Close Brothers has confirmed it provisioned £400 million ahead of the Financial Conduct Authority’s (FCA) review of the motor finance sector. This decision was disclosed alongside the firm’s half-year results for the period ending January 31, 2024. Due to these preparations, the company opted not to pay dividends.
During the stated period, Close Brothers reported a statutory operating profit before tax of £93.8 million, a substantial increase from £11.7 million in the first half of 2023. However, operating income dipped slightly by 1%, from £474.3 million to £470.8 million.
The FCA initiated an investigation earlier this year into discretionary commissions on car financing deals, expressing concerns about potential customer interest rate hikes. Analysts fear potential industry-wide costs amounting to billions of pounds as a result of these inquiries.
Adrian Sainsbury, Close Brothers’ CEO, emphasized the ongoing nature of the FCA review and refrained from predicting its outcome or estimating its potential impact. However, he highlighted the company’s proactive measures to fortify its capital position, including the suspension of dividend payments and efforts to optimize risk-weighted assets and reduce costs.
Despite the prevailing uncertainty, Sainsbury remains confident in Close Brothers’ ability to navigate through this period and capitalize on future opportunities. This move by Close Brothers mirrors Black Horse’s earlier announcement in February, where they also set aside £450 million in anticipation of the FCA investigation.
