Lloyds Banking Group PLC (LSE:LLOY) might be a short-term gainer from the FCA’s comments yesterday that a financial redress scheme for any motor finance mis-selling will be delayed until 2025, says broker KBW.
For the UK lender, KBW estimates a worst-case liability of £2 billion or 6% of this year’s projected book value.
“Whilst the delay is likely to frustrate management, for shareholders it is a small positive,” it adds.
“Management has already accrued what they believe to be a reasonable £0.5 billion provision.
“In the absence of further news this year any delay should enable a higher 2025 capital return.
KBW's current forecasts include a £1 billion motor provision this year, out of a total of £2 billion, and a £1.5 billion share buyback to be announced at the year's end.
On Close Brothers Group PLC (LSE:CBG), the other bank most exposed to motor finance, KBW is more cautious.
“Our projected worst-case liability of £350m equates to c.20% of FY24e tangible book value.
“We see this delay as negative for CBG, where the uncertainty around what could be a material liability has significant implications for both organic growth in the core business and dividend-paying capacity.”
Shares in Lloyds were flat at 59.6p today with Close Bros up 2.5% at 522p.