Close Brothers Group (LSE:CBG) has said that the Financial Conduct Authority’s proposed motor finance consumer redress programme would likely result in a provision of approximately £320 million. The estimate is broadly consistent with the bank’s current IAS 37 provision of £294 million. According to the company, the potential cost can be absorbed within its existing capital resources and is expected to reduce its CET1 ratio by around 25 basis points to roughly 14.0%, still above its medium-term target range of 12–13%.
The estimate is based on around 720,000 qualifying UK motor finance loans issued between April 2007 and November 2024. The bank has assumed an average compensation payment of about £500 per customer and a claim rate of approximately 75%, alongside roughly £66 million in expected implementation costs. Close Brothers noted that it has not yet updated its existing provision and will continue to monitor legal, regulatory and industry developments before making any adjustments. Despite the potential financial impact, the group said it remains well positioned to execute its strategic plans and generate long-term shareholder value.
The company’s outlook is currently constrained by weaker profitability, including a decline in revenue and a net loss, as well as higher leverage levels. Technical indicators also reflect a broader downward trend in the share price. Some positive factors—such as a recovery in cash flow and a relatively low price-to-earnings multiple—offer partial support, but these are not sufficient to fully offset the fundamental and momentum-related risks.
More about Close Brothers Group
Close Brothers Group is a UK specialist banking organisation focused on lending and deposit-taking activities, primarily in the United Kingdom and Ireland. Listed on the London Stock Exchange and a member of the FTSE 250 index, the group employs around 2,600 people and provides tailored financing solutions across niche markets, including motor finance and asset-backed lending.
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