability	4,288	-	4,288
Other liabilities	5,467	-	5,467
Debt securities in issue	-	37,982	37,982
	9,755	37,982	47,737

 

 

6.  Financial risk management

Strategy

By their nature, the Group's activities are principally related to the use of financial instruments. The Directors and senior management of the Group have formally adopted a Group Risk and Controls Policy which sets out the Board's attitude to risk and internal controls. Key risks identified by the Directors are formally reviewed and assessed at least once a year by the Board, in addition to which key business risks are identified, evaluated and managed by operating management on an ongoing basis by means of procedures such as physical controls, credit and other authorisation limits and segregation of duties. The Board also receives regular reports on any risk matters that need to be brought to its attention. Significant risks identified in connection with the development of new activities are subject to consideration by the Board. There are budgeting procedures in place and reports are presented regularly to the Board detailing the results of each principal business unit, variances against budget and prior year, and other performance data.

 

The principal non-operational risks inherent in the Group's business are credit, macroeconomic, market, liquidity and capital.

 

(a) Credit risk

The Company and Group take on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Significant changes in the economy, or in the health of a particular industry segment that represents a concentration in the Company and Group's portfolio, could result in losses that are different from those provided for at the balance sheet date. Credit risk is managed through the Credit Committee of the banking subsidiary.

 

The Committee regularly reviews the credit risk profile of the Group, with a clear focus on performance against risk appetite statements and risk metrics. The Committee considered credit conditions during the year, and in particular the impact of the high interest rates on performance against both credit risk appetite and a range of key credit risk metrics.

 

The Company and Group structure the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to products, and one borrower or groups of borrowers. Such risks are monitored on a revolving basis and subject to an annual or more frequent review. The limits are approved periodically by the Board of Directors and actual exposures against limits are monitored daily.

 

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral, and corporate and personal guarantees.

 

The economic environment remains uncertain and future impairment charges may be subject to further volatility (including from changes to macroeconomic variable forecasts).

 

Uncertainty in current market conditions has created a challenge for ECL modelling, given the severity of economic shock and associated uncertainty for the future economic path coupled with the scale of government and central bank intervention that have altered the relationships between economic drivers and default.

 

The Group has attempted to leverage stress test modelling insights to inform ECL model refinements to enable reasonable estimates. Management review of modelling approaches and outcomes continues to inform any necessary adjustments to the ECL estimates through the form of in-model adjustments, based on expert judgement including the use of available information. Management considerations included the potential severity and duration of the economic shock, including the mitigating effects of government support actions, as well the potential trajectory of the subsequent recovery.

 

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of collateral to secure advances, which is common practice.  The principal collateral types for loans and advances include, but are not limited to:

 

•      Charges over residential and commercial properties;

•      Charges over business assets such as premises, inventory and accounts receivable;

•      Charges over financial instruments such as debt securities and equities;

•      Charges over other chattels; and

•      Personal guarantees

 

Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets.  In order to minimise any potential credit loss the Group will seek additional collateral from the counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances. Repossessed collateral, not readily convertible into cash, is made available for sale in an orderly fashion, with the proceeds used to reduce or repay the outstanding indebtedness, or held as inventory where the Group intends to develop and sell in the future. Where excess funds are available after the debt has been repaid, they are available either for other secured lenders with lower priority or are returned to the customer.

 

Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards.

                                                                                                                                                                                                                   

The Group incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and its measurement of ECL. The key inputs into the measurement of the ECL are:

•      assessment of significant increase in credit risk

•      future economic scenarios (see Note 4.2 (a))

•      probability of default

•      loss given default

•      exposure at default

 

The IFRS 9 impairment model adopts a three stage approach based on the extent of credit deterioration since origination, see Note 11.

 

The Group's maximum exposure to credit risk before collateral held or other credit enhancements is as follows:

 

	2025
Group	Banking	RAF	ACABL	AAG	All Other Divisions	Total
Credit risk exposures (all stage 1, unless otherwise stated)	£000	£000	£000	£000	£000	£000
On-balance sheet:
Cash and balances at central banks	-	-	-	-	437,548	437,548
Loans and advances to banks	-	-	-	-	117,497	117,497
Debt securities at amortised cost	-	-	-	-	2,033,158	2,033,158
Derivative financial instruments	-	-	-	-	1,398	1,398
Loans and advances to customers (Gross of ECL)	1,367,125	288,308	219,536	97,586	1,148	1,973,703
Stage 1	1,288,927	280,720	189,554	97,454	(12)	1,856,643
Stage 2	18,413	4,888	29,982	100	-	53,383
Stage 3	59,785	2,700	-	32	1,160	63,677
Other assets	-	-	-	-	7,011	7,011
Financial investments	-	-	-	-	2,061	2,061
Off-balance sheet:
Guarantees	3,059	-	-	-	-	3,059
Loan commitments and other credit related liabilities	74,457	-	300,835	-	-	375,292
At 31 December	1,444,641	288,308	520,371	97,586	2,599,821	4,950,727

 

	2024
Group	Banking	RAF	ACABL	AAG	All Other Divisions	Total
Credit risk exposures (all stage 1, unless otherwise stated)	£000	£000	£000	£000	£000	£000
On-balance sheet:
Cash and balances at central banks	-	-	-	-	911,699	911,699
Loans and advances to banks	-	-	-	-	66,971	66,971
Debt securities at amortised cost	-	-	-	-	1,199,847	1,199,847
Derivative financial instruments	-	-	-	-	2,970	2,970
Loans and advances to customers (Gross of ECL)	1,549,071	249,789	228,507	77,305	1,129	2,105,801
Stage 1	1,420,547	242,482	189,097	77,065	(14)	1,929,177
Stage 2	60,379	4,407	38,249	240	-	103,275
Stage 3	68,145	2,900	1,161	-	1,143	73,349
Other assets	-	-	-	-	7,758	7,758
Financial investments	-	-	-	-	4,947	4,947
Off-balance sheet:
Guarantees	2,500	-	-	-	-	2,500
Loan commitments and other credit related liabilities	101,412	-	324,119	-	-	425,531
At 31 December	1,652,983	249,789	552,626	77,305	2,195,321	4,728,024

 

The Company's maximum exposure to credit risk (all stage 1) before collateral held or other credit enhancements is as follows:
	2025	2024
	£000	£000
Credit risk exposures relating to on-balance sheet assets are as follows:
Loans and advances to banks	4,760	920
Debt securities at amortised cost	38,781	38,103
Other assets	1,676	3,280
At 31 December	45,217	42,303

 

The above tables represent the maximum credit risk exposure (before impairment) to the Group and Company at 31 December 2025 and 2024 without taking account of any collateral held or other credit enhancements attached. For financial assets, the balances are based on carrying amounts as reported in the Statement of Financial Position. For guarantees and loan commitments, the amounts in the table represent the amounts for which the Group is contractually committed.

 

The table below represents an analysis of the loan to values of the exposures secured by property for the Group:
				2025
					Total
					Loan Balance	Collateral
Group					£000	£000
Less than 60%					1,106,535	2,353,498
Stage 1					1,079,543	2,296,152
Stage 2					7,379	16,005
Stage 3					19,613	41,341
60%-80%					203,944	322,419
Stage 1					184,841	294,386
Stage 2					10,746	15,898
Stage 3					8,357	12,135
80%-100%					20,219	22,220
Stage 1					3,106	4,107
Stage 2					60	109
Stage 3					17,053	18,004
Greater than 100%					8,882	8,061
Stage 1					2,667	3,004
Stage 2					69	112
Stage 3					6,146	4,945
Total					1,339,580	2,706,198

 

The table below represents an analysis of the loan to values of the exposures secured by property for the Group:
				2024
					Total
					Loan Balance	Collateral
Group					£000	£000
Less than 60%					1,113,713	2,455,910
Stage 1					1,058,577	2,334,164
Stage 2					31,121	72,836
Stage 3					24,015	48,910
60%-80%					348,701	569,311
Stage 1					304,176	497,360
Stage 2					26,322	41,414
Stage 3					18,203	30,537
80%-100%					22,304	31,581
Stage 1					12,594	18,683
Stage 2					659	1,008
Stage 3					9,051	11,890
Greater than 100%*					17,130	17,574
Stage 1					6,577	7,789
Stage 2					1,986	482
Stage 3					8,567	9,303
Total					1,501,848	3,074,376

 

*In addition to property, other security is taken, including charges over Arbuthnot Latham Investment Management portfolios, other chattels and personal guarantees. Additionally under the government scheme for BBLs, collateral is not required as the loans are 100% backed by the government.

 

Loans with a loan to value of greater than 100% have no additional collateral (2024: £1.0m) in the form of cash deposits and security over Arbuthnot Latham Investment Management Portfolios and personal guarantees of £2.2m (2024: £7.0m). Non-property collateral reduces loan to value below 100% for all such exposures.

 

The table below represents an analysis of loan commitments compared to the values of property collateral for the Group (all Stage 1):
						2025
						Loan commitments	Collateral
Group						£000	£000
Less than 60%						37,496	94,693
60%-80%						1,697	2,425
Total						39,193	97,118
						2024
						Loan commitments	Collateral
Group						£000	£000
Less than 60%						44,584	93,125
60%-80%						981	1,550
80%-100%						2,296	2,717
Total						47,861	97,392

 

Renegotiated loans and forbearance

The contractual terms of a loan may be modified due to factors that are not related to the current or potential credit deterioration of the customer (changing market conditions, customer retention, etc.). In such cases, the modified loan may be derecognised and the renegotiated loan recognised as a new loan at fair value.

 

When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming it is not credit-impaired at that time).

 

The Group renegotiates loans to customers in financial difficulties (referred to as 'forbearance') to maximise collection opportunities and minimise the risk of default. Under the Group's forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in default on its debt, or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.

 

The revised terms can include changing the timing of interest payments, extending the date of repayment of the loan, transferring a loan to interest only payments and a payment holiday. Both retail and corporate loans are subject to the forbearance policy. The Group Credit Committee regularly reviews reports on forbearance.

 

For financial assets modified as part of the Group's forbearance policy, the estimate of PD (probability of default) reflects whether the modification has improved or restored the Group's ability to collect interest and principal and the Group's previous experience of similar forbearance action. As part of this process, the Group evaluates the borrower's payment performance against the modified contractual terms and considers various behavioural indicators. Whilst the customer is under forbearance, the customer will be classified as Stage 2 and the Group recognise a lifetime ECL. The customer will transfer to Stage 1 and revert to a 12 month ECL when they exit forbearance. This is conditional upon both a minimum six months' good account conduct and the improvement to the client's situation to the extent the probability of default has receded sufficiently and full repayment of the loan, without recourse to the collateral, is likely.

 

Forbearance is a qualitative indicator of a SICR (see Note 3.4)

 

As at 31 December 2025, loans for which forbearance measures were in place totalled 0.86% (2024: 1.86%) of total value of loans to customers for the Group. These are set out in the following table:

 

	2025
	Stage 1			Stage 2			Stage 3			Total
	Number	Loan Balance		Number	Loan Balance		Number	Loan Balance		Number	Loan Balance
Group		£000			£000			£000			£000
Term extension	-	-		3	271		1	463		4	734
Payment holiday	-	-		3	897		-	-		3	897
Modification in terms and conditions	-	-		36	9,061		35	6,124		71	15,185
Total forbearance	-	-		42	10,229		36	6,587		78	16,816

 

	2024
	Stage 1			Stage 2			Stage 3			Total
	Number	Loan Balance		Number	Loan Balance		Number	Loan Balance		Number	Loan Balance
Group		£000			£000			£000			£000
Time for asset sale	-	-		-	-		1	35		1	35
Term extension	-	-		7	1,911		1	118		8	2,029
Time for refinance with third party	-	-		1	2,440		-	-		1	2,440
Payment holiday	-	-		7	8,560		5	4,964		12	13,524
Covenant waived	-	-		1	752		-	-		1	752
Modification in term and conditions	-	-		39	10,617		40	8,637		79	19,254
Restructure	-	-		5	392		1	285		6	677
Total forbearance	-	-		60	24,672		48	14,039		108	38,711

 

Concentration risk

The table below show the concentration in the loan book based on the most significant type of collateral held for each loan.

 

	Loans and advances to customers			Loan Commitments
	2025	2024		2025	2024
	£000	£000		£000	£000
Concentration by product
Asset based lending	219,362	228,196		300,835	324,119
Asset finance	385,254	325,191		-	-
Cash collateralised	6,894	7,034		529	1,946
Commercial lending	48,287	72,504		1,370	6,380
Investment portfolio secured	23,473	23,088		2,144	2,219
Residential mortgages	1,235,645	1,311,158		36,631	40,590
Mixed collateral*	32,893	108,232		1,144	1,416
Unsecured**	8,734	18,809		32,639	48,861
At 31 December	1,960,542	2,094,212		375,292	425,531
Concentration by location
East Anglia	28,900	34,335		4,226	1,642
London	658,972	731,280		19,093	27,693
Midlands	108,963	117,749		466	3,322
North East	68,017	111,818		28	404
North West	69,315	80,403		3,912	4,673
Northern Ireland	2,571	2,956		-	-
Scotland	10,364	24,405		-	500
South East	254,434	257,244		10,035	6,611
South West	98,221	127,112		1,686	2,615
Wales	8,984	10,452		196	-
Non-property collateral	651,801	596,458		335,650	378,071
At 31 December	1,960,542	2,094,212		375,292	425,531

 

*      Mixed collateral is where there is no single, overall majority collateral type.

**   Included within unsecured are £3.4m (2024: £4.5m) of loans which are backed by the government guarantee scheme for BBLs.

 

(b) Operational risk

Operational risk is the risk that the Group may be exposed to financial losses from conducting its business. The Group's exposure to operational risk include its Information Technology ("IT") and Operating platforms. There are additional internal controls in these processes that are designed to protect the Group from these risks. The Group's overall approach to managing internal control and financial reporting is described in the Corporate Governance section of the Annual Report.

 

In line with guidance issued by the Regulator, the Bank has continued to focus on ensuring that the design of systems and operational plans are robust to maintain operational resilience in the face of unexpected incidents.

 

Cyber risk

Cyber risk is an increasing risk for the Group within its operational processes. It is the risk that the Group is subject to some form of disruption arising from an interruption to its IT and data infrastructure. The Group regularly tests the infrastructure to ensure that it remains robust to a range of threats and has continuity of business plans in place including a disaster recovery plan.

 

Residual value risk

Residual value risk equals the difference in the residual value of a leased asset set at lease inception and the lower salvage value realised upon its disposal or re-lease at the end of the lease term. The Group is exposed to residual value risk in its AAG business. Normal residual value risk is managed through the process set out below, and it should be noted that the transition to greener technology may further impact residual values in two ways. Firstly, residual values could decrease due to assets becoming obsolete; climate related regulations might change, which could result in legal restrictions on the use of assets or technological advances could lead to preferred environmental technologies. Secondly, the lack of historical information on green vehicles could lead to inaccurate measurement of residual values at inception of leases.

 

The AAG business manage Residual Value setting through its Residual Value Committee that comprises representatives from its Asset Management, Procurement, Sales and Leasing divisions and is chaired by the Residual Value Manager. Assets are valued using either an approved Residual Value matrix or individually, dependent upon the nature of the asset and current market conditions. The strategy for Residual Value setting and oversight of the Residual Value Committee is conducted by the AAG Residual Risk Committee, which in turn reports into the Asset Alliance Group Holdings Limited board. The Residual Risk Committee, chaired by the AAG Group Risk Director, includes AAG CEO, AL Group Risk Director, AAG Managing Director, AAG Finance Director and heads of Asset Management, Sales and Leasing divisions in AAG.

 

Conduct risk

As a financial services provider the Group faces conduct risk, including selling products to customers which do not meet their needs, failing to deal with clients' complaints effectively, not meeting clients' expectations, and exhibiting behaviours which do not meet market or regulatory standards.

