Trying to guess what Close Brothers Group PLC's (LSE:CBG) trading update might contain next week seems futile given the chaos surrounding the motor finance market at present.
To recap, about three weeks ago lenders Close Bros, and Firstrand Bank, lost appeal court cases over the disclosure of commissions on loans for car purchases.
The case broadened the remit of an investigation already underway by financial regulator the FCA into these types of deals and, according to some commentators, opens the door for anyone who bought a car with a loan over the past fifteen years to make a claim for mis-selling compensation.
Estimates from the City suggest that if the Appeal Court judgment is upheld the amount claimed could rival the tens of billions paid out during the banks’ PPI scandal.
Close Bros has reportedly appealed the judgement and the FCA has asked the Supreme Court to make a swift decision to bring some clarity to the situation.
Canadian bank RBC has suggested that at the current state of play, Close Bros might face a bill of £320 million, but that presumably could change quickly depending on any new legal decision or if the appeal is rejected.
Close Bros, which also owns market maker Winterflood, has already agreed to sell its asset management arm for £200 million to bolster its balance sheet, while RBC says other options are to unwind its motor and premium finance loan books and scrap dividends in 2025/26.