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Close Brothers delivers stable Q1 performance, increases motor finance provision
(Sharecast News) - Merchant banking group Close Brothers said on Thursday that it had increased its provision for a proposed motor finance redress scheme following the FCA's October consultation, while also reporting a solid first-quarter performance from its banking division, supported by a strong net interest margin, stable credit quality, and ongoing cost discipline. Close Brothers increased its provision for a proposed industry-wide redress scheme in respect of motor finance commissions by around £135m in the first quarter, taking the total to approximately £300m.
It said the provision, which includes redress and operational costs, reflects its current best estimate but warned the final cost could vary materially depending on regulatory and legal developments. Close Brothers added that the FCA's proposed methodology does not accurately reflect actual loss or align with the Supreme Court's fact-specific test for unfairness.
Close Brothers said its banking unit's loan book declined 1% in the quarter to £9.4bn, reflecting softer demand amid macro uncertainty. Asset finance and motor finance delivered growth, offset by higher repayments and lower volumes in property and invoice finance.
The FTSE 250-listed firm said its annualised net interest margin stood at 7.1%, boosted by temporary behavioural fee income, though full-year margins were expected to come in slightly below 7% due to loan mix effects.
Close Brothers also noted that cost optimisation initiatives were progressing well, with around £20m of annualised savings expected in FY26 and at least £20m per year in the following two years, and stated that it remained well positioned to benefit from a recovery in demand, having refocused the business on segments with mid to high single-digit growth potential.
Chief executive Mike Morgan said: "We have made a solid start to the year and are progressing at pace with our cost reduction initiatives, focusing on the delivery of our strategic priorities to improve operational efficiency and drive growth. Our capital position remains strong, and we are well positioned for future growth as a specialist banking group."
As of 0905 GMT, Close Brothers shares were up 2.09% at 420.60p.
Reporting by Iain Gilbert at Sharecast.com
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