 

The Group adopts a low risk appetite for any unfair customer outcomes. It maintains clear compliance guidelines and provides ongoing training to all employees. Periodic spot checks, compliance monitoring and internal audits are performed to ensure these guidelines are followed. The Group also has insurance policies in place to provide some cover for any claims that may arise.

 

Financial Crime

The Group is exposed to risk due to financial crime including money laundering, sanctions evasion, bribery and corruption, market abuse, tax evasion and fraud. The Group operates policies and controls which are designed to ensure that financial crime risks are identified, appropriately mitigated and managed.

 

Regulatory and capital risk

Regulatory and capital risk includes the risk that the Group will have insufficient capital resources to support the business and/or does not comply with regulatory requirements. The Group adopts a conservative approach to managing its capital. The Board of Arbuthnot Latham approves an ICAAP annually, which includes the performance of stringent stress tests to ensure that capital resources are adequate over a three year horizon. Capital and liquidity ratios are regularly monitored against the Board's approved risk appetite as part of the risk management framework.

 

Regulatory change also exists as a risk to the Group's business. Notwithstanding the assessments carried out by the Group to manage regulatory risk, it is not possible to predict how regulatory and legislative changes may alter and impact the business. Significant and unforeseen regulatory changes may reduce the Group's competitive situation and lower its profitability.

 

(c) Macroeconomic and competitive environment

The Group is exposed to risks that may arise from the macroeconomic and competitive environment.

 

In recent years there have been a number of global and domestic events which have had significant implications for the Group's operating environment, namely: The US-Israeli war with Iran, Russia's war in the Ukraine, the Israel-Hamas war in Gaza and Coronavirus. The culmination of these events has led to significant turmoil in both global and domestic markets. Geo-political volatility and uncertainty remains high with the potential to adversely affect the UK economy, as well as the Group's customers and assets.

 

(d) Market risk

Price risk

The Group is exposed to price risk from equity investments and derivatives held by the Group. The Group is not exposed to commodity price risk.

 

Based upon the financial investment exposure in Note 25, a stress test scenario of a 10% (2024: 10%) decline in market prices, would result in a £Nil (2024: £Nil) decrease in the Group's income and a decrease of £0.2m (2024: £0.5m) in the Group's equity. The Group considers a 10% stress test scenario appropriate after taking the current values and historic data into account.

 

Currency risk

The Company and Group take on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. This is managed through the Group entering into forward foreign exchange contracts. The Board sets limits on the level of exposure for both overnight and intra-day positions, which are monitored daily. The table below summarises the Group's exposure to foreign currency exchange rate risk at 31 December 2025. Included in the table below are the Group's assets and liabilities at carrying amounts, categorised by currency.

	GBP (£)	USD ($)	Euro (€)	Other	Total
At 31 December 2025	£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	437,475	30	42	1	437,548
Loans and advances to banks	13,337	20,607	73,215	10,338	117,497
Debt securities at amortised cost	1,648,808	305,402	78,947	1	2,033,158
Derivative financial instruments	1,398	-	-	-	1,398
Loans and advances to customers	1,946,864	2,741	9,999	938	1,960,542
Other assets	7,011	-	3,267	-	10,278
Financial investments	-	1,865	196	-	2,061
	4,054,893	330,645	165,666	11,278	4,562,482
LIABILITIES
Deposits from banks	1,389	-	-	-	1,389
Deposits from customers	4,079,131	330,130	149,700	11,404	4,570,365
Other liabilities	17,220	916	2,357	-	20,493
Debt securities in issue	25,605	-	13,067	-	38,672
	4,123,345	331,046	165,124	11,404	4,630,919
Net on-balance sheet position	(68,452)	(401)	542	(126)	(68,437)
Credit commitments	375,292	-	-	-	375,292

 

The table below summarises the Group's exposure to foreign currency exchange risk at 31 December 2024:
	GBP (£)	USD ($)	Euro (€)	Other	Total
At 31 December 2024	£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	911,754	76	-	57	911,887
Loans and advances to banks	10,882	26,209	23,004	6,876	66,971
Debt securities at amortised cost	888,567	237,474	73,805	1	1,199,847
Derivative financial instruments	2,970	-	-	-	2,970
Loans and advances to customers	2,090,263	(1,558)	4,632	874	2,094,211
Other assets	7,758	-	2,960	-	10,718
Financial investments	-	4,787	160	-	4,947
	3,912,194	266,988	104,561	7,808	4,291,551
LIABILITIES
Deposits from banks	192,911	-	-	-	192,911
Deposits from customers	3,767,984	264,095	92,735	7,680	4,132,494
Other liabilities	6,229	-	-	-	6,229
Debt securities in issue	26,209	-	11,773	-	37,982
	3,993,333	264,095	104,508	7,680	4,369,616
Net on-balance sheet position	(81,139)	2,893	53	128	(78,065)
Credit commitments	425,531	-	-	-	425,531

 

Derivative financial instruments (see Note 20) are in place to mitigate foreign currency risk on net exposures for each currency. A 10% strengthening of the pound against the US dollar would lead to a £40k decrease (2024: £289k increase) in Group profits and equity, while a 10% weakening of the pound against the US dollar would lead to the same increase (2024: decrease) in Group profits and equity. Additionally, the Group holds a property classified as inventory of £3.3m (2024: £3.0m). The property is located in the EU and relates to a Euro denominated loan where the property was repossessed. Including this Euro asset, the net Euro exposure is positive £0.5m (2024: positive £0.1m).

 

The table below summarises the Company's exposure to foreign currency exchange rate risk at 31 December 2025:
	GBP (£)	Euro (€)	Total
At 31 December 2025	£000	£000	£000
ASSETS
Loans and advances to banks	4,760	-	4,760
Debt securities at amortised cost	25,613	13,168	38,781
Other assets	1,676	-	1,676
	32,049	13,168	45,217
LIABILITIES
Other liabilities	1,824	-	1,824
Debt securities in issue	25,613	13,059	38,672
	27,437	13,059	40,496
Net on-balance sheet position	4,612	109	4,721

 

The table below summarises the Company's exposure to foreign currency exchange rate risk at 31 December 2024:
	GBP (£)	Euro (€)	Total
At 31 December 2024	£000	£000	£000
ASSETS
Loans and advances to banks	920	-	920
Debt securities at amortised cost	25,575	12,528	38,103
Other assets	3,280	-	3,280
	29,775	12,528	42,303
LIABILITIES
Other liabilities	1,812	-	1,812
Debt securities in issue	25,575	12,407	37,982
	27,387	12,407	39,794
Net on-balance sheet position	2,388	121	2,509

 

A 10% strengthening of the pound against the Euro would lead to £10k increase (2024: £11k increase) in the Company profits and equity, conversely a 10% weakening of the pound against the Euro would lead to a £12k decrease (2024: £13k decrease) in the Company profits and equity.

 

Interest rate risk

Interest rate risk is the potential adverse impact on the Company and Group's future cash flows from changes in interest rates, and arises from the differing interest rate risk characteristics of the Company and Group's assets and liabilities. In particular, fixed rate savings and borrowing products expose the Group to the risk that a change in interest rates could cause either a reduction in interest income or an increase in interest expense relative to variable rate interest flows. The Group seeks to "match" interest rate risk on both assets and liabilities. However, this is not a perfect match and interest rate risk is present in: Money market transactions of a fixed rate nature, fixed rate loans, fixed rate savings accounts and floating rate products dependent on when they re-price at a future date.

 

Interest rate risk is measured throughout the maturity bandings of the book on a parallel shift scenario for a 200 basis points movement. The current position of the balance sheet is such that it results in an favourable impact on the economic value of equity of £5.4m (2024: favourable impact of £1.8m) for a positive 200bps shift and an adverse impact of £5.8m (2024: adverse impact of £2.0m) for a negative 200bps movement.

 

The following tables summarise the re-pricing periods for the assets and liabilities in the Company and Group, including derivative financial instruments which are principally used to reduce exposure to interest rate risk. Items are allocated to time bands by reference to the earlier of the next contractual interest rate re-price and the maturity date.

Group	Within 3 months	More than 3 months but less than 6 months	More than 6 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years	Non interest bearing	Total
As at 31 December 2025	£000	£000	£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	437,548	-	-	-	-	-	437,548
Loans and advances to banks	117,497	-	-	-	-	-	117,497
Debt securities at amortised cost	1,158,566	513,422	286,170	75,000	-	-	2,033,158
Derivative financial instruments	1,398	-	-	-	-	-	1,398
Loans and advances to customers	1,280,198	34,211	84,411	509,875	1,904	49,943	1,960,542
Other assets*	-	-	-	-	-	445,634	445,634
Financial investments	-	-	-	-	-	2,061	2,061
	2,995,207	547,633	370,581	584,875	1,904	497,638	4,997,838
LIABILITIES AND EQUITY
Deposits from banks	1,389	-	-	-	-	-	1,389
Deposits from customers	3,219,973	396,462	537,257	414,778	1,895	-	4,570,365
Other liabilities**	54,340	-	-	-	-	56,674	111,014
Debt securities in issue	38,672	-	-	-	-	-	38,672
Equity	-	-	-	-	-	276,398	276,398
	3,314,374	396,462	537,257	414,778	1,895	333,072	4,997,838
Impact of derivative instruments	33,750	-	-	(33,750)	-	-
Interest rate sensitivity gap	(285,417)	151,171	(166,676)	136,347	9	164,566
Cumulative gap	(285,417)	(134,246)	(300,922)	(164,575)	(164,566)	-
*   Other assets include all remaining assets in the Statement of Financial Position, which are not shown separately above.
** Other liabilities include all remaining liabilities in the Statement of Financial Position, which are not shown separately above.

 

Group	Within 3 months	More than 3 months but less than 6 months	More than 6 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years	Non interest bearing	Total
As at 31 December 2024	£000	£000	£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	911,887	-	-	-	-	-	911,887
Loans and advances to banks	66,971	-	-	-	-	-	66,971
Debt securities at amortised cost	567,847	295,895	173,755	162,350	-	-	1,199,847
Derivative financial instruments	2,970	-	-	-	-	-	2,970
Loans and advances to customers	1,495,051	23,589	67,855	489,688	6,238	11,791	2,094,212
Other assets	-	-	-	-	-	448,393	448,393
Financial investments	-	-	-	-	-	4,947	4,947
	3,044,726	319,484	241,610	652,038	6,238	465,131	4,729,227
LIABILITIES AND EQUITY
Deposits from banks	192,911	-	-	-	-	-	192,911
Deposits from customers	3,384,011	285,670	417,969	38,793	6,050	-	4,132,493
Other liabilities	56,130	-	-	-	-	42,755	98,885
Debt securities in issue	(121)	-	-	-	38,103	-	37,982
Equity	(6,817)	-	-	226,488	3,850	43,435	266,956
	3,626,114	285,670	417,969	265,281	48,003	86,190	4,729,227
Impact of derivative instruments	33,750	-	-	(33,750)	-	-
Interest rate sensitivity gap	(547,638)	33,814	(176,359)	353,007	(41,765)	378,941
Cumulative gap	(547,638)	(513,824)	(690,183)	(337,176)	(378,941)	-
*   Other assets include all remaining assets in the Statement of Financial Position, which are not shown separately above.
** Other liabilities include all remaining liabilities in the Statement of Financial Position, which are not shown separately above.

 

Company	Within 3 months	More than 3 months but less than 6 months	More than 6 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years	Non interest bearing	Total
As at 31 December 2025	£000	£000	£000	£000	£000	£000	£000
ASSETS
Loans and advances to banks	7	-	-	-	-	-	7
Loans and advances to banks - due from subsidiary	4,740	-	-	-	-	13	4,753
Debt securities at amortised cost	38,781	-	-	-	-	-	38,781
Other assets*	-	-	-	-	-	166,773	166,773
	43,528	-	-	-	-	166,786	210,314
LIABILITIES AND EQUITY
Other liabilities**	-	-	-	-	-	11,143	11,143
Debt securities in issue	38,672	-	-	-	-	-	38,672
Equity	-	-	-	-	-	160,499	160,499
	38,672	-	-	-	-	171,642	210,314
Interest rate sensitivity gap	4,856	-	-	-	-	(4,856)
Cumulative gap	4,856	4,856	4,856	4,856	4,856	-
*   Other assets include all remaining assets in the Statement of Financial Position, which are not shown separately above.
** Other liabilities include all remaining liabilities in the Statement of Financial Position, which are not shown separately above.
Company	Within 3 months	More than 3 months but less than 6 months	More than 6 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years	Non interest bearing	Total
As at 31 December 2024	£000	£000	£000	£000	£000	£000	£000
ASSETS
Loans and advances to banks	7						7
Loans and advances to banks - due from subsidiary	877	-	-	-	-	36	913
Debt securities at amortised cost	38,103	-	-	-	-	-	38,103
Other assets*	-	-	-	-	-	168,445	168,445
	38,987	-	-	-	-	168,481	207,468
LIABILITIES AND EQUITY
Other liabilities**	-	-	-	-	-	9,754	9,754
Debt securities in issue	37,982	-	-	-	-	-	37,982
Equity	-	-	-	-	-	159,732	159,732
	37,982	-	-	-	-	169,486	207,468
Interest rate sensitivity gap	1,005	-	-	-	-	(1,005)
Cumulative gap	1,005	1,005	1,005	1,005	1,005	-
*   Other assets include all remaining assets in the Statement of Financial Position, which are not shown separately above.
** Other liabilities include all remaining liabilities in the Statement of Financial Position, which are not shown separately above.

 

(e) Liquidity risk

Liquidity risk is the risk that the Group, although solvent, either does not have sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure such resources at excessive cost.

 

The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The liquidity requirements of the Group are met through withdrawing funds from its Bank of England Reserve Account to cover any short-term fluctuations and longer term funding to address any structural liquidity requirements.

 

The Group has formal governance structures in place to manage and mitigate liquidity risk on a day to day basis. The Board of AL sets and approves the liquidity risk management strategy. The Assets and Liabilities Committee ("ALCO"), comprising senior executives of the Group, monitors liquidity risk. Key liquidity risk management information is reported by the finance teams and monitored by the Chief Executive Officer, Finance Director and Deputy CEO on a daily basis. The ALCO meets monthly to review liquidity risk against set thresholds and risk indicators including early warning indicators, liquidity risk tolerance levels and Internal Liquidity Adequacy Assessment Process ("ILAAP") metrics.

 

The PRA requires the Board to ensure that the Group has adequate levels of liquidity resources and a prudent funding profile, and that it comprehensively manages and controls liquidity and funding risks. The Group maintains deposits placed at the Bank of England and highly liquid unencumbered assets that can be called upon to create sufficient liquidity to meet liabilities on demand, particularly in a period of liquidity stress.

 

Arbuthnot Latham & Co., Limited ("AL") has a Board approved ILAAP, and maintains liquidity buffers in excess of the minimum requirements. The ILAAP is embedded in the risk management framework of the Group and is subject to ongoing updates and revisions when necessary. At a minimum, the ILAAP is updated annually. The Liquidity Coverage Ratio ("LCR") regime has applied to the Group from 1 October 2015, requiring management of net 30 day cash outflows as a proportion of high quality liquid assets. The LCR has exceeded the regulatory minimum of 100% throughout the year. There has been an increase in deposits of 20%, which has accordingly improved the Bank's liquidity.

 

The Group is exposed to daily calls on its available cash resources from current accounts, maturing deposits and loan draw-downs. The Group maintains significant cash resources to meet all of these needs as they fall due. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks to be completely matched, as transacted business is often of uncertain term and of different types.

 

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as they mature are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates.

