Tight credit supply lifts Close Brothers Tight credit conditions in the UK helped Close Brothers" banking division enjoy bumper growth as the financial services group's securities division struggled with falling risk appetite among clients. Close Brothers" banking division enjoyed a 27 per cent rise in annual adjusted operating profit to £135m as the group benefited from the weak supply of credit in the UK. Close Brothers increased its loan book by a fifth year-on-year to £4.1bn. The group, which focuses on secured lending to small businesses and on areas such as motor financing, has benefited from the reluctance of major domestic banks to lend. Preben Prebensen, chief executive, said: "The context of this is that when credit gets tight, we do very well. This is the third year of 20 per cent growth for us, which correlates to the constricted supply for credit in the UK. "The longer term context is that we have a strong model that has always done pretty well," he added. Our 10-year growth is [on average] 10 per cent per annum. While the group's core tier one capital ratio edged down 0.3 percentage points year-on-year to 12.8 per cent, it still remains ahead of incoming regulatory requirements. Close Brothers" leverage ratio also crept up 0.2 percentage points year-on-year to 9.7 per cent. Close Brothers" securities division suffered as declining risk appetite among retail investors contributed to a 55 per cent year-on-year drop in the division's adjusted operating profit, which fell to £24.5m Winterflood, Close Brothers" market maker for UK retail brokers, experienced a big drop in volumes as investors steered clear of less-liquid small-cap and Aim-traded shares. Close Brothers Seydler, the group's German market making division, suffered an 86 per cent year-on-year drop in adjusted operating profit to £1.3m, as reduced client activity knocked the division. Mr Prebensen said that the declines were not structural and that he expected volumes to bounce back as risk appetite improved. [Equities are] a cyclical business; equities are not dead. Investors will increase their risk appetite," he said. The group's asset management division continued to be lossmaking, although at a lesser rate than the previous year. Operating losses in the division, which underwent a restructuring in 2011, halved year-on-year to £4.3m for the full year. "We expect the division to achieve an operating margin and return to profit in 2013," said Mr Prebensen. We're not calling whether it's going to be month two or month 10. The restructuring is behind us. Profit before tax leapt 72 per cent year-on-year to £134.9m, after the group's impairment of its investment in Mako, the derivatives market maker, weighed heavily on its bottom line the previous year. Overall revenues edged down 3 per cent year-on-year to £531.7m. Diluted earnings per share more than doubled year-on-year to 67.5p. The group also increased its dividend by 1p to 27.5p. Shares in the group fell 0.9 per cent to 843p in early morning trading.