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Close Bros optimistic despite softer loan book
(Sharecast News) - Close Brothers Group saw its loan book shrink in the third quarter, the merchant bank confirmed on Wednesday, but remained confident for the full year after it bolstered its capital position. Updating on trading, the FTSE 250 firm said the loan book had decreased by 0.9% in three months to 30 April, or 3.5% in the year-to-date, to £9.7bn.
It attributed the decline to increased levels in of repayments in property, reduced activity in some of its asset finance businesses and a "competitive" market in premium finance.
However, that was partly offset by growth in invoice finance and improved new business volumes in motor finance, following a temporary pause in lending last year.
As a consequence, it now expects the loan book for the 2025 full year to be broadly flat.
However, Close Brothers also strengthened its capital position during the quarter. Its common equity tier 1 capital ratio - a key measure of a bank's financial health - stood at 14.0% as at 30 April, compared to 13.4% at the end of the second quarter.
The group said: "We are encouraged by the resilient performance we have delivered so far this year, while significantly strengthening our capital position.
"We have updated our loan book growth expectations to reflect the performance year-to date, and now expect our CET1 capital ratio to be above our medium-term target range of 12% and 13% by the end of the financial year.
"We remain confidence in all other guidance."
Close Brothers is currently waiting on a key ruling from the Supreme Court regarding motor finance, which could end up costing the industry billions.
The Court of Appeal ruled in October that it was illegal for banks to pay commission to a car dealer without the customer's informed consent.
Close Brothers, along with South Africa's FirstRand, challenged that ruling to the Supreme Court in April. The court's decision is due in July, and the Financial Conduct Authority has pledged to confirm within six weeks of that details of any likely redress scheme.
Close Brothers has put aside £156m to deal with any potential claims.
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