Why interest rates sit at the centre of the story

Arbuthnot Banking Group, the Holding Company of private and commercial bank Arbuthnot Latham, has been explicit that its Earnings move with the Bank of England base rate. (LSE:ARBB) In its half-year results on 21 July 2026, the group said income on its large Liquidity resources is linked to the base rate, and that the average rate in the first half of 2026 was 3.75%, compared with 4.48% a year earlier, a fall of 73 basis points.

That context helps explain a result that looked flat on the surface. (LSE:ARBB) Profit before tax for the six months to 30 June 2026 was £11.0m, against £10.9m in the same period of 2025, even as the Business grew across its divisions. Earnings Per Share rose to 49.9p from 42.5p, and the Interim Dividend was raised by 2p to 24p, paid on 25 September.

What changed in the third-quarter update

The trading update on 22 October said the Bank of England held rates at 3.75% at its September meeting. (LSE:ARBB) The board noted that expectations at the start of 2026 had been for cuts, but that the conflict involving Iran had kept oil prices and Inflation high. It added that any UK Base Rate rises would provide a further tailwind.

Citing Loan growth, momentum in Wealth Management and stable rates across 2026 to date, the board said it now expects full-year profit before tax to be ahead of prior expectations. (LSE:ARBB) The company did not quantify the upgrade or name the expectations it was referring to.

The Balance Sheet behind the sensitivity

At 30 September 2026 customer deposits were £4.9bn, against customer loans and leased Assets of £2.5bn. On our reading, that gap is why rate levels matter so much: a substantial pool of funds is held as liquidity rather than lent out, and its Yield tracks the official rate. Funds under management and administration reached £3.1bn.

The update also flagged pressure on the funding side. Management described the deposit market as competitive, particularly for rate-sensitive money, and said it had chosen not to chase balances where pricing did not make economic sense. Private banking deposits had recovered from tax-related outflows of about £250m in January, while commercial banking added more than £200m of deposits during 2026.

Capital, valuation and a Shareholder change

The common Equity tier 1 ratio was 12.0% at 30 June, down from 13.3% at the end of 2025 as lending expanded. Net assets per share were 1712p. Using the LSE delayed price of 810p for the 3 November session, captured shortly after midnight on 4 November, our calculation puts the shares at roughly 0.47 times that June book value.

Separately, a TR-1 released on 2 November showed Liontrust Investment Partners holding 806,318 voting shares, or 4.98%, down from 9.88% at its previous notification. The filing gives no reason for the reduction or a buyer.

Risks and limitations

Rate sensitivity cuts both ways. If inflation eases and the Bank of England resumes cutting, the same liquidity that would benefit from higher rates would earn less. Renaissance Asset Finance has already said it expects growth to slow in the fourth quarter as financing costs rise. Asset Alliance Group reported that its coach market remains subdued because of weaker tourism linked to the Middle East conflict. Faster lending also absorbs capital, as the lower CET1 ratio shows. The board's upgrade is guidance, not a reported result.

What to watch

The next scheduled Bank of England decisions will shape the earnings backdrop. We have not found a confirmed date for 2026 full-year results in the announcements reviewed. When they arrive, the size of the profit outcome against the upgraded guidance, the final dividend decision and any update on Capital ratios and deposit pricing will be the main points of interest for shareholders.