Banking group Close Brothers plunged to a £104m loss in the first half of 2024 after the firm set aside provisions for the motor finance scandal.
The FTSE 100 lender recorded a pre-tax loss in the first half of 2025, compared to a profit of £88.1m in the same period of 2024 due to a £165m provision for motor finance payouts.
Shares in Close Brothers plunged 14 per cent in early deals as the market digested the figures.
The group added that the impact of complaints handling and other legal costs incurred concerning the car commission scandal had also driven losses.
Operating income fell by one per cent to £390m, with the firm citing a marginal decline in banking and lower interest income.
The group’s net interest margin reduced by 30 basis points to 7.2 per cent from 7.5 per cent.
The lender said the sale of Close Brothers Asset Management, which was completed on February 28, was estimated to have generated £59m and increased the group’s CET1 ratio by around 120 basis points to 13.4 per cent.
It added the transaction had allowed it to sharpen focus on lending activity.
Mike Morgan, Close Brothers chief executive, said: “The group’s performance reflects the strength and resilience of our business model, with robust underlying profit in the Banking business.”
“At our core, we have been here to serve our customers, deliver excellent service, provide specialist expertise and build strong, lasting relationships over the years. Today we are a trusted partner to UK SMEs, millions of customers, and our dedicated colleagues.”
Morgan added that the group’s banking model was “more relevant than ever” and aligned with “the UK government’s growth agenda”.
“My priorities include focusing on greater simplification, improving operational efficiency, and driving sustainable growth.
“Our goal is to ensure that, once the motor finance commissions uncertainty has been resolved, the group is well positioned to generate strong, sustainable returns,” he added.
Supreme Court motor finance ruling will set the tone
At the beginning of next month, the Supreme Court is due to hear an appeal by car loan providers challenging the October Court of Appeal ruling that sided with consumers who complained about “secret” commissions on car loans.
The judgment ruled that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent.
The decision opened the door for a potentially fresh wave of complaints from consumers who think they may have been mis-sold car finance in previous years.
The Supreme Court will hear an appeal against the Court of Appeal’s judgement between April 1 to 3. The outcome could have a major impact on the UK finance industry as the FCA has indicated it would move towards a sector-wide redress scheme if the judgement is upheld.
Broker Peel Hunt said the upcoming case adds a great deal of uncertainty to Close Brothers’ outlook.
“Much depends on both on the Supreme Court ruling and the outcome of the FCA review of the use of discretionary commissions in motor finance,” the firm’s analysts wrote in a note on the lender this morning.