The tables below show the undiscounted contractual cash flows of the Group's financial liabilities and assets as at 31 December 2025:
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2025	£000	£000	£000	£000	£000	£000
Financial liability by type
Non-derivative liabilities
Deposits from banks	1,389	(1,389)	(1,389)	-	-	-
Deposits from customers	4,570,365	(4,630,216)	(3,873,093)	(721,265)	(33,957)	(1,901)
Other liabilities	20,493	(20,493)	(18,953)	-	-	(1,540)
Debt securities in issue	38,672	(71,298)	(901)	(2,745)	(14,595)	(53,057)
Issued financial guarantee contracts	-	(3,059)	(3,059)	-	-	-
Unrecognised loan commitments	-	(375,292)	(375,292)	-	-	-
	4,630,919	(5,101,747)	(4,272,687)	(724,010)	(48,552)	(56,498)
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2025	£000	£000	£000	£000	£000	£000
Financial asset by type
Non-derivative assets
Cash and balances at central banks	437,548	437,548	437,548	-	-	-
Loans and advances to banks	117,497	117,497	117,497	-	-	-
Debt securities at amortised cost	2,033,158	2,044,425	1,198,496	804,682	41,247	-
Loans and advances to customers	1,960,542	2,272,721	303,063	314,447	1,526,480	128,731
Other assets	7,011	7,011	7,011	-	-	-
Financial investments	2,061	2,061	2,061	-	-	-
	4,557,817	4,881,263	2,065,676	1,119,129	1,567,727	128,731
Derivative assets
Risk management:
- Inflows	1,398	1,398	-	-	1,398	-
	1,398	1,398	-	-	1,398	-

 

The tables below show the undiscounted contractual cash flows of the Group's financial liabilities and assets as at 31 December 2024:
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2024	£000	£000	£000	£000	£000	£000
Financial liability by type
Non-derivative liabilities
Deposits from banks	192,911	(195,453)	-	(182,357)	(13,096)	-
Deposits from customers	4,132,493	(4,190,738)	(3,529,962)	(614,451)	(40,017)	(6,308)
Other liabilities	6,229	(6,229)	(4,689)	-	-	(1,540)
Debt securities in issue	37,982	(76,656)	(985)	(2,956)	(15,805)	(56,910)
Issued financial guarantee contracts	-	(2,500)	(2,500)	-	-	-
Unrecognised loan commitments	-	(425,531)	(425,531)	-	-	-
	4,369,615	(4,897,107)	(3,963,667)	(799,764)	(68,918)	(64,758)
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2024	£000	£000	£000	£000	£000	£000
Financial asset by type
Non-derivative assets
Cash and balances at central banks	911,887	911,887	911,887	-	-	-
Loans and advances to banks	66,971	66,971	66,971	-	-	-
Debt securities at amortised cost	1,199,847	1,211,748	572,701	474,364	164,684	-
Loans and advances to customers	2,094,212	2,472,304	387,219	314,263	1,658,699	112,123
Other assets	7,758	7,758	7,758	-	-	-
Financial investments	4,947	4,947	4,947	-	-	-
	4,285,622	4,675,615	1,951,483	788,627	1,823,383	112,123
Derivative assets
Risk management:
- Inflows	2,970	2,970	-	-	2,970	-
	2,970	2,970	-	-	2,970	-

 

The table below sets out the components of the Group's liquidity reserves:
			31 December 2025		31 December 2024
			Amount	Fair value	Amount	Fair value
Liquidity reserves			£000	£000	£000	£000
Cash and balances at central banks			437,548	437,548	911,887	911,887
Loans and advances to banks			117,497	117,497	66,971	66,971
Debt securities at amortised cost			2,033,158	2,034,512	1,199,847	1,199,963
			2,588,203	2,589,557	2,178,705	2,178,821

 

Assets pledged as collateral or encumbered

The total financial assets recognised in the statement of financial position that had been pledged as collateral for liabilities at 31 December 2025 were £Nil (2024: £237m). Assets are encumbered due to the Term Funding Scheme (Note 31).

 

Financial assets can be pledged as collateral as part of repurchases transactions under terms that are usual and customary for such activities.

The table below analyses the contractual cash flows of the Company's financial liabilities and assets as at 31 December 2025:
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2025	£000	£000	£000	£000	£000	£000
Financial liability by type
Non-derivative liabilities
Other liabilities	1,824	(1,824)	(284)	-	-	(1,540)
Debt securities in issue	38,672	(71,298)	(901)	(2,745)	(14,595)	(53,057)
	40,496	(73,122)	(1,185)	(2,745)	(14,595)	(54,597)
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2025	£000	£000	£000	£000	£000	£000
Financial asset by type
Non-derivative assets
Loans and advances to banks	4,760	4,760	4,760	-	-	-
Debt securities at amortised cost	38,781	71,298	901	2,745	14,595	53,057
Other assets	1,676	1,676	1,676	-	-	-
	45,217	77,734	7,337	2,745	14,595	53,057

 

The table below analyses the contractual cash flows of the Company's financial liabilities and assets as at 31 December 2024:
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2024	£000	£000	£000	£000	£000	£000
Financial liability by type
Non-derivative liabilities
Other liabilities	1,812	(1,812)	(272)	-	-	(1,540)
Debt securities in issue	37,982	(76,656)	(985)	(2,956)	(15,805)	(56,910)
	39,794	(78,468)	(1,257)	(2,956)	(15,805)	(58,450)
	Carrying amount	Gross inflow/ (outflow)	Not more than 3 months	More than 3 months but less than 1 year	More than 1 year but less than 5 years	More than 5 years
At 31 December 2024	£000	£000	£000	£000	£000	£000
Financial asset by type
Non-derivative assets
Loans and advances to banks	920	920	920	-	-	-
Debt securities at amortised cost	38,103	76,778	988	2,965	15,851	56,975
Other assets	3,280	3,280	3,280	-	-	-
	42,303	80,978	5,188	2,965	15,851	56,975

 

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates.

 

Fiduciary activities

The Group provides investment management and advisory services to third parties, which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements, because the assets do not meet the recognition criteria. These services give rise to the risk that the Group may be accused of maladministration or underperformance. At the balance sheet date, the Group had investment management accounts amounting to approximately £2.7bn (2024: £2.2bn). Additionally, the Group provides investment advisory services.

(f) Financial assets and liabilities
The tables below set out the Group's financial assets and financial liabilities into their respective classifications:
					FVPL	FVOCI	Amortised cost	Total carrying amount	Fair value
At 31 December 2025					£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks					-	-	437,548	437,548	437,548
Loans and advances to banks					-	-	117,497	117,497	117,497
Debt securities at amortised cost					-	-	2,033,158	2,033,158	2,034,512
Derivative financial instruments					1,398	-	-	1,398	1,398
Loans and advances to customers					-	-	1,960,542	1,960,542	1,963,911
Other assets					-	-	7,011	7,011	7,011
Financial investments					-	2,061	-	2,061	2,061
					1,398	2,061	4,555,756	4,559,215	4,563,938
LIABILITIES
Deposits from banks					-	-	1,389	1,389	1,389
Deposits from customers					-	-	4,570,365	4,570,365	4,570,365
Other liabilities					-	-	20,493	20,493	20,493
Debt securities in issue					-	-	38,672	38,672	38,672
					-	-	4,630,919	4,630,919	4,630,919
					FVPL	FVOCI	Amortised cost	Total carrying amount	Fair value
At 31 December 2024					£000	£000	£000	£000	£000
ASSETS
Cash and balances at central banks					-	-	911,887	911,887	911,887
Loans and advances to banks					-	-	66,971	66,971	66,971
Debt securities at amortised cost					-	-	1,199,847	1,199,847	1,199,963
Derivative financial instruments					2,970	-	-	2,970	2,970
Loans and advances to customers					-	-	2,094,212	2,094,212	2,088,933
Other assets					-	-	7,758	7,758	7,758
Financial investments						4,947	-	4,947	4,947
					2,970	4,947	4,280,675	4,288,592	4,283,429
LIABILITIES
Deposits from banks					-	-	192,911	192,911	192,911
Deposits from customers					-	-	4,132,493	4,132,493	4,132,493
Other liabilities					-	-	6,229	6,229	6,229
Debt securities in issue					-	-	37,982	37,982	37,982
					-	-	4,369,615	4,369,615	4,369,615

The tables below set out the Company's financial assets and financial liabilities into their respective classifications:
					FVPL	FVOCI	Amortised cost	Total carrying amount	Fair value
At 31 December 2025					£000	£000	£000	£000	£000
ASSETS
Loans and advances to banks					-	-	4,760	4,760	4,760
Debt securities at amortised cost					-	-	38,781	38,781	38,781
Other assets					-	-	1,676	1,676	1,676
					-	-	45,217	45,217	45,217
LIABILITIES
Other liabilities					-	-	1,824	1,824	1,824
Debt securities in issue					-	-	38,672	38,672	38,672
					-	-	40,496	40,496	40,496
					FVPL	FVOCI	Amortised cost	Total carrying amount	Fair value
At 31 December 2024					£000	£000	£000	£000	£000
ASSETS
Loans and advances to banks					-	-	920	920	920
Debt securities at amortised cost					-	-	38,103	38,103	38,103
Other assets					-	-	1	1	1
					-	-	39,024	39,024	39,024
LIABILITIES
Other liabilities					-	-	1,812	1,812	1,812
Debt securities in issue					-	-	37,982	37,982	37,982
					-	-	39,794	39,794	39,794

 

Valuation of financial instruments

The Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions. If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis. The objective of valuation techniques is to determine the fair value of the financial instrument at the reporting date as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

 

The Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making measurements:

 

•      Level 1: Quoted prices in active markets for identical assets or liabilities.

•      Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

•      Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

 

The consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads assists in the judgement as to whether a market is active. If, in the opinion of management, a significant proportion of the instrument's carrying amount is driven by unobservable inputs, the instrument in its entirety is classified as valued using significant unobservable inputs. 'Unobservable' in this context means that there is little or no current market data available from which to determine the level at which an arm's length transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value (consensus pricing data may, for example, be used).

 

The tables below analyses assets and liabilities measured at fair value by the level in the fair value hierarchy into which the measurement is categorised:

 

	Level 1	Level 2	Level 3	Total
At 31 December 2025	£000	£000	£000	£000
ASSETS
Derivative financial instruments	-	1,398	-	1,398
Financial investments	-	-	2,061	2,061
	-	1,398	2,061	3,459

 

	Level 1	Level 2	Level 3	Total
At 31 December 2024	£000	£000	£000	£000
ASSETS
Derivative financial instruments	-	2,970	-	2,970
Financial investments	-	-	4,947	4,947
	-	2,970	4,947	7,917

 

There were no transfers between level 1 and level 2 during the year.
For assets which are accounted at fair value under Level 3 the valuations are primarily based on Fund Manager valuations and are based on reasonable estimates. Changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would not lead to a significantly different fair value. The following table reconciles the movement in level 3 financial instruments measured at fair value during the year:
Group			2025	2024
Movement in level 3			£000	£000
At 1 January			4,947	3,942
Purchases			131	294
Disposals			(2,958)	(84)
Movements recognised in Other Comprehensive Income			(59)	795
At 31 December			2,061	4,947

 

The valuation technique used for the fair value calculation, the unobservable inputs and sensitivities are discussed below.

 

Hetz Ventures, L.P.

Arbuthnot Latham currently holds an equity investment in Hetz Ventures, L.P. which was launched in January 2018. The primary objective was to generate attractive risk-adjusted returns for its Partners, principally through long-term capital appreciation, by making, holding and disposing of equity and equity-related investments in early stage revenue generating Israeli technology companies, primarily in cyber, fin-tech and the disruptive software sectors. The company has committed to a capital contribution of USD2.5m of the total closing fund capital of USD132.5m. At 31 December 2025 Arbuthnot Latham & Co., Ltd had made capital contributions into the Fund of USD2.4m (2024: USD2.2m).

 

The investment is classified as FVOCI and is valued at fair value by Hetz Ventures, L.P. at £1.7m (2024: £1.7m). As at year end the fair value is deemed to be the Group's share of the fund based on what a third party would pay for the underlying investments.

 

The fair values provided by the Hetz Ventures funds are classified as significant unobservable inputs. Management have assessed that should the fund valuation decrease by 5% this would impact equity by a reduction of £84k and a reduction of 10% would impact equity by a reduction of £167k.

 

The tables below show the fair value of financial instruments carried at amortised cost by the level in the fair value hierarchy:

 

Group	Level 1	Level 2	Level 3	Total
At 31 December 2025	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	-	437,548	-	437,548
Loans and advances to banks	-	117,497	-	117,497
Debt securities at amortised cost	-	2,034,512	-	2,034,512
Loans and advances to customers	-	-	1,963,911	1,963,911
Other assets	-	-	7,011	7,011
	-	2,589,557	1,970,922	4,560,479
LIABILITIES
Deposits from banks	-	1,389	-	1,389
Deposits from customers	-	4,570,365	-	4,570,365
Other liabilities	-	-	20,493	20,493
Debt securities in issue	-	-	38,672	38,672
	-	4,571,754	59,165	4,630,919

 

Group	Level 1	Level 2	Level 3	Total
At 31 December 2024	£000	£000	£000	£000
ASSETS
Cash and balances at central banks	-	911,887	-	911,887
Loans and advances to banks	-	66,971	-	66,971
Debt securities at amortised cost	-	1,199,963	-	1,199,963
Loans and advances to customers	-	-	2,088,933	2,088,933
Other assets	-	-	7,758	7,758
	-	2,178,821	2,096,691	4,275,512
LIABILITIES
Deposits from banks	-	192,911	-	192,911
Deposits from customers	-	4,132,493	-	4,132,493
Other liabilities	-	-	6,229	6,229
Debt securities in issue	-	-	37,982	37,982
	-	4,325,404	44,211	4,369,615

 

Company	Level 1	Level 2	Level 3	Total
At 31 December 2025	£000	£000	£000	£000
ASSETS
Loans and advances to banks	-	7	4,753	4,760
Debt securities at amortised cost	-	38,781	-	38,781
	-	38,788	4,753	43,541
LIABILITIES
Other liabilities	-	-	1,824	1,824
Debt securities in issue	-	-	38,672	38,672
	-	-	40,496	40,496

 

Company	Level 1	Level 2	Level 3	Total
At 31 December 2024	£000	£000	£000	£000
ASSETS
Loans and advances to banks	-	7	913	920
Debt securities at amortised cost	-	38,103	-	38,103
	-	38,110	913	39,023
LIABILITIES
Other liabilities	-	-	1,812	1,812
Debt securities in issue	-	-	37,982	37,982
	-	-	39,794	39,794

 

All above assets and liabilities are carried at amortised cost. Therefore for these assets, the fair value hierarchy noted above relates to the disclosure in this note only.

 

Cash and balances at central banks

The fair value of cash and balances at central banks was calculated based upon the present value of the expected future principal and interest cash flows. The rate used to discount the cash flows was the market rate of interest at the balance sheet date.

 

At the end of each year, the fair value of cash and balances at central banks was calculated to be equivalent to their carrying value.

 

Loans and advances to banks

The fair value of loans and advances to banks was calculated based upon the present value of the expected future principal and interest cash flows. The rate used to discount the cash flows was the market rate of interest at the balance sheet date.

 

Loans and advances to customers

The fair value of loans and advances to customers was calculated based upon the present value of the expected future principal and interest cash flows. The rate used to discount the cash flows was the market rate of interest at the balance sheet date, and the same assumptions regarding the risk of default were applied as those used to derive the carrying value.

 

The Group provides loans and advances to commercial, corporate and personal customers at both fixed and variable rates. To determine the fair value of loans and advances to customers, loans are segregated into portfolios of similar characteristics. A number of techniques are used to estimate the fair value of fixed rate lending; these take account of expected credit losses based on historic trends and expected future cash flows.

 

For the acquired loan book, the discount on acquisition is used to determine the fair value in addition to the expected credit losses and expected future cash flows.

