What are the implications of the recent findings regarding Close Brothers and its compensation obligations? Close Brothers will have to double the amount it has set aside to compensate customers due to the motor finance scandal, according to Viceroy Research.
Viceroy estimates that Close Brothers will probably have to pay out between £572 million and £1.23 billion as part of the redress scheme. This comes as the Financial Conduct Authority (FCA) began a review of motor finance two years ago, prompted by the industry’s failure to properly disclose commissions.
In its latest financial report, Close Brothers revealed a £65.5 million loss for the six months to the end of January, compared to a loss of £102.2 million for the same period last year. The bank has also announced plans to cut 600 jobs over the next 18 months, reducing its workforce to 2,000.
Shares in Close Brothers have taken a hit, closing down 57¾p, or 13.9 percent, to a nine-month low of 357½p on Monday. The bank has set aside £300 million for motor finance compensation, but Viceroy warned that this amount may not be sufficient.
Close Brothers has stated that it “strongly disagrees” with Viceroy’s report, which claimed that the bank has “exhausted all available measures to sustain its capital base.” In response, Mike Morgan, a representative from Close Brothers, emphasized that the bank remains focused on delivering its strategic priorities: simplify, optimise, and grow.
As the situation develops, it remains to be seen how Close Brothers will navigate these challenges and what further actions may be required to address the fallout from the scandal. Details remain unconfirmed.
