The update from Close Brothers Group PLC (LSE:CBG) this morning should not provide much solace for investors, analysts said, as much remains to be decided outside of the company's control.
In an unscheduled trading statement, the mid-cap lender said it planned to make a provision of up to £165 million for motor finance commissions for the first half of its current financial year.
As analyst Gary Greenwood at Shore Capital noted, this is based on a probability-weighted scenario "and so the eventual costs could be materially larger or smaller depending on the outcome of the Supreme Court review", which is scheduled for the start of April, as well as any subsequent FCA redress scheme and eventual claimant behaviour.
Greenwood notes that the consensus of analyst forecasts that include a forecast for motor finance provision is £155 million in the current financial year, with a further £188 million in FY26 and £145 million in FY27.
The average total estimated provision over three years is forecast at £352 million, while Greenwood's estimate is at the top of the range at £450 million, "all of which we have assumed will be taken in FY25".
Analyst Rae Maile at Panmure Liberum said that even though the company has decided to put an estimated provision for motor finance into its results, which may provide solace for some investors, "we are still no closer to being certain that this is the 'right' level".
He said "other issues remain", including insurance premium finance, costs, the struggles of market maker Winterflood and "indeed the very positioning of the bank".
We are still a way away from a conclusion on the motor issue, he said. "And when that has been settled, focus should move to insurance premium finance, while costs also remain too high.
"Fundamentally the challenge is that what made Close special post-2008 is rather less special today. The stock remains as much a career choice as an investment call."