 

Debt securities at amortised cost

The fair value of debt securities is based on the quoted mid-market share price.

 

Derivatives

Where derivatives are traded on an exchange, the fair value is based on prices from the exchange.

 

Deposits from banks

The fair value of amounts due to banks was calculated based upon the present value of the expected future principal and interest cash flows. The rate used to discount the cash flows was the market rate of interest at the balance sheet date.

 

At the end of each year, the fair value of amounts due to banks was calculated to be equivalent to their carrying value due to the short maturity term of the amounts due.

 

Deposits from customers

The fair value of deposits from customers was calculated based upon the present value of the expected future principal and interest cash flows. The rate used to discount the cash flows was the market rate of interest at the balance sheet date for the notice deposits and deposit bonds. The fair value of instant access deposits is equal to book value as they are repayable on demand.

 

Financial liabilities

The fair value of other financial liabilities was calculated based upon the present value of the expected future principal cash flows.

 

At the end of each year, the fair value of other financial liabilities was calculated to be equivalent to their carrying value due to their short maturity. The other financial liabilities include all other liabilities other than non-interest accruals.

 

Debt Securities in Issue

The fair value of debt securities in issue was calculated based upon the present value of the expected future principal cash flows.

 

7.  Capital management (unaudited)

The Group's capital management policy is focused on optimising shareholder value over the long term. There is a clear focus on delivering organic growth and ensuring capital resources are sufficient to support planned levels of growth. The Board regularly reviews the capital position.

 

The Group and the individual banking operation, are authorised by the Prudential Regulation Authority ("PRA") and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. One of the requirements for the Group and the individual banking operation is that capital resources must be in excess of capital requirements at all times. 

 

In accordance with the parameters set out in the PRA Rulebook, the Internal Capital Adequacy Assessment Process ("ICAAP") is embedded in the risk management framework of the Group. The ICAAP identifies and assesses the risks to the Group, considers how these risks can be mitigated and demonstrates that the Group has sufficient resources, after mitigating actions, to withstand all reasonable scenarios.  

 

The Board determines the level of capital the Group needs to hold. The Group holds Pillar 1 capital for credit, market and operational risk as a starting point, and then considers whether each of the calculations delivers a sufficient amount of capital to cover risks to which the Group is, or could be, exposed. Where the Board considers that the Pillar 1 calculations do not adequately cover the risks, an additional Pillar 2A capital requirement is applied. The PRA will set a Pillar 2A capital requirement in light of the calculations included within the ICAAP. The Group's Total Capital Requirement, as issued by the PRA, is the sum of the Pillar 1 and the Pillar 2A capital requirements. The current Total Capital Requirement of the Group is 8.05%.

 

The Group's regulatory capital is divided into two tiers:

·       Common equity Tier 1 which comprises shareholder funds less regulatory deductions for intangible assets, including goodwill, and deferred tax assets that do not arise from temporary differences.

·       Tier 2 comprises qualifying subordinated loans.

 

The following table shows the regulatory capital resources as managed by the Group:
	2025	2024
	£000	£000
CET1 Capital
Share capital	167	167
Share premium	11,606	11,606
Capital redemption reserve	19	19
Treasury shares	(1,299)	(1,299)
Retained earnings*	265,738	254,575
IFRS 9 - Transitional add back	-	71
Fair value reserve	167	1,888
Deduction for goodwill	(5,202)	(5,202)
Deduction for other intangibles	(28,246)	(25,363)
Deduction for deferred tax asset that do not arise from temporary differences	(1,349)	(1,977)
Deduction for Prudent valuation	(3)	(8)
CET1 capital resources	241,598	234,477
Tier 2 Capital
Debt securities in issue	38,672	37,982
Total Tier 2 capital resources	38,672	37,982
Own Funds (sum of Tier 1 and Tier 2)	280,270	272,459
CET1 Capital Ratio (CET1 Capital/Total Risk Exposure)*	13.3%	13.2%
Total Capital Ratio (Own Funds/Total Risk Exposure)*	15.4%	15.3%

* Includes current year audited profit.

 

Capital ratios are reviewed on a monthly basis to ensure that external requirements are adhered to. During the period all regulated entities have complied with all of the externally imposed capital requirements to which they are subject.

 

Pillar 3 complements the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2). Its aim is to encourage market discipline by developing a set of disclosure requirements which will allow market participants to assess key pieces of information on a firm's capital resources, risk exposures and risk assessment processes. Our Pillar 3 disclosures for the year ended 31 December 2025 are published as a separate document on the Group's website under Investor Relations. These disclosures are prepared in accordance with the PRA rules for Small Domestic Deposit Takers.

 

8.  Net interest income

Interest income and expense are recognised in the Statement of Comprehensive Income for all instruments measured at amortised cost using the effective interest rate ("EIR") method.

 

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

•      the gross carrying amount of the financial asset; or

•      the amortised cost of the financial liability.

 

The 'gross carrying amount of a financial asset' is the amortised cost of a financial asset before adjusting for any expected credit loss allowance. When calculating the effective interest rate, the Group takes into account all contractual terms of the financial instrument but does not consider expected credit losses.

 

The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest income or expense.

 

For financial assets that have become credit impaired following initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis.

 

The Group monitors the actual cash flows for each acquired book and where they diverge significantly from expectation, the future cash flows are reset. Expectation may diverge due to factors such as one-off payments or expected credit losses. In assessing whether to adjust future cash flows on an acquired portfolio, the Group considers the cash variance on an absolute and percentage basis. The Group also considers the total variance across all acquired portfolios. Where cash flows for an acquired portfolio are reset, they are discounted at the EIR to derive a new carrying value, with changes taken to the Statement of Comprehensive Income as interest income. The EIR rate is adjusted for events where there is a change to the reference interest rate (e.g. Bank of England base rate) affecting portfolios with a variable interest rate which will impact future cash flows. The revised EIR is the rate which exactly discounts the revised cash flows to the net carrying value of the loan portfolio.

 

Net interest income is analysed as follows.

 

			2025	2024
			£000	£000
Cash and balances at central banks			33,114	33,099
Loans and advances to banks			3,211	4,907
Debt securities at amortised cost			67,927	57,025
Loans and advances to customers			142,996	168,404
Total interest income			247,248	263,435
Deposits from banks			(6,628)	(9,566)
Deposits from customers			(115,465)	(120,692)
Debt securities in issue			(3,751)	(4,179)
Interest on lease liabilities			(3,278)	(3,131)
Total interest expense			(129,122)	(137,568)
Net interest income			118,126	125,867

9.  Fee and commission income

Fee and commission income which is integral to the EIR of a financial asset are included in the effective interest rate (see Note 8).

 

All other fee and commission income is recognised as the related services are performed, under IFRS 15, revenues from Contracts with Customers. Fee and commission income is reported in the below segments.

 

Types of fee	Description
Banking commissions	- Banking Tariffs are charged monthly for services provided.
Investment management fees	- Annual asset management fees relate to a single performance obligation that is continuously provided over an extended period of time.
Wealth planning fees	- Provision of bespoke, independent Wealth Planning solutions to Arbuthnot Latham's clients. Fees are recognised as the service is performed.
Foreign exchange fees	- Provides foreign currencies for our clients to purchase/sell.

 

The principles in applying IFRS 15 to fee and commission use the following 5 step model:

•      identify the contract(s) with a customer;

•      identify the performance obligations in the contract;

•      determine the transaction price;

•      allocate the transaction price to the performance obligations in the contract; and

•      recognise revenue when or as the Group satisfies its performance obligations.

 

Asset and other management, advisory and service fees are recognised, under IFRS 15, as the related services are performed. The same principle is applied for wealth planning services that are continuously provided over an extended period of time.

 

The Group includes the transaction price of variable consideration only when it is highly probable that a significant reversal in the amount recognised will not occur or when the variable element becomes certain.

 

Fee and commission income is disaggregated below and includes a total for fees in scope of IFRS 15:
Group	Banking	Wealth Management	RAF	ACABL	AAG	All other divisions	Total
At 31 December 2025	£000	£000	£000	£000	£000	£000	£000
Banking commissions	3,871	-	14	7,182	-	-	11,067
Foreign exchange fees	1,700	-	-	-	-	1,819	3,519
Investment management fees	-	15,919	-	-	-	-	15,919
Wealth planning fees	-	596	-	-	-	-	596
Broker commissions	-	-	-	-	588	-	588
Total fee and commission income	5,571	16,515	14	7,182	588	1,819	31,689

 

Group	Banking	Wealth Management	RAF	ACABL	All other divisions	Total
At 31 December 2024	£000	£000	£000	£000	£000	£000
Banking and services fees	2,988	-	169	9,922	1	13,080
Foreign exchange fees	1,509	-	-	-	1,013	2,522
Investment management fees	-	13,183	-	-	-	13,183
Wealth planning fees	-	357	-	-	-	357
Total fee and commission income	4,497	13,540	169	9,922	1,014	29,141

 

10.  Gross profit from leasing activities

 

Accounting for operating lease and related income:

The statement of comprehensive income is credited with:

•      Income from operating leases recognised on a straight-line basis over the period of the lease.

•      The sales proceeds from the sale of vehicles at the end of operating lease agreements, when a vehicle is transferred to a buyer, and the buyer obtains control of the vehicle.

•      Income from service and maintenance contracts recognised on a straight-line method.

 

Revenue from service and maintenance contracts is recognised in accordance with the principles of IFRS 15, Revenue from contracts with customers. Payments from customers for service and maintenance contracts are deferred on the balance sheet until the point they are recognised and when the performance obligations are met. For these contracts the obligation or part of the obligation is satisfied at the point the costs for service and maintenance are incurred.

 

Revenue is the aggregate of operating lease income and service and maintenance contracts. Revenue also includes the sales proceeds from the sale of vehicles at the end of operating lease agreements and other returned vehicles. Amounts recognised within gross profit from leasing activities in the statement of comprehensive income are set out below:

 

	2025	2024
Group	£000	£000
Income from lease or rental of commercial vehicles	79,114	72,981
Sale of commercial vehicles	25,971	27,003
Income from service and maintenance contracts	13,237	10,183
Other income	247	665
Revenue	118,569	110,832
Depreciation and rental costs of commercial vehicles held for lease or rent	(57,036)	(51,339)
Carrying amount of vehicles disposed	(27,439)	(24,009)
Service & maintenance cost	(12,682)	(9,744)
Other expenditure	(309)	(209)
Cost of goods sold	(97,466)	(85,301)
Gross profit from leasing activities	21,103	25,531

 

11.  Net impairment loss on financial assets

(a) Assets carried at amortised cost

The Group recognises loss allowances on an expected credit loss basis for all financial assets measured at amortised cost, including loans and advances, debt securities and loan commitments.

 

Credit loss allowances are measured as an amount equal to lifetime ECL, except for the following assets, for which they are measured as 12 month ECL:

•      Financial assets determined to have a low credit risk at the reporting date. The assets, to which the low credit risk exemption applies, include cash and balances at central banks (Note 17), loans and advances to banks (Note 18) and debt securities at amortised cost (Note 19). These assets are all considered investment grade.

•      Financial assets which have not experienced a significant increase in credit risk since their initial recognition.

 

Impairment model

The IFRS 9 impairment model adopts a three stage approach based on the extent of credit deterioration since origination:

 

•      Stage 1: 12‐month ECL applies to all financial assets that have not experienced a significant increase in credit risk ("SICR") since origination and are not credit impaired. The ECL will be computed based on the probability of default events occurring over the next 12 months. Stage 1 includes the current performing loans (up to date and in arrears of less than 10 days) and those within Heightened Business Monitoring ("HBM"). Accounts requiring HBM are classified as a short-term deterioration in financial circumstances and are tightly monitored with additional proactive client engagement, but not deemed SICR.

 

•      Stage 2: When a financial asset experiences a SICR subsequent to origination, but is not in default, it is considered to be in Stage 2. This requires the computation of ECL based on the probability of all possible default events occurring over the remaining life of the financial asset. Provisions are higher in this stage (except where the value of charge against the financial asset is sufficient to enable recovery in full) because of an increase in credit risk and the impact of a longer time horizon being considered (compared to 12 months in Stage 1).

 

Evidence that a financial asset has experienced a SICR includes, but is not limited to, the following considerations:

•      A loan is in arrears between 31 and 90 days;

•      Forbearance action has been undertaken;

•      Any additional reasons whereby the Probability of Default is considered to have increased significantly since inception of the facility.

 

•      Stage 3: Financial assets that are credit impaired are included in this stage. Similar to Stage 2, the allowance for credit losses will continue to capture the lifetime expected credit losses. At each reporting date, the Group will assess whether financial assets carried at amortised cost are in default. A financial asset will be considered to be in default when an event(s) that has a detrimental impact on estimated future cash flows have occurred.

 

Evidence that a financial asset is within Stage 3 includes, but is not limited to, the following data:

•      A loan is in arrears in excess of 90 days;

•      Breach of terms of forbearance;

•      Recovery action is in hand;

•      Bankruptcy proceedings or similar insolvency process of a client, or director of a company;

•      Any additional reasons where default and/or recovery action is considered inevitable.

 

The credit risk of financial assets that become credit impaired are not expected to improve, beyond the extent that they are no longer considered to be credit impaired.

 

A borrower will move back into Stage 1 conditional upon both a minimum of six months' good account conduct and the improvement of the Client's situation to the extent that the credit risk has receded sufficiently and a full repayment of the loan, without recourse to the collateral, is likely.

 

Presentation of allowance for ECL in the statement of financial position

For financial assets measured at amortised cost, these are presented as the gross carrying amount of the assets minus a deduction for the ECL.

 

Write-off

Loans and debt securities are written off (either partially or in full) when there is no realistic prospect of recovery. This is the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the outstanding amount due.

 

(b) Renegotiated loans

Renegotiated loans are derecognised if the new terms are significantly different to the original agreement. Loans that have been modified to such an extent the renegotiated loan is a substantially different to the original loan, are no longer considered to be past due and are treated as new loans.

 

(c) Forbearance

Under certain circumstances, the Group may use forbearance measures to assist borrowers who are experiencing significant financial hardship. Any forbearance support is assessed on a case by case basis in line with best practice and subject to regular monitoring and review. The Group seeks to ensure that any forbearance results in a fair outcome for both the customer and the Group.

 

(d) Assets classified as financial investments

Equity instruments at fair value through other comprehensive income

Equity investments are not subject to impairment charges recognised in the income statement. Any fair value gains and losses are recognised in OCI which are not subject to reclassification to the income statement on derecognition.

 

	2025	2024
	£000	£000
Net Impairment losses / (reversals) on financial assets	2,501	6,275
Of which:
Loans and advances to customers
Stage 1	82	(242)
Stage 2	(1,450)	1,192
Stage 3	3,812	5,331
Treasury assets (Balances at central banks, Loans and advances to banks and Debt securities at amortised cost)
Stage 1	57	(6)
	2,501	6,275
During the year, the Group recovered £94k (2024: £17k) of loans which had previously been written off.

 

12.  Other income

 

Other income includes £3.25m in relation to a settled claim related to a negligent property valuation.

 

Other items reflected in other income include rental income from the investment property of £0.5m (2024: £0.5m).

 

Accounting for rental income

Rental income is recognised on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income over the term of the lease.

 

13.  Operating expenses
	2025	2024
Operating expenses comprise:	£000	£000
Staff costs, including Directors:
Wages, salaries and bonuses	80,518	77,940
Social security costs	10,120	8,875
Pension costs	3,961	3,825
Share based payment transactions (Note 39)	29	(132)
Depreciation (Note 28, 29)	7,060	6,119
Amortisation of intangibles (Note 27)	3,680	3,018
Premises and equipment*	20,918	16,959
Consultancy, legal and professional fees	9,059	11,051
Marketing and advertising*	1,839	1,700
Financial Services Compensation Scheme Levy	894	721
Expenses relating to short-term leases	791	1,066
Write down of repossessed and commercial properties	-	1,359
Charitable donations	42	162
Loss/(profit) on disposals of property, plant and equipment	3	(37)
Other administrative expenses*	8,294	7,180
Total operating expenses from continuing operations	147,208	139,806
*Prior year expenses have been re-presented to better reflect internal cost categories

 

Details on Directors remuneration are disclosed in the Remuneration Report on page 53.

