Close Brothers Group PLC (LSE:CBG) shares plunged 13% as the lender swung to a first-half loss of £103.8 million after it made a £165 million provision relating to motor finance commissions.
The provision was flagged last month, with the loss also reflecting lower income and the impact of complaints handling and other operational and legal costs incurred in relation to the motor finance issue, where the Supreme Court is due to rule early next month.
The lender reported a pro-forma CET1 capital ratio of 13.4% at the 31 January 2025 half-year period, following the boost from the February sale of its asset management business and other actions to maintain capital levels.
Operating income shrank 1% to £390.0 million, with a decline in Banking and lower interest income from central functions more than offsetting higher income in the Winterflood market-making arm.
Progress was also reported on cost initiatives, with an additional £5 million of annualised savings now expected to take total estimated savings to around £25 million by the end of the current financial year, though in the first half costs were higher than last year.
Alongside the results, chief executive Mike Morgan talked up the “strength and resilience” of the business model, with an underlying profit made in the banking business and capital ratio well above the regulatory minimum.
He said his priorities included “focusing on greater simplification, improving operational efficiency, and driving sustainable growth”, with the board’s goal being “to ensure that, once the motor finance commissions uncertainty has been resolved, the group is well positioned to generate strong, sustainable returns”.
Analysts at Peel Hunt said the results were in line with the trading update issued on 12 February in all material respects.
"We view these results as neutral for the share price and look forward to the upcoming decision from the Supreme Court on the cases of Hopcraft, Wrench, and Johnson as representing a potentially significant catalyst for the share price."
** Update: Adds share price, broker comment **