LONDON - Close Brothers (F:CBRO) Group PLC, a prominent UK merchant banking group, announced today that it expects to recognize a provision of up to £165 million in relation to motor commissions in its first-half financial statements for the period ending January 31, 2025. This provision is intended to cover potential operational and legal costs, as well as potential remediation for affected customers, following a review of the group’s accounting assessment of these matters.
The estimated provision is based on a range of scenarios and assumptions, including commission models, rates, and time periods that may be subject to regulatory redress. The group acknowledges significant uncertainty around the outcomes from the motor commissions appeals and the Financial Conduct Authority’s (FCA) ongoing review, indicating that the ultimate cost could vary materially from the current estimate.
Despite this anticipated provision, Close Brothers reported a robust performance for the six-month period, with an expected Adjusted operating profit (AOP) of approximately £104 million in Banking, excluding the provision and other adjusting items. However, unfavorable market conditions led to an operating loss of about £1 million for Winterflood, the group’s securities trading business.
The group’s CET1 capital ratio was 13.5% as of December 31, 2024, and the provision is expected to reduce this ratio by approximately 150 basis points. Nevertheless, Close Brothers anticipates that its CET1 capital ratio will recover to around 13% by the end of the 2025 financial year, bolstered by the completion of the sale of Close Brothers Asset Management and other capital management initiatives.
Close Brothers maintains a solid capital, funding, and liquidity position, with a conservative funding strategy and a liquidity coverage ratio substantially above regulatory requirements. The group is also preparing for a significant risk transfer of assets in Motor Finance and continues to evaluate additional potential management actions to optimize risk-weighted assets.
The group’s half-year results for the period ending January 31, 2025, will be released on March 18, 2025. The announcement also includes updates on developments related to motor commissions, including an ongoing appeal to the Supreme Court and the FCA’s review process, which is set to outline next steps in May 2025.
This update is based on a press release statement from Close Brothers Group PLC and contains unaudited financial information subject to interim audit review. The company has taken steps to ensure compliance with UK regulations by disclosing this inside information to the public.
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