 

	2025	2024
Remuneration of the auditor and its associates, excluding VAT, was as follows:	£000	£000
Fees payable to the Company's auditor for the audit of the Company's annual accounts	79	138
Audit of the accounts of subsidiaries	710	638
Audit related assurance services	155	155
Total fees payable	944	931

 

14.  Income tax expense

Current income tax which is payable on taxable profits is recognised as an expense in the period in which the profits arise. Income tax recoverable on tax allowable losses is recognised as an asset only to the extent that it is regarded as recoverable by offset against current or future taxable profits.

 

	2025	2024
United Kingdom corporation tax at 25% (2024: 25%)	£000	£000
Current taxation
Corporation tax charge - current year	7,299	7,490
Corporation tax charge - adjustments in respect of prior years	(221)	1,496
	7,078	8,986
Deferred taxation
Origination and reversal of temporary differences	(996)	1,790
Adjustments in respect of prior years	292	(540)
	(704)	1,250
Income tax expense	6,374	10,236
Tax reconciliation
Profit before tax	24,184	35,089
Tax at 25% (2024: 25%)	6,046	8,773
Other permanent differences	256	236
Tax rate change	-	272
Prior period adjustments	72	955
Corporation tax charge for the year	6,374	10,236
The effective tax rate for the year is 26.36%

 

15.  Average number of employees
	2025	2024
Banking	291	286
RAF	66	59
ACABL	37	35
AAG	149	146
All Other Divisions	393	369
Group Centre	18	19
	954	914

 

Accounting for employee benefits

(a) Post-retirement obligations

The Group contributes to a defined contribution scheme and to individual defined contribution schemes for the benefit of certain employees. The schemes are funded through payments to insurance companies or trustee-administered funds at the contribution rates agreed with individual employees.

 

The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

There are no post-retirement benefits other than pensions.

 

(b) Share-based compensation - cash settled

The Group adopts a Black-Scholes valuation model in calculating the fair value of the share options as adjusted for an attrition rate for members of the scheme and a probability of pay-out reflecting the risk of not meeting the terms of the scheme over the vesting period. The number of share options that are expected to vest are reviewed at least annually.

 

The fair value of cash settled share-based payments is recognised as personnel expenses in the profit or loss with a corresponding increase in liabilities over the vesting period. The liability is remeasured at each reporting date and at settlement date based on the fair value of the options granted, with a corresponding adjustment to personnel expenses.

 

(c) Deferred cash bonus scheme

The Bank has a deferred cash bonus scheme for senior employees. The cost of the award is recognized in the income statement over the period to which the performance relates.

 

(d) Short-term incentive plan

The Group has a short-term incentive plan payable to employees of one of its subsidiary companies. The award of a profit share is based on a percentage of the net profit of a Group subsidiary.

 

16.  Earnings per ordinary share

Basic

Basic earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares of 16,319,926 (2024: 16,319,926) in issue during the year (this includes Ordinary shares and Ordinary Non-Voting shares).

 

Diluted

There are no convertible instruments, conditional ordinary shares or options or warrants that would create diluted earnings per share. Therefore, the diluted earnings per share is equal to basic earnings per share.

 

	2025	2024
	£000	£000
Profit after tax attributable to equity holders of the Company	17,810	24,854
	2025	2024
	p	p
Basic Earnings per share	109.1	152.3

 

17.  Cash and balances at central banks
	2025	2024
Group	£000	£000
Cash and balances at central banks	437,548	911,887

 

ECL has been assessed to be immaterial.

 

Surplus funds are mainly held in the Bank of England reserve account, with the remainder held in certificates of deposit and fixed and floating rate notes in investment grade banks.

 

18.  Loans and advances to banks
	2025	2024
Group	£000	£000
Placements with banks included in cash and cash equivalents (Note 41)	117,497	66,971
The table below presents an analysis of loans and advances to banks by rating agency designation as at 31 December, based on Moody's short and long term ratings:
	2025	2024
Group	£000	£000
A1	117,497	66,971
	117,497	66,971
None of the loans and advances to banks are past due (2024: nil). ECL has been assessed as immaterial.
	2025	2024
Company	£000	£000
Placements with banks included in cash and cash equivalents (Note 41)	4,760	920
Loans and advances to banks include bank balances of £Nil (2024: £Nil) with Arbuthnot Latham & Co., Ltd. ECL has been assessed as insignificant.

 

19.  Debt securities at amortised cost

Debt securities represent certificates of deposit.

 

The movement in debt securities may be summarised as follows:
	2025	2024
Group	£000	£000
At 1 January	1,199,847	942,437
Exchange difference	(10,747)	2,564
Additions	3,273,056	1,621,196
Redemptions	(2,428,998)	(1,366,350)
At 31 December	2,033,158	1,199,847

 

The table below presents an analysis of debt securities by rating agency designation at 31 December, based on Moody's long term ratings:
	2025	2024
Group	£000	£000
Aaa	554,058	476,103
Aa1	106,986	151,619
Aa2	241,133	126,533
Aa3	1,096,188	413,252
A1	34,793	32,340
	2,033,158	1,199,847
None of the debt securities are past due (2024: nil). ECL has been assessed as immaterial.
The movement in debt securities for the Company may be summarised as follows:
	2025	2024
Company	£000	£000
At 1 January	38,103	38,129
Exchange difference on monetary assets	649	(593)
Additions	29	28,834
Redemptions	-	(28,267)
At 31 December	38,781	38,103
The exposure relates to Arbuthnot Latham & Co., Limited, which is unrated.  A new facility of £26m subordinated loan notes were issued on 3 June 2024 and are denominated in Pound Sterling. The principal amount outstanding at 31 December 2025 was £26m (2024: £26m). The notes carry interest at 7.25% over 3 month average SONIA and are repayable at par in June 2034 unless redeemed or repurchased earlier by the Arbuthnot Latham & Co., Limited. On 24 May 2023 an additional €15m subordinated loan notes were issued and denominated in EURO. The principal amount outstanding at 31 December 2025 was €15m / £13.1m (2024: €15m / £13m). The notes carry interest at 3% over 3 Month EURIBOR and are repayable at par in August 2035. ECL has been assessed as immaterial.

 

20.  Derivative financial instruments

All derivatives are recognised at their fair value. Fair values are obtained using recent arm's length transactions or calculated using valuation techniques such as discounted cash flow models at the prevailing interest rates, and for structured notes classified as financial instruments fair values are obtained from quoted market prices in active markets. Derivatives are shown in the Statement of Financial Position as assets when their fair value is positive and as liabilities when their fair value is negative.

 

 

	2025				2024
	Contract/ notional amount	Fair value assets	Fair value liabilities		Contract/ notional amount	Fair value assets	Fair value liabilities
Group	£000	£000	£000		£000	£000	£000
Interest rate swaps	33,750	1,398	-		33,750	2,970	-
	33,750	1,398	-		33,750	2,970	-

 

The principal derivatives used by the Group are over the counter exchange rate contracts. Exchange rate related contracts include currency swaps and interest rate swaps.

 

A forward foreign exchange contract is an agreement to buy or sell a specified amount of foreign currency on a specified future date at an agreed rate. Currency swaps generally involve the exchange of interest payment obligations denominated in different currencies; exchange of principal can be notional or actual. The currency swaps are settled net and therefore the fair value is small in comparison to the contract/notional amount. Interest rate swaps are used to hedge against the Profit or Loss impact resulting from the movement in interest rates, due to some exposures having fixed rate terms.

 

The Group primarily uses investment graded banks as counterparties for derivative financial instruments.

 

The table below presents an analysis of derivative financial instruments contract/notional amounts by rating agency designation of
counterparty bank at 31 December, based on Moody's long term ratings:
	2025	2024
Group	£000	£000
A1	33,750	33,750
	33,750	33,750

 

21. Derivatives held for risk management and hedge accounting

See accounting policy in Note 3.

 

Derivatives held for risk management

The following table describes the fair values of derivatives held for risk management purposes by type of risk exposure.

 

	2025			2024
	Fair value assets	Fair value liabilities		Fair value assets	Fair value liabilities
Group	£000	£000		£000	£000
Interest rate - Designated fair value hedges	1,398	-		2,970	-
Total interest rate derivatives	1,398	-		2,970	-

 

Details of derivatives designated as hedging instruments in qualifying hedging relationships are provided in the hedge accounting section below. The instruments used principally include interest rate swaps.

 

For more information about how the Group manages its market risks, see Note 6.

 

Hedge accounting

Fair value hedges of interest rate risk

The Group uses interest rate swaps to hedge its exposure to changes in the fair values of fixed rate pound sterling loans to customers in respect of the SONIA (The Sterling Overnight Index Average) benchmark interest rate. Pay-fixed/receive-floating interest rate swaps are matched to specific fixed-rate loans and advances with terms that closely align with the critical terms of the hedged item.

 

The Group's approach to managing market risk, including interest rate risk, is discussed in Note 6. The Group's exposure to interest rate risk is disclosed in Note 6. Interest rate risk to which the Group applies hedge accounting arises from fixed-rate loans and advances, whose fair value fluctuates when benchmark interest rates change. The Group hedges interest rate risk only to the extent of benchmark interest rates because the changes in fair value of a fixed-rate loan are significantly influenced by changes in the benchmark interest rate (SONIA). Hedge accounting is applied where economic hedging relationships meet the hedge accounting criteria.

 

By using derivative financial instruments to hedge exposures to changes in interest rates, the Group also exposes itself to credit risk of the derivative counterparty, which is not offset by the hedged item. The Group minimises counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties whose credit rating is not lower than A.

 

Before fair value hedge accounting is applied by the Group, the Group determines whether an economic relationship between the hedged item and the hedging instrument exists based on an evaluation of the qualitative characteristics of these items and the hedged risk that is supported by quantitative analysis. The Group considers whether the critical terms of the hedged item and hedging instrument closely align when assessing the presence of an economic relationship. The Group evaluates whether the fair value of the hedged item and the hedging instrument respond similarly to similar risks. The Group further supports this qualitative assessment by using regression analysis to assess whether the hedging instrument is expected to be and has been highly effective in offsetting changes in the fair value of the hedged item.

 

The Group establishes a hedge ratio by aligning the par amount of the fixed-rate loan and the notional amount of the interest rate swap designated as a hedging instrument. Under the Group policy, in order to conclude that a hedging relationship is effective, all of the following criteria should be met.

•      The regression co-efficient (R squared), which measures the correlation between the variables in the regression, is at least 0.8.

•      The slope of the regression line is within a 0.8-1.25 range.

•      The confidence level of the slope is at least 95%.

 

In these hedging relationships, the main sources of ineffectiveness are:

•      the effect of the counterparty and the Group's own credit risk on the fair value of the interest rate swap, which is not reflected in the fair value of the hedged item attributable to the change in interest rate; and

•      differences in payable/receivable fixed rates of the interest rate swap and the loans.

 

There were no other sources of ineffectiveness in these hedging relationships.

 

The effective portion of fair value gains on derivatives held in qualifying fair value hedging relationships and the hedging gain or loss on the hedged items are included in net interest income.

 

At 31 December 2025 and 31 December 2024, the Group held the following interest rate swaps as hedging instruments in fair value hedges of interest risk.

 

 

	Maturity 2025				Maturity 2024
Group	Less than 1 year	1-5 years	More than 5 years		Less than 1 year	1-5 years	More than 5 years
Risk category: Interest rate risk - Hedge of loans and advances
Nominal amount (in £000)	-	33,750	-		-	33,750	-
Average fixed interest rate	-	0.09%	-		-	0.09%	-
The amounts relating to items designated as hedging instruments and hedge ineffectiveness at 31 December 2025 were as follows:
					2025
					Nominal amount	Carrying amount
						Assets	Liabilities
Group					£000	£000	£000
Interest rate risk
Interest rate swaps - hedge of loans and advances					33,750	1,398	-
The amounts relating to items designated as hedging instruments and hedge ineffectiveness at 31 December 2024 were as follows:
					2024
					Nominal amount	Carrying amount
						Assets	Liabilities
Group					£000	£000	£000
Interest rate risk
Interest rate swaps - hedge of loans and advances					33,750	2,970	-

 

The amounts relating to items designated as hedged items at 31 December 2025 were as follows:
						2025
						Carrying amount
						Assets	Liabilities
Group						£000	£000
Loans and advances						32,682	-
The amounts relating to items designated as hedged items at 31 December 2024 were as follows:
						2024
						Carrying amount
						Assets	Liabilities
Group						£000	£000
Loans and advances						31,189	-

 

Group	2025
Line item in the statement of financial position where the hedging instrument is included	Change in fair value used for calculating hedge ineffectiveness	Ineffectiveness recognised in profit or loss
	£000	£000
Derivative financial instruments	(1,573)	(80)

 

Group	2024
Line item in the statement of financial position where the hedging instrument is included	Change in fair value used for calculating hedge ineffectiveness	Ineffectiveness recognised in profit or loss
	£000	£000
Derivative financial instruments	(2,740)	62

 

Group	2025
	Change in value used for calculating hedge ineffectiveness		Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item
Line item in the statement of financial position in which the hedged item is included			Assets	Liabilities
	£000		£000	£000
Loans and advances to customers	1,493		(1,068)	-

 

Group	2024
	Change in value used for calculating hedge ineffectiveness			Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item
Line item in the statement of financial position in which the hedged item is included				Assets			Liabilities
	£000			£000			£000
Loans and advances to customers	3,360			(3,169)			608
22.  Loans and advances to customers
Analyses of loans and advances to customers:
					2025
					Stage 1	Stage 2		Stage 3	Total
Group					£000	£000		£000	£000
Gross loans and advances at 1 January 2025					1,929,178	103,276		73,347	2,105,801
Originations and repayments					(78,388)	(20,873)		(31,905)	(131,166)
Write-offs					-	-		(930)	(930)
Transfer to Stage 1					23,554	(21,430)		(2,124)	-
Transfer to Stage 2					(8,221)	10,241		(2,020)	-
Transfer to Stage 3					(9,477)	(17,832)		27,309	-
Gross loans and advances at 31 December 2025					1,856,646	53,382		63,677	1,973,705
Less allowances for ECLs (see Note 23)					(707)	(172)		(12,284)	(13,163)
Net loans and advances at 31 December 2025					1,855,939	53,210		51,393	1,960,542
					2024
					Stage 1	Stage 2		Stage 3	Total
Group					£000	£000		£000	£000
Gross loans and advances at 1 January 2024					1,908,942	82,752		79,331	2,071,025
Originations					110,716	(33,647)		(40,769)	36,300
Repayments and write-offs					-	-		(1,524)	(1,524)
Transfer to Stage 1					12,379	(11,717)		(662)	-
Transfer to Stage 2					(83,360)	84,328		(968)	-
Transfer to Stage 3					(19,499)	(18,440)		37,939	-
Gross loans and advances at 31 December 2024					1,929,178	103,276		73,347	2,105,801
Less allowances for ECLs (see Note 23)					(665)	(1,623)		(9,301)	(11,589)
Net loans and advances at 31 December 2024					1,928,513	101,653		64,046	2,094,212
*Originations include further advances and drawdowns on existing commitments.

 

For a maturity profile of loans and advances to customers, refer to Note 6.

