Close Brothers Posts £122m Loss Amid Motor Finance Charges and Business Exits
Close Brothers Group has reported a startling turnaround, swinging to a full-year loss of £122.4 million.
The loss comes after the firm booked a £165 million provision linked to motor finance commission costs, a stark contrast to last year’s £132.7 million profit.
In a statement on Tuesday, the financial services group said the provision, together with £33 million set aside for a customer remediation programme and £47.5 million in rental business losses, more than offset its underlying profits.
Adjusted operating profit fell 14% to £144.3 million from £167.6 million the previous year, as revenue declined 2% to £681.2 million and expenses rose by 3% to £445.1 million. Return on average tangible equity also slid, down to 7.1% from 9.3%.
“The group had exited or sold several businesses during the year, including Close Brothers Asset Management, Winterflood, Brewery Rentals and Vehicle Hire,” said Chief Executive Mike Morgan.
Close Brothers Group Plc is exiting the vehicle hire business as the UK lender seeks to enhance profits following a prolonged legal battle related to its motor finance operations. pic.twitter.com/kzgj5JPVzl
— unumihai Media (@unumihaimedia) September 30, 2025
Banking Division Faces Headwinds
The Banking division saw a 7% drop in adjusted operating profit, landing at £198.3 million. The loan book shrank by 4% to £9.5 billion.
Analysts attributed the decline to a temporary pause in UK motor lending following a 2024 Court of Appeal ruling and generally lower market activity. Net interest margins, however, remained stable at 7.2%.
Capital Position Strengthens
Despite the setbacks, Close Brothers’ capital position improved. The Common Equity Tier 1 ratio climbed to 13.8% from 12.8%.
The planned sale of Winterflood, announced in July, is expected to contribute an additional 55 basis points once finalised.
The group also recorded £49.2 million in profit from discontinued operations, which included the disposals of Close Brothers Asset Management and Winterflood.
Dividend Withheld Amid Regulatory Uncertainty
The board decided not to declare a final dividend, citing uncertainty around the Financial Conduct Authority’s ongoing review of motor finance commission arrangements.
The regulator is preparing an industry-wide consultation following the Supreme Court’s August ruling that overturned a prior Court of Appeal decision.
Morgan highlighted the strategic exits over the year, noting, “The vehicle hire exit resulted in a £30 million impairment.
The group achieved £25 million in annualised cost savings and is targeting at least £20 million more each year over the next three years.”
Key Metrics
- Return on opening equity fell to 6.2% from 7.9%
- Adjusted basic earnings per share from continuing operations dropped to 5.8p
- Statutory earnings per share turned negative at (99.8)p
- No ordinary dividend declared
Close Brothers is now navigating a period of restructuring and non-supervisory scrutiny, balancing capital strength with the need to streamline operations and restore shareholder confidence.
