Close Brothers shares tank as motor finance provisions lead to H1 loss

(Sharecast News) - Close Brothers shares tanked on Tuesday after the merchant banking group swung to a hefty loss in the first half on the back of a £165m provision for motor finance commissions. Looking forward, the company also said that the reinstatement of dividends would be reviewed "once there is further clarity on the financial impact of the FCA review of motor finance commission arrangements and the Supreme Court appeals".

Close Brothers reported a loss before tax of £103m for the six months to 31 January, compared with a £88.1m profit recorded a year earlier.

Despite the £165m motor finance provision already being reported last month, shares were down more than 13% at 299.38p in early deals.

Other key financial metrics weakened over the period, with operating income down 1% at £390m, as a small decline in banking and lower interest income offsetting higher income from the Winterflood brokerage division. The loan book shrank 3% over six months to £9.8bn and net asset value per share fell 8% to £10.10.

Meanwhile, the company's CET1 capital ratio declined to 12.2% from 12.8%. However, after including profits from the disposal of Close Brothers Asset Management, the CET1 capital ratio would have been 13.4%.

"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," said chief executive Mike Morgan.

"Alongside a stronger capital position, delivering on these priorities will create a more efficient and resilient business, one that delivers greater value for shareholders and continues to support customers, as we have through many cycles."