Loans and advances to customers by division (net of ECL):
	2025
	Banking	RAF	ACABL	AAG	All Other Divisions	Total
Group	£000	£000	£000	£000	£000	£000
Stage 1	1,288,476	280,674	189,461	97,326	-	1,855,937
Stage 2	18,410	4,801	29,901	100	-	53,212
Stage 3	49,761	1,604	-	28	-	51,393
At 31 December 2025	1,356,647	287,079	219,362	97,454	-	1,960,542
	2024
	Banking	RAF	ACABL	AAG	All Other Divisions	Total
Group	£000	£000	£000	£000	£000	£000
Stage 1	1,420,274	242,417	189,011	76,811	-	1,928,513
Stage 2	59,035	4,355	38,023	240	-	101,653
Stage 3	60,867	2,018	1,161	-	-	64,046
At 31 December 2024	1,540,176	248,790	228,195	77,051	-	2,094,212
Analyses of past due loans and advances to customers by division:
		2025
		Banking	RAF	ACABL	All Other Divisions	Total
Group		£000	£000	£000	£000	£000
Up to 30 days		7,626	5,140	-	-	12,766
Stage 1		7,183	3,455	-	-	10,638
Stage 2		443	1,510	-	-	1,953
Stage 3		-	175	-	-	175
30 - 60 days		1,603	1,745	-	-	3,348
Stage 2		1,494	1,206	-	-	2,700
Stage 3		109	539	-	-	648
60 - 90 days		2,528	192	-	-	2,720
Stage 2		2,528	168	-	-	2,696
Stage 3		-	24	-	-	24
Over 90 days		53,526	1,271	-	721	55,518
Stage 2*		1,189	-	-	-	1,189
Stage 3		52,337	1,271	-	721	54,329
At 31 December 2025		65,283	8,348	-	721	74,352
* These represent forborne customers
Analyses of past due loans and advances to customers by division:
		2024
		Banking	RAF	ACABL	All Other Divisions	Total
Group		£000	£000	£000	£000	£000
Up to 30 days		10,966	4,214	-	-	15,180
Stage 1		8,782	1,632	-	-	10,414
Stage 2		1,971	1,989	-	-	3,960
Stage 3		213	593	-	-	806
30 - 60 days		15,867	211	-	-	16,078
Stage 2		5,347	137	-	-	5,484
Stage 3		10,520	74	-	-	10,594
60 - 90 days		12,759	53	-	368	13,180
Stage 2		10,470	-	-	-	10,470
Stage 3		2,289	53	-	368	2,710
Over 90 days		58,485	1,411	-	144	60,040
Stage 2		4,702	-	-	144	4,846
Stage 3		53,783	1,411	-	-	55,194
At 31 December 2024		98,077	5,889	-	512	104,478

 

Loans and advances to customers include finance lease receivables as follows:
	2025	2024
Group	£000	£000
Gross investment in finance lease receivables:
- No later than 1 year	162,460	142,107
- Later than 1 year and no later than 5 years	263,237	229,630
- Later than 5 years	17,654	958
	443,351	372,695
Unearned future finance income on finance leases	(58,686)	(46,856)
Net investment in finance leases	384,665	325,839
The net investment in finance leases may be analysed as follows:
- No later than 1 year	137,588	103,719
- Later than 1 year and no later than 5 years	233,699	221,316
- Later than 5 years	13,378	804
	384,665	325,839

 

(b) Loans and advances renegotiated

Restructuring activities include external payment arrangements, modification and deferral of payments. Following restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar accounts. Restructuring policies and practices are based on indicators or criteria which, in the judgement of management, indicate that payment will most likely continue. These policies are kept under continuous review. Renegotiated loans that would otherwise be past due or impaired totalled £Nil (2024: £Nil).

 

(c) Collateral held

Collateral is measured at fair value less costs to sell. Most of the loans are secured by property. The fair value of the collateral held against loans and advances in Stage 3 is £89m (2024: £106m), against loans of £63.5m (2024: £73.3m). The weighted average loan-to-value of loans and advances in Stage 3 is 71.2% (2024: 69.1%).

23.  Allowances for impairment of loans and advances
An analysis of movements in the allowance for ECLs (2025):
		Stage 1	Stage 2	Stage 3	Total
Group		£000	£000	£000	£000
At 1 January 2025		665	1,623	9,301	11,589
Transfer to Stage 1		2	(2)	-	-
Transfer to Stage 2		(6)	6	-	-
Transfer to Stage 3		(3)	(1,609)	1,612	-
Current year charge		237	157	2,347	2,741
Change in assumptions		(188)	(2)	(148)	(338)
Repayments and write-offs		-	-	(829)	(829)
At 31 December 2025		707	173	12,283	13,163

 

An analysis of movements in the allowance for ECLs (2024):
		Stage 1	Stage 2		Stage 3		Total
Group		£000	£000		£000		£000
At 1 January 2024		902	427		5,479		6,808
Transfer to Stage 2		(17)	17		-		-
Transfer to Stage 3		(43)	(1)		44		-
Current year charge		(127)	1,207		5,593		6,673
Change in assumptions		(50)	(27)		(291)		(368)
Repayments and write-offs		-	-		(1,524)		(1,524)
At 31 December 2024		665	1,623		9,301		11,589
24.  Other assets
				2025		2024
Group				£000		£000
Trade receivables				7,011		7,758
Inventory				20,644		27,349
Prepayments and accrued income				22,592		16,594
				50,247		51,701
Trade receivables
Gross balance				7,127		7,818
Allowance for bad debts				(116)		(60)
Net receivables				7,011		7,758

 

Inventory

Inventory is measured at the lower of cost or net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

 

As at 31 December 2025 inventory included the following 3 properties:

-       Pinnacle Universal is a special purpose vehicle, 100% owned by the Bank, which owns land that is currently in the process of being redeveloped with a view to selling off as individual residential plots. The value of the property at 31 December 2025 is £3.4m (2024: £5.0m).

-       In 2019 a property was reclassified from investment property to inventory due to being under development with a view to sell. The property was still owned at 31 December 2025 when it was valued at net realisable value less costs to sell of £9.3m (2024: cost of £9.5m).

-       The Group holds a property classified as inventory of £3.3m (2024: £3.0m). The property is located in the EU and relates to a Euro denominated loan where the property was repossessed.

 

	2025	2024
Company	£000	£000
Trade receivables	1,676	3,280
Prepayments and accrued income	63	75
	1,739	3,355
25.  Financial investments
	2025	2024
Group	£000	£000
Designated at fair value through other comprehensive income
- Unlisted securities	2,061	4,947
Total financial investments	2,061	4,947

 

Unlisted securities

All unlisted securities have been designated as FVOCI as they are held for strategic reasons. These securities are measured at fair value in the Statement of Financial Position with fair value gains/losses recognised in OCI.

 

Dividends received during the year amounted to £18k (2024: £19k).

 

An additional investment in an unlisted investment vehicle was made in 2025. The Group received a distribution of £0.1m (2024: £0.1m) which included a gain of £0.05m (2024: £0.1m) in the year.

 

26.  Deferred taxation

 

Accounting for deferred tax

Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax is not accounted for if it arises from the initial recognition of goodwill, the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, when they intend to settle current tax liabilities and assets on a net basis or the tax assets and liabilities will be realised simultaneously.

 

Deferred tax assets are recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised.

 

The deferred tax liability comprises:
	2025	2024
Group	£000	£000
Accelerated capital allowances and other short-term timing differences	(11,656)	(7,306)
Movement in fair value of financial investments FVOCI	(56)	(499)
Unutilised tax losses	1,349	1,977
IFRS 9 adjustment*	105	157
Deferred tax liability	(10,258)	(5,671)
At 1 January	(5,671)	(4,910)
Other Comprehensive Income - FVOCI	590	(199)
Profit and loss account - accelerated capital allowances and other short-term timing differences	(4,495)	(1,666)
Profit and loss account - tax losses	(629)	1,158
IFRS 9 adjustment*	(53)	(54)
Deferred tax liability at 31 December	(10,258)	(5,671)
* This relates to the timing difference on the adoption of IFRS 9 spread over 10 years for tax purposes.

 

	2025	2024
Company	£000	£000
Accelerated capital allowances and other short-term timing differences	120	2
Movement in fair value of financial investments	-	147
Unutilised tax losses	366	366
Deferred tax asset	486	515
At 1 January	515	520
Profit and loss account - accelerated capital allowances and other short-term timing differences	(29)	(5)
Deferred tax asset at 31 December	486	515

 

Deferred tax assets are recognised for tax losses to the extent that the realisation of the related tax benefit through future taxable profits is probable.

 

27.  Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

 

The Group reviews the goodwill for impairment at least annually or more frequently when events or changes in economic circumstances indicate that impairment may have taken place and carries goodwill at cost less accumulated impairment losses. Assets are grouped together in the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit" or "CGU"). For impairment testing purposes goodwill cannot be allocated to a CGU that is greater than a reported operating segment. CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The test for impairment involves comparing the carrying value of goodwill with the present value of pre-tax cash flows, discounted at a rate of interest that reflects the inherent risks of the CGU to which the goodwill relates, or the CGU's fair value if this is higher.

 

(b) Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over the expected useful lives (three to fifteen years).

 

Costs associated with maintaining computer software programs are recognised as an expense as incurred.

 

Costs associated with developing computer software which are assets in the course of construction, which management has assessed to not be available for use, are not amortised.

 

Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate: that the product is technically and commercially feasible, its intention and ability to complete the development and use the software in a manner that will generate future economic benefits, and that it can reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly attributable to developing the software, and are amortised over its useful life.

 

(c) Other intangibles

Other intangibles include trademarks, customer relationships, broker relationships, technology and banking licences acquired. These costs are amortised on a straight line basis over the expected useful lives (three to fourteen years).

 

(d) SaaS (Software as a Service) costs

The Group assesses its SaaS arrangements to determine whether the arrangement results in any resources controlled by the Group.  Where the arrangement provides the Group with control over the software asset, and the criteria for recognition as an intangible asset are met, the related costs are capitalised.  Where the arrangement does not convey control over the software asset, the SaaS costs are expensed when the Group receives the configuration and customisation services.

	Goodwill	Computer software	Other    intangibles	Total
Group	£000	£000	£000	£000
Cost
At 1 January 2024	5,202	37,995	6,829	50,026
Additions	-	4,739	-	4,739
Transfers	-	742	(742)	-
At 31 December 2024	5,202	43,476	6,087	54,765
Additions	-	6,427	-	6,427
Disposals and write-off of fully amortised assets	-	(962)	-	(962)
At 31 December 2025	5,202	48,941	6,087	60,230
Accumulated amortisation
At 1 January 2024	-	(17,973)	(2,466)	(20,439)
Amortisation charge	-	(3,024)	(737)	(3,761)
At 31 December 2024	-	(20,997)	(3,203)	(24,200)
Amortisation charge	-	(3,073)	(471)	(3,544)
Disposals and write-off of fully amortised assets	-	962	-	962
At 31 December 2025	-	(23,108)	(3,674)	(26,782)
Net book amount
At 31 December 2024	5,202	22,479	2,884	30,565
At 31 December 2025	5,202	25,833	2,413	33,448

 

Significant management judgements are made in estimations, to evaluate whether an impairment of goodwill is necessary. Impairment testing is performed at CGU level and the following two items, with judgements surrounding them, have a significant impact on the estimations used in determining the necessity of an impairment charge:

 

•      Future cash flows - Cash flow forecasts reflect management's view of future business forecasts at the time of the assessment. A detailed three year budget is done every year and management also uses judgement in applying a growth rate. The accuracy of future cash flows is subject to a high degree of uncertainty in volatile market conditions. During such conditions, management would perform impairment testing more frequently than annually to ensure that the assumptions applied are still valid in the current market conditions.

 

•      Discount rate - Management also apply judgement in determining the discount rate used to discount future expected cash flows. The discount rate is derived from the cost of capital for each CGU.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. There are currently two CGUs (2024: two) with goodwill attached; the core Arbuthnot Latham CGU (£1.7m) and RAF CGU (£3.5m).

 

Management considers the value in use for the Arbuthnot Latham CGU to be the discounted cash flows over 3 years with a terminal value (2024: 3 years with a terminal value). The 3 year discounted cash flows with a terminal value are considered to be appropriate as the goodwill relates to an ongoing well established business and not underlying assets with finite lives. The terminal value is calculated by applying a discounted perpetual growth model to the profit expected in 2024 as per the approved 3 year plan. A growth rate of 4.9% (2024: 2.2%) was used for income and 6.3% (2024: 6.3%) for expenditure from 2025 to 2027 (these rates were the best estimate of future forecasted performance), while a 3% (2024: 3%) percent growth rate for income and expenditure was used for cash flows after the approved 3 year plan.

 

Management considers the value in use for the RAF CGU to be the discounted cash flows over 3 years with a terminal value. The 3 year discounted cash flows with a terminal value are considered to be appropriate as the goodwill relates to an ongoing, well established, business and not underlying assets with finite lives. The terminal value is calculated by applying a discounted perpetual growth model to the profit expected in 2027 as per the approved budget. A growth rate of 3% (2024: 3%) was used (this rate was the best estimate of future forecasted performance).

 

Cash flows were discounted at a pre-tax rate of 14.8% (2024: 14.9%) to their net present value. The discount rate of 14.8% is considered to be appropriate after evaluating current market assessments of the time value of money and the risks specific to the assets or CGUs.

 

Currently, the value in use and fair value less costs to sell of both CGUs exceed the carrying values of the associated goodwill and as a result no sensitivity analysis was performed.

 

	Computer software
Company	£000
Cost
At 1 January 2024	7
At 31 December 2024	7
At 31 December 2025	7
Accumulated amortisation
At 1 January 2024	(7)
At 31 December 2024	(7)
At 31 December 2025	(7)
Net book amount
At 31 December 2024	-
At 31 December 2025	-

28.  Property, plant and equipment

Land and buildings comprise mainly branches and offices and are stated at the latest valuation, with subsequent additions at cost less depreciation. Plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

 

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, applying the following annual rates, which are subject to regular review:

 

Leasehold improvements	3 to 20 years
Commercial vehicles	2 to 7 years
Plant and machinery	5 years
Computer and other equipment	3 to 10 years
Motor vehicles	4 years

 

Leasehold improvements are depreciated over the term of the lease (until the first break clause). Gains and losses on disposals are determined by deducting carrying amount from proceeds. These are included in the Statement of Comprehensive Income.

 

Commercial vehicles are subject to operating leases. The other assets are owned and used by the Group.

