Highlights

• Arbuthnot Banking Group paid 55p per share over the last year, a trailing Yield of 6.67%.

• First-half pre-tax profit reached £11.0m, and Earnings Per Share climbed to 49.9p from 42.5p a year earlier.

• Total client balances passed the £10bn target set under the Future State 2 plan more than two years early.

• The CET1 Capital ratio stood at 12.0%, down from 13.3% at the end of 2025.

Not many small banks hit a ten-billion-pound target two years early. Arbuthnot Banking Group (LSE:ARBB) did, and it marked the half year by lifting its Interim Dividend by 2p to 24p. The AIM-quoted private bank has paid 55p per share across its last two dividends, which is 6.67% of an 825p share price. Behind the headline sits a capital ratio that has been falling as the Balance Sheet grows.

The payments in the window

Two Ordinary Dividends have gone ex in the last twelve months. A 31p final went ex on 16 April 2026 and was paid on 29 May. The 24p interim went ex on 27 August and was paid on 25 September. That makes 55p in total, compared with 51p a year earlier (29p plus 22p), an increase of about 8%. There was no Special Dividend in the period.

Half-year performance

Unaudited results for the six months to 30 June 2026 showed pre-tax profit of £11.0m, marginally above £10.9m a year earlier, while earnings per share rose to 49.9p from 42.5p. Set against the 24p interim, earnings per share give cover of about 2.1 times. Net Assets per share rose to 1,712p. Customer deposits reached £4.78bn and loans, including leased assets, grew 9% in the half to £2.45bn.

The Business behind the payout

The group is the Holding Company for Arbuthnot Latham, with divisions in banking, wealth management, vehicle and asset finance, asset-based lending and commercial vehicle finance. Funds under management and administration reached £3.00bn after net inflows of £189m, and specialist lending balances passed £1bn. Total client balances comfortably beat the £10bn Future State 2 goal. Diversified fee and lending income reduces reliance on any single line.

Capital and rate risks

The CET1 ratio fell to 12.0% from 12.7% a year earlier, and the total capital ratio slid to 13.9% from 14.8%. Growth consumes capital, so the dividend competes with lending expansion. Earnings on Liquidity track the Bank of England base rate, which averaged 3.75% against 4.48% a year earlier, and £523m of free cash is unhedged. Management itself notes that further near-term rate cuts now seem less likely, though residual-value and Credit risks in the vehicle finance book remain.

What to watch next

Next in line is the full-year result and the final dividend decision. The path of the Bank of England Base Rate matters because earnings on liquidity track it, and the CET1 ratio will show whether the group can keep growing lending while paying out 55p a share. A further drop in capital headroom would be the clearest sign that growth and dividends are competing for the same resources.

Private banking and growth

Arbuthnot Banking Group (LSE:ARBB) combines private banking with specialist lending and wealth management. Growth in customer deposits to £4.78 billion and in loans to £2.45 billion gives the bank more earning assets, but it also requires more capital. This is the trade-off facing many banks: faster growth lifts profit over time but reduces the capital ratio in the short term. The board must weigh these factors when deciding on dividends.

What CET1 and total capital ratios show

The CET1 ratio compares a bank's core capital with its risk-weighted assets, and the total capital ratio includes other types of capital. Both measures fell over the year, to 12.0% and 13.9%. A ratio that falls but remains well above the regulatory minimum is not a cause for alarm, yet it reduces headroom. Investors in LSE:ARBB should watch whether the ratios stabilise as growth continues.

Interest rates and liquidity

Because earnings on liquidity track the Bank of England base rate, a fall in the rate reduces income on cash held. The base rate averaged 3.75% against 4.48% a year earlier, and management said that further near-term cuts now seem less likely. The unhedged free cash of £523 million is therefore a driver of both opportunity and risk. A steady rate environment would help to keep profit stable and support the dividend.

Total return and yield

Yield shows only part of what a Shareholder earns. Total return combines dividends with changes in the share price, so a high yield can still produce a loss if the price falls by more than the income received. The reverse is also true: a modest yield with a rising price can deliver a good overall return. Both parts should be reviewed over a period of several years.

Reinvesting dividends

Reinvesting dividends buys additional shares and allows later payments to be calculated on a larger holding. Over many years, the compounding effect can add noticeably to the value of an investment. Dealing costs and spreads can reduce the benefit for small amounts, so some investors prefer to reinvest when the cash has built up. Others use a reinvestment scheme offered by a broker or the company.