It said this was because assets with variable rate benchmarks had been repriced. However, it noted there has been more demand for fixed rate lending from clients which impacted its pipeline. Despite this, it expects lending opportunities to increase in the second half of the year as it said the immediate prospect of steeper base rate rises appears “to have subsided”.
Within its private and commercial banking businesses, the group said Arbuthnot continued its trend of strong client acquisition and a healthy lending pipeline.
This branch of the business offers residential investment finance, bridging loans and mortgages.
Net loan growth was affected by early repayments as cases were resolved, yet its loan book grew by 29 per cent in the 12 months to April 2022.
Last year, the bank announced a three-year originate to sell loan agreements with a third party partner for its commercial real estate loan portfolio.
The originate to sell model is where a loan originator sells it to third parties through securitisation.
Arbuthnot reported transactions totalling £7.1m have been completed to date with a strong pipeline in development. Additionally, it said there was a “large volume of capital intensive commercial real estate loans” maturing in the second half of the year outside of its current appetite, which it would be able to support due to the agreement.
It said its short-term lending specialist finance arm was making progress on its business plan and the loan book remains steady with the previous year-end.
Arbuthnot said due to increased competition in the real estate lending markets, it would maintain its discipline and only lend where return on capital hurdles are met – the minimum rate of an investment’s return.
Its loan balances including leased assets amounted to £2.06bn, a three per cent increase on its 31 December 2021 balance, and a 15 per cent rise year-on-year.