	Leasehold improvements	Commercial vehicles	Plant and machinery	Computer and other equipment	Motor Vehicles	Total
Group	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 January 2024	11,727	309,623	17	6,873	848	329,088
Additions	20,581	90,472	-	2,216	407	113,676
Disposals and write-off of fully depreciated assets	-	(50,471)	-	-	(247)	(50,718)
At 31 December 2024	32,308	349,624	17	9,089	1,008	392,046
Additions	310	79,340	-	674	118	80,442
Disposals of assets acquired through acquisition*	-	33,102	-	-	-	33,102
Disposals and write-off of fully depreciated assets	(5,471)	(46,588)	-	(2,133)	(98)	(54,290)
At 31 December 2025	27,147	415,478	17	7,630	1,028	451,300
Accumulated depreciation
At 1 January 2024	(6,644)	(42,032)	(12)	(5,814)	(280)	(54,782)
Depreciation charge	(1,405)	(51,337)	(8)	(899)	(141)	(53,790)
Disposals and write-off of fully depreciated assets	-	29,698	10	-	184	29,892
At 31 December 2024	(8,049)	(63,671)	(10)	(6,713)	(237)	(78,680)
Depreciation charge	(1,857)	(57,013)	(4)	(1,175)	(170)	(60,219)
Disposals of assets acquired through acquisition*	-	(33,102)	-	-	-	(33,102)
Disposals and write-off of fully depreciated assets	5,471	23,635	-	2,132	32	31,270
At 31 December 2025	(4,435)	(130,151)	(14)	(5,756)	(375)	(140,731)
Net book amount
At 31 December 2024	24,259	285,953	7	2,376	771	313,366
At 31 December 2025	22,712	285,327	3	1,874	653	310,569
*Elimination of consolidation adjustment on disposal of assets acquired through a subsidiary and previously measured at acquisition date fair value in the Group accounts

 

	Leasehold improvement	Motor Vehicles	Total
Company	£000	£000	£000
Cost or valuation
At 1 January 2024	217	91	308
Additions	(1)	118	117
Disposals and write-off of fully amortised assets	-	(91)	(91)
At 31 December 2024	216	118	334
At 31 December 2025	216	118	334
Accumulated depreciation
At 1 January 2024	(88)	(90)	(178)
Depreciation charge	-	(26)	(26)
Disposals and write-off of fully amortised assets	-	91	91
At 31 December 2024	(88)	(25)	(113)
Depreciation charge	-	(27)	(27)
At 31 December 2025	(88)	(52)	(140)
Net book amount
At 31 December 2024	128	93	221
At 31 December 2025	128	66	194

 

Minimum lease payments receivable under operating and contract hire leases fall due as follows:
	2025	2024
Group	£000	£000
Maturity analysis for operating lease receivables:
- No later than 1 year	56,615	55,825
- Later than 1 year and no later than 5 years	98,961	76,293
- Later than 5 years	7,051	3,722
	162,627	135,840

 

29.  Right-of-use assets

At inception or on reassessment of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

·      the contract involves the use of an identified asset. This may be specified explicitly or implicitly, and should be physically   distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

·      the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

·      the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used.

 

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

 

(a) As a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore it or its site, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

Practical exemptions

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

(b) As a lessor

Assets leased to customers under agreements which transfer substantially all the risks and rewards of ownership, with or without ultimate legal title, are classified as finance leases. When assets are held subject to finance leases, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

 

Assets leased to customers under agreements which do not transfer substantially all the risks and rewards of ownership are classified as operating leases. When assets are held subject to operating leases, the underlying assets are held at cost less accumulated depreciation. The assets are depreciated down to their estimated residual values on a straight-line basis over the lease term. Lease rental income is recognised on a straight line basis over the lease term.

 

Breakdown of right-of-use assets:
	Properties	Equipment	Total
Group	£000	£000	£000
At 1 January 2024	52,637	177	52,816
Additions	181	134	315
Amortisation	(5,452)	(168)	(5,620)
At 31 December 2024	47,368	143	47,511
Additions	690	393	1,083
Amortisation	(3,909)	(184)	(4,093)
At 31 December 2025	44,149	352	44,501
In the year, the Group received £Nil (2024: £Nil) of rental income from subleasing right-of-use assets through operating leases.
The Group recognised £3.3m (2024: £3.1m) of interest expense related to lease liabilities. The Group also recognised £0.8m (2024: £0.7m) of expense in relation to leases with a duration of less than 12 months.

 

30.  Investment property

Investment property is initially measured at cost. Transaction costs are included in the initial measurement. Subsequently, investment property is measured at fair value, with any change therein recognised in profit and loss within other income.

 

	2025	2024
Group	£000	£000
Opening balance	5,250	5,950
Fair value adjustment	-	(700)
At 31 December 2025	5,250	5,250

 

Crescent Office Park, Bath

The property represents a freehold office building in Bath and comprises 25,528 square ft. over ground and two upper floors with parking spaces. The property was acquired for £6.35m. On the date of acquisition, the property was being multi-let to tenants and was at full capacity.

 

The Group has elected to apply the fair value model (see Note 4.2 (c)). The fair value of the investment property was determined by an external, independent property valuer, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued.

 

The fair value measurements for the investment property have been categorised as Level 3 fair value measurement.

 

The Group recognised £0.5m (2024: £0.5m) rental income during the year and incurred £0.4m (2024: £0.5m) of direct operating expenses. The property remained tenanted during 2025.

31.  Deposits from banks
	2025	2024
Group	£000	£000
	1,389	192,911
Deposits from banks include £Nil (2024: £190m) obtained through the Bank of England Term Funding Scheme with additional incentives for small and medium-sized enterprises (TFSME).

 

32.  Deposits from customers
	2025	2024
Group	£000	£000
Current/demand accounts	3,155,647	2,754,141
Notice accounts	145,808	158,537
Term deposits	1,268,910	1,219,815
	4,570,365	4,132,493

 

Included in customer accounts are deposits of £20.8m (2024: £24.8m) held as collateral for loans and advances. The fair value of these deposits approximates their carrying value.

 

For a maturity profile of deposits from customers, refer to Note 6.

 

33.  Other liabilities
	2025	2024
Group	£000	£000
Trade payables	20,493	6,229
Accruals and deferred income	21,996	29,155
	42,489	35,384

 

	2025	2024
Company	£000	£000
Trade payables	1,824	1,812
Accruals and deferred income	3,928	3,655
	5,752	5,467

 

34.  Lease liabilities

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Primarily, the Group uses its incremental borrowing rate as the discount rate.

 

Lease payments included in the measurement of the lease liability comprise the following:

·      fixed payments, including in-substance payments;

·      variable lease payments that depend on an index or a rate, initially measured using the index or rates as at the commencement date;

·      amounts expected to be payable under a residual value guarantee.

 

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the statement of comprehensive income if the carrying amount of the right-of-use asset has been reduced to zero.

 

		Properties	Equipment	Total
Group		£000	£000	£000
At 1 January 2024		53,602	159	53,761
Additions		197	134	331
Interest expense		3,125	7	3,132
Lease payments		(2,215)	(180)	(2,395)
At 31 December 2024		54,709	120	54,829
Additions		689	393	1,082
Interest expense		3,258	20	3,278
Lease payments		(752)	(170)	(922)
At 31 December 2025		57,904	363	58,267
Maturity analysis
			2025	2024
Group			£000	£000
Less than one year			7,022	1,216
One to five years			26,780	26,121
More than five years			54,702	61,099
Total undiscounted lease liabilities at 31 December			88,504	88,436
Lease liabilities included in the statement of financial position at 31 December			58,267	54,829
Current			3,963	1,087
Non-current			54,303	53,742

 

 

35.  Debt securities in issue

Issued financial instruments or their components are classified as liabilities where the contractual arrangement results in the Group having a present obligation to either deliver cash or another financial asset to the holder.

 

Financial liabilities, other than trading liabilities at fair value, are carried at amortised cost using the effective interest rate method as set out in the policy in Note 8.

 

	2025	2024
Group and Company	£000	£000
Subordinated loan notes	38,672	37,982

 

Euro subordinated loan notes

The subordinated loan notes 2035 were issued on 7 November 2005 and are denominated in Euros. The principal amount outstanding at 31 December 2025 was €15.0m / £13.1m (2024: €15.0m / £12.4m). The notes carry interest at 3% over the interbank rate for three month deposits in euros and are repayable at par in August 2035 unless redeemed or repurchased earlier by the Company.

 

The contractual amount that will be required to be paid at maturity of the above debt securities is €15.0m.

 

The fair value of these Euro subordinated loan notes approximates their carrying value.

 

Pounds Sterling subordinated loan notes

£26m subordinated loan notes were issued on 3 June 2024 and are denominated in Pound Sterling. The principal amount outstanding at 31 December 2025 was £26m (2024: £26m). The notes carry interest at 7.25% over 3 month average SONIA and are repayable at par in June 2034 unless redeemed or repurchased earlier by the Arbuthnot Latham & Co., Limited.

 

The contractual amount that will be required to be paid at maturity of the above debit securities is £26.0m.

 

The fair value of these subordinated loan notes approximates their carrying value.

 

36.  Contingent liabilities and commitments

 

Financial guarantees and loan commitments policy

Financial guarantees represent undertakings that the Group will meet a customer's obligation to third parties if the customer fails to do so. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. The Group is theoretically exposed to loss in an amount equal to the total guarantees or unused commitments. However, the likely amount of loss is expected to be significantly less; most commitments to extend credit are contingent upon customers maintaining specific credit standards. Liabilities under financial guarantee contracts are initially recorded at their fair value, and the initial fair value is amortised over the life of the financial guarantee. Subsequently, the financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative amortisation, and the best estimate of the expenditure to settle obligations.

 

Provisions and contingent liabilities policy

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be reliably measured.

 

Onerous contract provisions are recognised for losses on contracts where the forecast costs of fulfilling the contract throughout the contract period exceed the forecast income receivable. In assessing the amount of the loss to provide on any contract, account is taken of the Group's forecast results which the contract is servicing. The provision is calculated based on discounted cash flows to the end of the contract.

 

Contingent liabilities are disclosed when the Group has a present obligation as a result of a past event, but the probability that it will be required to settle that obligation is more than remote, but not probable.

 

Contingent liabilities

The Group is subject to extensive regulation in the conduct of its business. A failure to comply with applicable regulations could result in regulatory investigations, fines and restrictions on some of the Group's business activities or other sanctions. The Group seeks to minimise this risk through the adoption and compliance with policies and procedures, continuing to refine controls over business practices and behaviour, employee training, the use of appropriate documentation, and the involvement of outside legal counsel where appropriate.

 

No material contingent liabilities existed as at 31 December 2025 and 2024.

 

Capital commitments

At 31 December 2025 the Group had capital commitments of £11.9m (2024: £14.3m). Of this total, AAG fleet purchases amounted to £11.8m (2024: £14.1m).

 

Credit commitments

The contractual amounts of the Group's off-balance sheet financial instruments that commit it to extend credit to customers are as follows:

 

	2025	2024
Group	£000	£000
Guarantees and other contingent liabilities	3,059	2,500
Commitments to extend credit:
- Original term to maturity of one year or less	375,292	425,531
	378,351	428,031

 

37.  Share capital and share premium
		31 December 2025	31 December 2024
Group and Company		£000	£000
Share capital		167	167
Share premium		11,606	11,606
Share capital and share premium		11,773	11,773
Ordinary share capital
		Number of shares	Share Capital
Group and Company			£000
At 1 January 2025		16,576,619	166
At 31 December 2025		16,576,619	166
Ordinary non-voting share capital
		Number of shares	Share Capital
Group and Company			£000
At 1 January 2025		152,621	1
At 31 December 2025		152,621	1
Total share capital
		Number of shares	Share Capital
Group and Company			£000
At 1 January 2025		16,729,240	167
At 31 December 2025		16,729,240	167

 

(a) Share issue costs

Incremental costs directly attributable to the issue of new shares or options by Company are shown in equity as a deduction, net of tax, from the proceeds.

 

(b) Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are approved.

 

(c) Share buybacks

Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued.

 

The Ordinary shares have a par value of 1p per share (2024: 1p per share). At 31 December 2025 the Company held 409,314 shares (2024: 409,314) in treasury. This includes 390,274 (2024: 390,274) Ordinary shares and 19,040 (2024: 19,040) Ordinary Non-Voting shares.

38.  Reserves and retained earnings
	2025	2024
Group	£000	£000
Capital redemption reserve	19	19
Fair value reserve	167	1,888
Treasury shares	(1,299)	(1,299)
Retained earnings	265,738	254,575
Total reserves at 31 December	264,625	255,183

 

The capital redemption reserve represents a reserve created after the Company purchased its own shares which resulted in a reduction of share capital.

 

The fair value reserve relates to gains or losses on assets which have been recognised through other comprehensive income.

 

	2025	2024
Company	£000	£000
Capital redemption reserve	19	19
Treasury shares	(1,299)	(1,299)
Retained earnings	150,006	149,238
Total reserves as 31 December	148,726	147,958

 

39.  Share-based payment options

 

Company - cash settled

Grants were made to Messrs Salmon and Cobb on 23 July 2021 under the Phantom Option Scheme to subscribe for 200,000 and 100,000 ordinary 1p shares respectively in ABG at 990p. 50% of each director's individual holding of phantom options is exercisable at any time since 23 July 2024 and the other 50% is exercisable at any time after 23 July 2026 when a cash payment would be made equal to any increase in market value. All share options awarded on 23 July 2021, regardless of first exercise date, may not be exercised later than 23 July 2028, being the day before the seventh anniversary of the date of grant. The valuation of the share options are considered as level 2 within the fair value hierarchy, with the Group adopting a Black-Scholes valuation model as adjusted for an attrition rate for members of the scheme and a probability of pay-out reflecting the risk of not meeting the terms of the scheme over the vesting period. The number of share options that are expected to vest is reviewed at least annually. The fair value of the options as at 31 December 2025 was a liability of £0.3m (2024: £0.2m). As at 31 December 2025 the initial 50% of each director's holding had reached the strike date of 24 July 2024 but have not been exercised.

 

The performance conditions of the Scheme are that, from the grant date to the date the Option is exercised, there must be no public criticism by any regulatory authority on the operation of the Company or any of its subsidiaries which has a material impact on the business of Group and for the duration of the vesting period, there has been satisfactory growth in the dividends paid by the Company.

 

Options are forfeited if they remain unexercised after a period of more than 7 years from the date of grant. If the participant ceases to be employed by the Group by reason of injury, disability, ill-health or redundancy; or because his employing company ceases to be a shareholder of the Group; or because his employing business is being transferred out of the Group, his option may be exercised within 6 months after such cessation.  In the event of the death of a participant, the personal representatives of a participant may exercise an option, to the extent exercisable at the date of death, within 6 months after the death of the participant. 

 

On cessation of employment for any other reason (or when a participant serves, or has been served with, notice of termination of such employment), the option will lapse although the Remuneration Committee has discretion to allow the exercise of the option for a period not exceeding 6 months from the date of such cessation.

 

In such circumstances, the performance conditions may be modified or waived as the Remuneration Committee, acting fairly and reasonably and taking due consideration of the circumstances, thinks fit. The number of Ordinary Shares which can be acquired on exercise will be pro-rated on a time elapsed basis, unless the Remuneration Committee, acting fairly and reasonably and taking due consideration of the circumstances, decides otherwise. In determining whether to exercise its discretion in these respects, the Remuneration Committee must satisfy itself that the early exercise of an option does not constitute a reward for failure.

 

The probability of payout has been assigned based on the likelihood of meeting the performance criteria, which is 100%. The Directors consider that there is some uncertainty surrounding whether the participants will all still be in situ and eligible at the vesting date. Therefore the directors have assumed a 15% attrition rate for the share options vesting in July 2026. The attrition rate will increase by 3% per year until the vesting date. ABG had a credit of £0.03m in relation to share based payments during 2025 (2024: £0.13m cost), as disclosed in Note 13.

 

Measurement inputs and assumptions used in the Black-Scholes model are as follows:
	2025	2024
Expected Stock Price Volatility	27.0%	23.2%
Risk Free Interest Rate	1.1%	2.1%
Average Expected Life (in years)	0.28	0.78

 

40.  Dividends per share

The Directors recommend the payment of a final dividend of 31p (2024: 29p) per Ordinary share and Ordinary Non-Voting share. This represents total dividends for the year of 53p (2024: 69p which also included a special dividend of 20p) per Ordinary share and Ordinary Non-Voting share. The final dividend is not recognised at 31 December 2025. If approved by members at the forthcoming AGM, the final dividend will be paid on 29 May 2026 to shareholders on the register at close of business on 17 April 2026.

 

41.  Cash and cash equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents comprises cash on hand and demand deposits, and cash equivalents are deemed highly liquid investments that are convertible into cash with an insignificant risk of changes in value with a maturity of three months or less at the date of acquisition.

 

	2025	2024
Group	£000	£000
Cash and balances at central banks (Note 17)	437,548	911,887
Loans and advances to banks (Note 18)	117,497	66,971
	555,045	978,858
	2025	2024
Company	£000	£000
Loans and advances to banks	4,760	920

 

 

42.  Related party transactions

Related parties of the Company and Group include subsidiaries, directors, Key Management Personnel, close family members of Key Management Personnel and entities which are controlled, jointly controlled or significantly influenced, or for which significant voting power is held, by Key Management Personnel or their close family members.

