Shares in British specialist lender Close Brothers surged by 23% on Wednesday after the company estimated its exposure to the market regulator’s significant motor finance compensation bill would be broadly in line with existing provisions. Close Brothers is a British specialist lender. The company provides loans, wealth management, and securities trading services. It assessed its costs from the redress scheme at approximately 320 million pounds, only about 26 million pounds higher than its initial forecast. This positive assessment saw its shares trade 17.8% higher in mid-morning, comfortably outperforming a 5.6% gain in broader British financials amidst a wider stock market rally.
The Financial Conduct Authority (FCA) recently instructed the nation’s motor finance industry to compensate motorists by around 9.1 billion pounds. This directive follows findings that lenders and car dealerships inadequately disclosed commissions and contractual ties over a 17-year period until 2024. The final compensation bill was adjusted downwards from the FCA’s original 11 billion pound estimate after revisions to administrative costs, eligibility criteria, and motorist participation forecasts. While other major banks like Lloyds and Santander have collectively provisioned billions, individual lender exposure varies significantly, as highlighted by South Africa’s FirstRand hiking its provisions by 510 million pounds to 750 million.
Close Brothers’ provision is expected to reduce its Common Equity Tier 1 capital ratio, a key measure of financial strength, by approximately 25 basis points to 14% on a pro-forma basis as at January 31, 2026. This figure remains comfortably above its medium-term target range of 12%-13%. In March, the company had announced plans to reduce its workforce by a fifth by 2027, as it navigates the expenses stemming from one of Britain’s most costly financial mis-selling scandals. Close Brothers indicated it would continue to closely monitor legal, regulatory, and industry developments as it considers its next steps, not ruling out any legal challenge.
