Arbuthnot: the UK’s best kept banking secret

When the country’s top performing UK equity income fund manager over the last three years praises a bank and says it is on the verge of something special, you sit up and take notice.

This is exactly how John McClure (pictured) feels about private bank Arbuthnot, which has seen its share price surge by 93% in the 12 months to 1 October at a time when bank bashing has become a national sport.

McClure, who has held Arbuthnot through his top performing Unicorn UK Income fund* for a number of years, names the stock as one of his two best ideas over the last year. 

‘Arbuthnot is a secure and sensible bank and anyone who knew anything about it realised its valuation was ridiculous. It has always been profitable and never done anything daft like the mainstream banks,’ McClure told Wealth Manager.

‘It is solvent and has played the game properly while other banks went on a merry acquisition spree. When the boom was happening it kept its powder dry. It’s a firm that has been completely misunderstood.’

Arbuthnot pitches itself as a one-stop shop for discretionary investment and wealth management, which does not do an ‘off the shelf’ service. It believes this is the reason why it has long lasting relationships with its clients. 

The catalyst for Arbuthnot’s meteoric rise over the last year was the listing of its retail banking unit, Secure Trust Bank (STB), on the Alternative Investment Market (AIM) last November. STB used the market to raise around £12 million to support a ‘significant’ expansion of the firm’s loan book and Arbuthnot said the float was designed to capitalise on the legacy problems the large banks faced following the financial crisis. 

Arbuthnot retains a 75.5% stake in STB and its performance since float has also been impressive with shares gaining around 40%.

Shortly after the STB spin-off, the strategic overhaul at Arbuthnot gathered momentum with the sale of its loss-making investment banking business Westhouse.

In March, the group also announced the sale of its Swiss subsidiary Ducartis, alongside the appointment of former SG Hambros international private banking head James Fleming as chief executive.