 

A number of banking transactions are entered into with related parties in the normal course of business on normal commercial terms. These include loans and deposits. Directors and Key Management includes solely Executive and Non-Executive Directors.

 

	2025	2024
Group - Directors and close family members	£000	£000
Loans
Loans outstanding at 1 January	2,783	1,450
Loans advanced during the year	241	1,540
Loan repayments during the year	(1,999)	(105)
Transfer to deposits during the year	-	(102)
Loans outstanding at 31 December	1,025	2,783
Interest income earned	74	61

 

The loans to directors are mainly secured on property, shares or cash and bear interest at rates linked to base rate. No provisions have been recognised in respect of loans given to related parties (2024: £nil). During the year, Arbuthnot Latham made available facilities of £0.2m and £0.9m. The facilities are guaranteed by Sir Henry Angest, with the £0.9m facility also supported by a charge over cash. No fees or benefits were provided to the director in connection with these transactions.

	2025		2024
	Highest balance during the year	Balance at 31 December	Highest balance during the year	Balance at 31 December
Group - Directors and close family members	£000	£000	£000	£000
Deposits	5,741	5,630	3,901	3,887
Interest expense on deposits		130		106

 

Details of directors' remuneration are given in the Remuneration Report on pages 52 and 53. The Directors do not believe that there were any other transactions with key management or their close family members that require disclosure.

 

Details of principal subsidiaries are given in Note 43. Transactions and balances with subsidiaries are shown below:
	2025		2024
	Highest balance during the year	Balance at 31 December	Highest balance during the year	Balance at 31 December
	£000	£000	£000	£000
ASSETS
Due from subsidiary undertakings - Loans and advances to banks	9,179	4,753	6,231	913
Due from subsidiary undertakings - Debt securities at amortised cost	39,253	38,781	38,776	38,103
Shares in subsidiary undertakings	164,354	164,354	164,354	164,354
	212,786	207,888	209,361	203,370
Interest income		3,755		4,180
LIABILITIES
Due to subsidiary undertakings	2,597	128	7,014	1,406
	2,597	128	7,014	1,406

 

The disclosure of the year end balance and the highest balance during the year is considered the most meaningful information to represent the transactions during the year. The above transactions arose during the normal course of business and are on substantially the same terms as for comparable transactions with third parties.

 

The Company undertook the following transactions with other companies in the Group during the year:
	2025	2024
	£000	£000
Arbuthnot Latham & Co., Ltd - Recharge of property and IT costs	1,142	995
Arbuthnot Latham & Co., Ltd - Recharge for costs paid on the Company's behalf	9,720	5,279
Arbuthnot Latham & Co., Ltd - Recharge of costs paid on behalf of Arbuthnot Latham & Co., Ltd	(25)	(44)
Arbuthnot Latham & Co., Ltd - Group recharges for shared services	(9,878)	(10,058)
Arbuthnot Latham & Co., Ltd - Group recharges for liquidity	(2,047)	(1,349)
Total	(1,088)	(5,177)

 

43.  Interests in subsidiaries
	Investment at cost	Impairment provisions	Net
Company	£000	£000	£000
At 1 January 2025	164,354	-	164,354
At 31 December 2025	164,354	-	164,354

 

	2025	2024
Company	£000	£000
Subsidiary undertakings:
Bank	162,814	162,814
Other	1,540	1,540
Total	164,354	164,354

 

(a)   List of subsidiaries

Arbuthnot Latham & Co., Limited is the only significant subsidiary of Arbuthnot Banking Group. Arbuthnot Latham is incorporated in the United Kingdom, has a principal activity of Private and Commercial Banking and is 100% owned by the Group.

 

		% shareholding	Country of incorporation
					Principal activity
Direct shareholding
	Arbuthnot Fund Managers Limited	100.0%	UK	Dormant
	Arbuthnot Investments Limited	100.0%	UK	Dormant
	Arbuthnot Limited	100.0%	UK	Dormant
	Arbuthnot Properties Limited	100.0%	UK	Dormant
	Arbuthnot Unit Trust Management Limited	100.0%	UK	Dormant
	Gilliat Financial Solutions Limited	100.0%	UK	Dormant
Indirect shareholding via intermediate holding companies
	Arbuthnot Commercial Asset Based Lending Limited	100.0%	UK	Asset Finance
	Arbuthnot Latham (Nominees) Limited	100.0%	UK	Dormant
	Arbuthnot Latham Real Estate PropCo 1 Limited	100.0%	Jersey	Property Investment
	Arbuthnot Securities Limited	100.0%	UK	Dormant
	Arbuthnot Specialist Finance Limited	100.0%	UK	Specialist Finance
	Asset Alliance Group Holdings Limited	100.0%	UK	Commercial Vehicle Financing
	Asset Alliance Leasing Limited	100.0%	UK	Commercial Vehicle Financing
	Asset Alliance Limited	100.0%	UK	Commercial Vehicle Financing
	ATE Truck & Trailer Sales Limited	100.0%	UK	Dormant
	Forest Asset Finance Limited	100.0%	UK	Commercial Vehicle Financing
	Hanbury Riverside Limited	100.0%	UK	Dormant
	John K Gilliat & Co., Limited	100.0%	UK	Dormant
	Pinnacle Universal Limited	100.0%	UK	Property Development
	Renaissance Asset Finance Limited	100.0%	UK	Asset Finance
	AAG Traffic Management Limited	100.0%	UK	Dormant
	The Peacocks Management Company Limited	100.0%	UK		Property Management
	Valley Finance Limited	100.0%	UK	Dormant

 

All the subsidiaries above were 100% owned during the current and prior year and are unlisted and none are banking institutions. All entities are included in the consolidated financial statements and have an accounting reference date of 31 December.

 

The Jersey entity's registered office is 26 New Street, St Helier, Jersey, JE2 3RA. All other entities listed above have their registered office as 20 Finsbury Circus, London, EC2M 7EA.

 

Arbuthnot Specialist Finance Limited is exempt from the requirement to prepare audited accounts under section 479A of the Companies Act 2006.

 

The following entities were dissolved during the current year:

·      Asset Alliance Group Finance No.2 Limited was dissolved on 25 November 2025

·      Asset Alliance Finance Limited was dissolved on 9 December 2025.

 

(b) Non-controlling interests in subsidiaries

There were no non-controlling interests at the end of 2025 or 2024.

 

(c) Significant restrictions

The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the supervisory frameworks within which banking subsidiaries operate. The supervisory frameworks require banking subsidiaries to keep certain levels of regulatory capital and liquid assets, limit their exposure to other parts of the Group and comply with other ratios. The carrying amounts of the banking subsidiary's assets and liabilities are £5.0bn and £4.7bn respectively (2024: £4.7bn and £4.4bn respectively).

 

(d) Risks associated with interests

During the year Arbuthnot Banking Group PLC did not make capital contributions to Arbuthnot Latham & Co., Ltd.

 

44.  Operating segments

The Group is organised into seven operating segments as disclosed below:

 

1) Banking - Includes Private and Commercial Banking. Private Banking - Provides traditional private banking services.

    Commercial Banking - Provides bespoke commercial banking services and tailored secured lending against property

    investments and other assets.

2) Wealth Management - Offering financial planning and investment management services.

3) RAF - Specialist asset finance lender mainly in high value cars but also business assets.

4) ACABL - Provides finance secured on either invoices, assets or stock of the borrower.

5) AAG - Provides vehicle finance and related services, predominantly in the truck & trailer and bus & coach markets.

6) All Other Divisions - All other smaller divisions and central costs in Arbuthnot Latham & Co., Ltd (Investment property and

    Central costs)

7) Group Centre - ABG Group management.

 

Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis. Segment assets and liabilities comprise loans and advances to customers and customer deposits, being the majority of the balance sheet.

	Banking	Wealth Management	RAF	ACABL	AAG	All Other Divisions	Group Centre	Total
Year ended 31 December 2025	£000	£000	£000	£000	£000	£000	£000	£000
Interest revenue	94,002	-	23,305	19,196	6,298	104,447	3,755	251,003
Inter-segment revenue	-	-	-	-	-	-	(3,755)	(3,755)
Interest revenue from external customers	94,002	-	23,305	19,196	6,298	104,447	-	247,248
Fee and commission income	5,410	16,678	112	7,182	588	1,719	-	31,689
Revenue	-	-	-	-	118,569	-	-	118,569
Revenue from external customers	99,412	16,678	23,417	26,378	125,455	106,166	-	397,506
Interest expense	4,671	674	(7,667)	(10,276)	(13,406)	(103,122)	-	(129,126)
Cost of goods sold	-	-	-	-	(97,466)	-	-	(97,466)
Add back inter-segment revenue	-	-	-	-	-	-	3,755	3,755
Subordinated loan note interest	-	-	-	-	-	-	(3,751)	(3,751)
Fee and commission expense	(303)	(180)	(20)	-	(163)	(778)	-	(1,444)
Segment operating income	103,780	17,172	15,730	16,102	14,420	2,266	4	169,474
Impairment losses	(1,275)	-	(922)	(3)	86	(387)	-	(2,501)
Other income	-	-	-	-	-	5,536	(1,117)	4,419
Operating expenses	(73,979)	(20,185)	(7,612)	(7,241)	(16,758)	(10,598)	(10,835)	(147,208)
Segment profit / (loss) before tax	28,526	(3,013)	7,196	8,858	(2,252)	(3,183)	(11,948)	24,184
Income tax (expense) / income	-	-	(1,824)	(2,230)	503	1,432	(4,255)	(6,374)
Segment profit / (loss) after tax	28,526	(3,013)	5,372	6,628	(1,749)	(1,751)	(16,203)	17,810
Loans and advances to customers	1,355,936	-	287,079	219,362	97,454	721	(10)	1,960,542
Assets available for lease	-	-	-	-	285,327	-	-	285,327
Other assets	-	-	-	-	-	2,760,821	(8,852)	2,751,969
Segment total assets	1,355,936	-	287,079	219,362	382,781	2,761,542	(8,862)	4,997,838
Customer deposits	4,575,114	-	-	-	-	-	(4,749)	4,570,365
Other liabilities	-	-	-	-	-	149,142	1,933	151,075
Segment total liabilities	4,575,114	-	-	-	-	149,142	(2,816)	4,721,440
Other segment items:
Capital expenditure	-	-	(558)	-	(82,077)	(4,232)	-	(86,867)
Depreciation and amortisation	-	-	(26)	-	(57,714)	(6,022)	(27)	(63,789)
The "Group Centre" segment above includes the parent entity and all intercompany eliminations.

 

	Banking	Wealth Management	RAF	ACABL	AAG	All Other Divisions	Group Centre	Total
Year ended 31 December 2024	£000	£000	£000	£000	£000	£000	£000	£000
Interest revenue	117,660	-	19,340	25,456	5,119	95,860	4,180	267,615
Inter-segment revenue	-	-	-	-	-	-	(4,180)	(4,180)
Interest revenue from external customers	117,660	-	19,340	25,456	5,119	95,860	-	263,435
Fee and commission income	4,695	13,779	256	9,922	-	490	-	29,142
Revenue	-	-	-	-	110,832	-	-	110,832
Revenue from external customers	122,355	13,779	19,596	35,378	115,951	96,350	-	403,409
Interest expense	(20,250)	-	(6,468)	(15,413)	(15,327)	(80,105)	(7)	(137,570)
Cost of goods sold	-	-	-	-	(85,301)	-	-	(85,301)
Add back inter-segment revenue	-	-	-	-	-	-	4,180	4,180
Subordinated loan note interest	-	-	-	-	-	-	(4,178)	(4,178)
Fee and commission expense	(896)	(114)	(17)	-	(15)	13	-	(1,029)
Segment operating income	101,209	13,665	13,111	19,965	15,308	16,258	(5)	179,511
Impairment losses	(5,571)	-	(554)	(32)	(60)	(58)	-	(6,275)
Other income	-	-	-	-	88	2,473	(901)	1,660
Operating expenses	(67,515)	(18,558)	(6,981)	(7,993)	(15,308)	(12,948)	(10,503)	(139,806)
Segment profit / (loss) before tax	28,123	(4,893)	5,576	11,940	28	5,725	(11,409)	35,090
Income tax (expense) / income	-	-	(1,397)	(2,998)	(1,358)	414	(4,897)	(10,236)
Segment profit / (loss) after tax	28,123	(4,893)	4,179	8,942	(1,330)	6,139	(16,306)	24,854
Loans and advances to customers	1,539,155	-	248,790	228,195	77,051	1,035	(14)	2,094,212
Assets available for lease	-	-	-	-	285,953	-	-	285,953
Other assets	-	-	-	-	-	2,353,779	(4,717)	2,349,062
Segment total assets	1,539,155	-	248,790	228,195	363,004	2,354,814	(4,731)	4,729,227
Customer deposits	4,133,406	-	-	-	-	-	(913)	4,132,493
Other liabilities	-	-	-	-	-	326,779	2,999	329,778
Segment total liabilities	4,133,406	-	-	-	-	326,779	2,086	4,462,271
Other segment items:
Capital expenditure	-	-	-	-	-	(118,298)	(117)	(118,415)
Depreciation and amortisation	-	-	-	-	-	(57,525)	(26)	(57,551)

 

Segment profit is shown prior to any intra-group eliminations.

 

All operations of the Group are conducted wholly within the United Kingdom and geographical information is therefore not presented.

 

45.  Country by Country Reporting

Article 89 of the EU Directive 2013/36/EU otherwise known as the Capital Requirements Directive IV ('CRD IV') was implemented into UK domestic legislation through statutory instrument 2013 No. 3118, the Capital Requirements (Country-by-Country Reporting) Regulations 2013 (the Regulations), which were laid before the UK Parliament on 10 December 2013 and which came into force on 1 January 2014.

 

Article 89 requires credit institutions and investment firms in the EU to disclose annually, specifying, by Member State and by third country in which it has an establishment, the following information on a consolidated basis for the financial year: name, nature of activities, geographical location, turnover, number of employees, profit or loss before tax, tax on profit or loss and public subsidies received.

 

		FTE	Profit/(loss)
31 December 2025	Turnover	employees	before tax	Tax paid
Location	£m	Number	£m	£m
UK	169.5	890	24.2	6.4
		FTE	Profit/(loss)
31 December 2024	Turnover	employees	before tax	Tax paid
Location	£m	Number	£m	£m
UK	179.5	883	35.1	10.2
No public subsidies were received during 2025 or 2024.

 

46.  Ultimate controlling party

The Company regards Sir Henry Angest, the Group Chairman and Chief Executive Officer, who has a beneficial interest in 58.0% of the issued Ordinary share capital of the Company, as the ultimate controlling party. Details of his remuneration are given in the Remuneration Report and Note 42 of the consolidated financial statements includes related party transactions with Sir Henry Angest.

 

47.  Events after the balance sheet date

There were no material post balance sheet events to report.

 

 

Five Year Summary

		2021	2022	2023	2024	2025
		£000	£000	£000	£000	£000
Profit / (loss) for the year after tax		6,786	16,458	35,379	24,854	17,810
Profit / (loss) before tax from continuing operations		4,638	20,009	47,117	35,090	24,184
Total Earnings per share
Basic (p)		45.2	109.6	222.8	152.3	109.1
Earnings per share from continuing operations
Basic (p)		45.2	109.6	222.8	152.3	109.1
Dividends per share (p)	- ordinary	38.0	42.0	46.0	49.0	53.0
	- special	21.0	-	-	20.0	-
		2021	2022	2022	2024	2025
Other KPI:
Net asset value per share (p)		1,337.2	1,411.1	1,546.8	1,635.8	1,693.6