Close Brothers, which has spun off its asset management arm and positioned to handle potential costs stemming from motor finance regulatory action, has updated markets on its performance.

London-listed Close Brothers, which has set aside provisions to handle potential regulatory action over motor finance practices, said its banking arm delivered a steady performance in the three months to 30 April.

The firm has restructured: In early March, it wrapped up the sale of its asset management business.

"We are taking proactive steps to ensure that the group is well positioned to generate strong, sustainable returns once the motor finance commissions uncertainty has been resolved,” Mike Morgan (pictured), CEO, said in a trading update yesterday.

In banking, Close Brothers said its loan book decreased by 0.9 per cent in the quarter and 3.5 per cent year-to-date to £9.7 billion ($13.03 billion), with lower activity in some of its businesses. 

There were increased levels of repayments in property, reduced activity in some of its asset finance businesses and a competitive market environment in premium finance. This was offset in part by growth in invoice finance and a recovery in new business volumes in motor finance to levels seen prior to the temporary pause in lending in October 2024. 

The annualised year-to-date net interest margin was 7.1 per cent; in line with guidance issued prior to this. Close Brothers expects full-year net interest margin to be around 7 per cent.

"The group's performance in the quarter highlights the strength of our business model, as we generated a CET1 capital ratio of 14.0 per cent,” Morgan said.

"We are taking proactive steps to ensure that the group is well positioned to generate strong, sustainable returns once the motor finance commissions uncertainty has been resolved. As outlined in March, my priorities include focusing on simplification of the group, improving operational efficiency, and driving sustainable growth,” he said. 

The firm has made a £165 million provision to deal with potential regulatory action linked to motor finance commissions and the way complaints about this business were handled. In the six months to 31 January, Close Brothers reported a statutory loss of £103.8 million.