The UK banking and financial services group has sold off parts of its business and made other changes to restore its fortunes in recent years.

Close Brothers, the UK-listed financial group that has been battling to recover from the motor finance mis-selling saga involving several organisations, said yesterday that it has made “significant progress” in the year ended 31 July.

It posted a pre-tax operating loss in its 2026 financial year of £60.3 million ($79.95 million), narrowing by more than half from £122.4 million a year earlier. Its adjusted operating profit was £120.3 million, falling 17 per cent on a year before. 

On an attributable basis, Close Brothers’ loss was £63.4 million, narrowing by 19 per cent, it said in a preliminary results statement.

The group’s cost/income ratio widened to 67 per cent from 65 per cent. The bad debt ratio was unchanged at 1 per cent. Return on opening equity fell to 4.9 per cent from 6.2 per cent.

At the end of July, Close Brothers said its Common Equity Tier 1 ratio, a standard international measure of a bank’s capital shock absorber, was 14.1 per cent, rising from 13.8 per cent.

"In FY 2026 we have made significant progress against our strategic priorities to simplify, optimise and grow the business. We have taken decisive action: exiting non-core activities and repositioning business lines; taking out costs; returning to growth; and sharpening our focus on our specialist lending markets in which we have expertise. In so doing, we have established a stronger foundation for future growth, operating leverage and returns,” Mike Morgan (main picture), CEO, said.

“We continue to make good progress on costs as we track ahead of schedule, delivering [around] £36 million of annualised cost savings in FY 2026 against a target of [around] £25 million. As execution continues through FY 2027, we expect to realise further benefits of our cost initiatives, supporting sustainable growth, driving operating leverage and positioning us to deliver further efficiency in the future,” he said. 

“During the year, we added [around] £165 million to our provision in relation to the FCA's motor finance consumer redress scheme, which now stands at [around] £320 million. As we await further clarity on the outcome, our focus remains on the execution of our strategy,” he said. 

Close Brothers has spun off parts of its business including its Winterflood brokerage arm to shore up its capital in anticipation of payouts related to motor finance mis-selling.

At the core of the issue were commissions paid by lenders to car dealerships when they offered loans to customers. The Financial Conduct Authority and courts have said that these were insufficiently disclosed to consumers and encouraged charging higher interest rates. 

Shares in Close Brothers have languished amidst uncertainties about what the FCA would impose on the bank, and other lenders such as Barclays and Lloyds. Since the start of 2026, its shares have fallen by about 17 per cent. 

“We are now a simpler, more focused specialist bank, better positioned to serve customers, invest in growth and enhance returns for shareholders. The progress we have made this year gives me confidence in our strategy and I remain fully committed to returning the group to double-digit returns by FY 2028, rising thereafter,” Morgan added.