9:13 am, September 30, 2026
Close Brothers has more than halved its annual losses despite taking another £164.7m hit from the proposed car finance compensation scheme.
The banking group reported a pre-tax operating loss of £60.3m for the year to July 31, compared with a £122.4m loss in 2024-25, as underlying lending returned to growth.
However, its latest results continue to be heavily influenced by the motor finance scandal, with the latest provision taking the total amount set aside for potential redress to around £320m.
Close Brothers said underlying lending increased by 2% over the year, including growth of 4% during the final six months.
The business recorded underlying operating profits of £120.3m, with chief executive Mike Morgan telling the Press Association it would have been profitable without the motor finance provisions.
He said that, assuming no further money needs to be set aside, Close Brothers is expected to return to profit in 2026-27.
The lender has also decided not to pay a final dividend for 2026 because of the continuing uncertainty surrounding the Financial Conduct Authority’s motor finance redress scheme.
The FCA paused plans for compensation payouts earlier this year as the proposed scheme faced legal challenges.
Close Brothers said the dividend decision reflected the ‘continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme and any potential financial impact’.
The potential motor finance bill has seen Close Brothers take a series of steps to strengthen its finances, including selling its Winterflood and asset management businesses.
It has also accelerated efforts to cut costs.
Close Brothers removed around £36m from its annual cost base in the year to July 31, beating an initial target of £25m.
It now expects to deliver cumulative annual savings of more than £60m by the end of July 2027.
The group announced plans in March to cut 600 jobs and reduce its office network, with around 200 of those roles going during the latest financial year.
The remaining 400 are due to disappear over the coming year, with some call centre roles being moved to South Africa.
Morgan did not rule out further redundancies but said there are currently no plans for job cuts beyond the 600 already announced.
Close Brothers said it was ‘well into planning for the next stage of restructuring activity’, including centralising support functions and accelerating its rollout of artificial intelligence.
Morgan said: ‘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.’
He added: ‘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 2027-28, rising thereafter.’
Shares in Close Brothers jumped 12% following the results.
Gary Greenwood, equity analyst at Shore Capital, said: ‘The acceleration in lending through the second half is particularly encouraging while management is delivering cost savings faster than planned.’