SHARES in UK merchant bank Close Brothers dropped almost five per cent yesterday after a trading update showed economic weakness taking a toll on its banking division and it said that costs are likely to grow.

The update — which covered the five months to 31 December — said the lender's loan book remained flat, while modest growth in its commercial arm was offset by a decline in the property business.

London-listed Close Brothers said that "costs are expected to continue to grow" in the coming year as it invests in "strategic initiatives to protect and grow our business".

4.91% Close cited a "a difficult UK economic environment" and said that "there remains uncertainty about the economic outlook".

Shore Capital Markets analyst Gary Greenwood said the subdued trading update was not "wholly unexpected at this point in the cycle given Close Brothers' focus on underwriting discipline". Yet net inflows continued to grow at Close Brothers's asset management division, aided by positive market movements.

Shares fell 4.9 per cent to 1,490p.

(c) 2020 City A.M., source Newspaper