Merchant bank Close Brothers Group PLC (LSE:CBG) has agreed to sell its Close Brothers Asset Management (CBAM) business to Oaktree Capital for £200 million.
Close Bros stated that the decision forms part of a strategy “to simplify the group and focus on our core lending business”.
The news comes as Close Bros faces uncertainty surrounding its motor finance arm following a Financial Conduct Authority review into the sector.
“There remains significant uncertainty about the outcome of the FCA's review of historical motor finance commission arrangements at this stage, and the timing, scope and quantum of any potential financial impact on the group cannot be reliably estimated at present,” the group said today.
Close Bros anticipates between £10 and 15 million in costs related to the handling of this review in the year ahead, but the potential financial impact could be considerably higher.
Disposing of CBAM will help to solidify Close Bros’ capital base to maintain its common equity tier one (CET1, a core measure of a bank’s financial strength) capital target range of 12% to 13%.
To help maintain a strong capital base, Close Bros did not pay out a dividend this year.
Close Bros announced the CBAM disposal alongside its full-year results, which showed group-wide profit before tax increasing 27% to £142 million.
Although CBAM grew assets under management by 18% in the first half, adjusted operating profit fell by nearly a quarter to £12.2 million after hiring a crew of new investment managers.
In the core banking segment, Close Bros grew its loan book by 6% to £10.1 billion and delivered a net interest margin of 7.4% compared to 7.7% in 2023.