As discussed in our report, Priced for perfection? (17 Dec), loan growth had slowed to 0.9% in Q1 FY20, and CBG now reports a net reduction of 0.5% for Nov/Dec 2019, with the Property segment accounting for the net decline. NIM has fallen to 7.8%, which is unsurprising in the context of a sustained decline from 9.8% in FY11 to 7.9% in FY19. Given levels of competition in a number of Close Brothers’ markets, we continue to see further (albeit more moderate) downside risk to NIM through FY20-FY22e. As already signalled in the Q1 FY20 IMS (21 Nov), credit costs have increased, albeit from low levels, rising to c.80bps vs 60bps in FY19. Profit before tax in the Securities business fell by 29% YoY in FY19 and we retain our view that the consensus expectation of a 10% positive rebound looks slightly ambitious. That said, after a poor start to the year, “Winterflood experienced an improvement in trading activing towards the end of 2019”. Within Asset Management, in the five months to 31 December 2019, total client assets increased by £0.7bn (5%) to £14.0bn, benefitting, as we expected, from strong net inflows and positive market movements. Close remains committed to ongoing investment in strategic initiatives, and in the context of the weak Banking Division performance and a challenging revenue environment more generally, it (perhaps unsurprisingly) is now guiding to a further year of negative “jaws” in FY20. It is difficult to justify CBG’s valuation premium in the context of slowing loan growth, broadly stable earnings (Fig 1, page 2) and falling returns (Fig 2, page 2). It trades on 2.0x FY19 tNAV against our current ROTE forecasts of 16.4%/15.4%/14.6% through FY20/21/22e. We retain our strong preference for OneSavings Bank (Buy) which is our top pick in the sector.