Arbuthnot Banking : Reports and Accounts

ARBUTHNOT BANKING GROUP PLC

Annual Report & Accounts 2022

Arbuthnot Banking Group PLC

Report & Accounts 2022

The importance of history and Sun Tzu

The importance of previous experience cannot be overstated. "Those who are not willing to learn from history are doomed to repeat the mistakes of previous generations."

A good place to start, therefore, is with the famous Chinese General, Sun Tzu and his writings in "The Art of War" c. 2500 years ago. He established some basic truths such as:

"He whose ranks are united in purpose will be victorious."

"The commander will surely choose those who are most fortunate."

"The traits of a true commander are: courage, wisdom, humanity and integrity."

Origins of Arbuthnot Latham

George Arbuthnot (1772 - 1843) was a son of the Edinburgh banker Robert Arbuthnot. He started in 1803 as a partner in Latour & Co. in Madras (today Chennai), Southern India. Latour & Co. had been set up in 1780 by Count Francis Joseph Louis Latour de Quercy, who died in 1808. In 1807 Latour & Co. became Arbuthnot & Co. and George Arbuthnot became the leading partner until he retired in 1824. In his farewell letter to the partners he said:

"…not only give the constituent (client) the assurance that his money is safe, but also give him the feeling that he is benefitting himself by dealing with the House."

In 1826 John Alves Arbuthnot started as a clerk at Arbuthnot & Co. and in 1831 became a partner. He married the daughter of George Arbuthnot. Upon his return to London he established, together with Alfred Latham, the trading house Arbuthnot & Latham on 13 March 1833.

(For more details, read the book: Arbuthnot Latham 1833 - 2013 by David Lascelles)

1	Corporate Philosophy	54	Remuneration Report
2	Business Overview	57	Independent Auditor's Report
3	Financial Highlights	64	Consolidated Statement of Comprehensive Income
4	Chairman's Statement	65	Consolidated Statement of Financial Position
8	Strategic Report - Business Review	66	Company Statement of Financial Position
14	Strategic Report - Financial Review	67	Consolidated Statement of Changes in Equity
26	Strategic Report - Non-Financial Information Statement	69	Company Statement of Changes in Equity
28	Strategic Report - Stakeholder Engagement and	70	Consolidated Statement of Cash Flows
	s.172 Report	71	Company Statement of Cash Flows
30	Strategic Report - Sustainability Report	72	Notes to the Consolidated Financial Statements
40	Board of Directors	152	Five Year Summary
42	Group Directors' Report	153	Notice of Annual General Meeting
46	Corporate Governance	157	Corporate Contacts and Advisers

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Report & Accounts 2022

Arbuthnot Banking Group PLC

The Seven Principles

Ever since George Arbuthnot first gave guidance about corporate behaviour, it has been the

culture of Arbuthnot to follow his advice. The Seven Principles summarise Arbuthnot's

corporate philosophy and ethics.

During the 190 year history of serving its customers, Arbuthnot has proven its ability to

adopt and grow by applying such principles with pragmatism and common sense.

1. Arbuthnot serves its shareholders, its customers and its employees with integrity and high ethical standards. This is demonstrated in a progressive dividend policy, in fair pricing and in pay for performance.
2. Arbuthnot attaches great importance to good relations with customers and business partners, and treating them fairly and promptly. Arbuthnot believes in reciprocity.

1. Arbuthnot is independent, and profit and growth oriented while maintaining a controlled risk profile.
2. Arbuthnot's business is conducted in an innovative, flexible and entrepreneurial manner, with an opportunistic and counter-cyclical attitude.
3. Arbuthnot's approach is based on diversification to spread the risk,
   a long-termview to further growth, empowerment of management and a culture of rewards for achievements to engender loyalty.

1. Arbuthnot does not sacrifice long term prospects for short term gains
   - nor sacrifice stability for quick profits, and it will never put the whole company at risk.
2. Ultimately, the success of Arbuthnot depends on the teamwork, commitment, and performance
   of its employees, combined with the determination to win.

The continued application of these principles will allow the business to pursue growth in a controlled manner, providing a high quality service to its customers whilst delivering good returns to shareholders and securing the well-being of its employees.

To this end an inclusive and balanced work environment will provide a rewarding

as well as challenging multiplicity.

Sir Henry Angest

Chairman & CEO

29 March 2023

2	Arbuthnot Banking Group PLC
Report & Accounts 2022

Business

Overview

Private Banking

Arbuthnot Latham provides a high quality private banking and wealth management service, consisting of three core elements:

Private	Comprises current accounts, deposit
Banking	accounts, loans, overdrafts and foreign
	exchange. Each client deals with a
	dedicated Private Banker who is key
	to providing an individual service.
Financial	Built on long-term relationships
Planning	and bespoke financial strategies.
	The service is independent and fee,
	not commission based.
Investment	Comprises asset management,
Management	developing tailored investment
	strategies to ensure that each client's
	specific investment objectives are met.

Commercial Banking

Arbuthnot Latham provides a bespoke commercial banking service which includes:

Banking	Comprising current accounts, deposits,
	overdrafts, guarantees and charge
	cards. Clients have a dedicated Banker
	who is key to managing the
	relationship.
Property	Comprises tailored lending to enable
Finance	funding of both property investments
	and developments.
Other	Comprises individual secured lending
finance	which is designed around the needs
	of each commercial client.

Asset Finance

Specialist

Finance

Provides asset finance funding in particular for high value and classic cars but also business assets.

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

Provides short term secured lending solutions to professional and entrepreneurial property investors.

Asset Based Lending

Deposits

Provides finance secured on either invoices, assets or stock of the borrower.

Provides deposit products directly to the retail market via a newly created internet platform, with rates advertised on the best buy tables.

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Report & Accounts 2022

Financial

Highlights

2022	2022
£137.4m	£31.1m
2021	2021
£88.7m	£17.0m
2020	2020
£72.5m	£5.1m

2022

£20.0m

2021 £4.6m

2020

(£1.1m)

Operating income

Underlying profit before tax

Profit / (Loss) before tax

2022	2022	2022
42.0p	£3.6bn	£213.0m
2021	2021	2021
38.0p	£3.4bn	£213.0m
2020	2020	2020
0.0p	£2.9bn	£218.2m

Total ordinary dividend per share

Total assets

Regulatory capital

£2.2bn £3.1bn £1.3bn

customer loans at	of deposit funding at	assets under
December 2022*	December 2022	management at
		December 2022

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