The cost of handling a motor finance mis-selling scandal at the bank – a saga that also affects a number of other organisations – had been previously announced. As set out before, Close Brothers will not pay a final dividend for the 2025 financial year until the FCA completes its review of the matter.

Shares fell in UK-listed Close Brothers yesterday after the financial group reported a £122.4 million ($164.5 million) pre-tax operating loss for the 12 months ending 31 July. It was hit by the cost of a £165 million provision to handle the fallout of a long-running motor finance mis-selling scandal. A year earlier, it logged a profit of £132.7 million.

Close Brothers said it is unloading its loss-making vehicle finance business, incurring a £30 million impairment charge, as part of its recovery plan. The firm has initiated a customer redress programme to deal with the motor finance saga, after historical deficiencies were identified in certain operational processes related to early settlement of loans, it said. 

Close Brothers has, as previously announced, sold its Close Brothers Asset Management, Winterflood and Close Breweries businesses. It has refocused on its Premium Finance Business, it said in a statement yesterday. 

While its shares softened yesterday, since the start of the year prices have more than doubled – 106.6 per cent – as the firm has embarked on restructuring to bolster its fortunes. 

“Our activities have been refocused on areas that offer attractive risk-adjusted returns. We are broadening our product offering in property finance, expanding distribution in motor finance, and have a renewed focus on growing our commercial lines business in premium finance,” the statement said. The firm said its actions have set a “clear path back to double-digit RoTE [return on tangible equity] by the 2028 financial year”.

Mike Morgan, CEO (main picture), said: "The task now is to accelerate from here. I am confident we are on the right path and that we will return this business to double-digit returns."

Results details
Close Brothers said adjusted operated income fell 2 per cent year-on-year to £681.2 million, mainly reflecting lower banking income as the loan book declined. Adjusted operating profit fell 14 per cent to £144.3 million. 

Group RoTE fell to 7.1 per cent from 9.3 per cent a year before.

At the end of July, Close Brothers’ Common Equity Tier 1 ratio – a standard international measure of a lender’s capital shock absorber – was 13.8 per cent, up from 12.8 per cent from a year before.

As previously announced, Close Brothers said that it will not be paying a final dividend on ordinary shares for the 2025 financial year because it is awaiting the outcome of the Financial Conduct Authority’s review of motor finance commission arrangements and any potential financial impact.