REG - Close Bros Grp PLC - Half-year Report for six months to 31 January 2025
18/03/2025 07:15
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RNS Number : 0432B Close Brothers Group PLC 18 March 2025
Half Year Results for the Six Months to 31 January 2025
18 March
2025
FOCUSING ON RESILIENCE AND LONG-TERM GROWTH
Mike Morgan, Chief Executive, said:
"The group's performance reflects the strength and resilience of our business
model, with robust underlying profit in the Banking business. We have made
significant progress on our capital actions, achieving a pro-forma CET1
capital ratio of 13.4% at 31 January 2025, following the sale of Close
Brothers Asset Management ("CBAM") and despite the impact of a £165 million
provision relating to motor finance commissions."
"At our core, we have been here to serve our customers, deliver excellent
service, provide specialist expertise and build strong, lasting relationships
over the years. Today we are a trusted partner to UK SMEs, millions of
customers, and our dedicated colleagues. Our banking model is more relevant
than ever, and aligned with the UK government's growth agenda. We will build
on our strong foundations while making the right strategic choices for
long-term success. My priorities include focusing on greater simplification,
improving operational efficiency, and driving sustainable growth. Our goal is
to ensure that, once the motor finance commissions uncertainty has been
resolved, the group is well positioned to generate strong, sustainable
returns. Alongside a stronger capital position, delivering on these priorities
will create a more efficient and resilient business, one that delivers greater
value for shareholders and continues to support customers, as we have through
many cycles."
Key Financials1
( ) First half First half Change
2025 2024 %
Operating (loss)/profit before tax(2) £(103.0)m £88.1m (217)
Adjusted operating profit3 £74.9m £88.1m (15)
Profit from discontinued operations, net of tax4 £0.3m £3.9m (93)
(Loss)/profit attributable to shareholders and other equity owners £(111.8)m £68.8m (263)
Adjusted basic earnings per share (continuing operations only)3,5 30.9p 43.4p (29)
Basic earnings per share (continuing operations only)5 (82.8p) 42.6p (294)
Basic earnings per share (continuing and discontinued operations)4,5 (82.1p) 46.0p (278)
Ordinary dividend per share - -
Return on opening equity6 6.1% 8.5%
Return on average tangible equity6 7.4% 9.9%
Net interest margin7 7.3% 7.5%
Bad debt ratio7 1.0% 0.9%
31 January 31 July Change
2025 2024 %
Loan book(8) £9.8bn £10.1bn (3)
Net asset value ("NAV") per share9 £10.1 £11.1 (8)
Tangible net asset value ("TNAV") per share9 £8.4 £9.3 (9)
CET1 capital ratio (transitional) 12.2% 12.8%
CET1 capital ratio (transitional) pro-forma after CBAM disposal(10) 13.4% n/a
Tier 1 capital ratio (transitional) 14.1% 14.7%
Total capital ratio (transitional) 16.0% 16.6%
Key Financials (Excluding Novitas)
( ) First half First half Change
2025 2024 %
Operating (loss)/profit before tax £(105.6)m £87.9m (220)
Adjusted operating profit £72.3m £87.9m (18)
Net interest margin7 7.2% 7.5%
Bad debt ratio7 1.0% 0.8%
31 January 31 July Change
2025 2024 %
Loan book(8) £9.8bn £10.0bn (3)
1. Please refer to definitions on pages 75 to 77.
2. Statutory operating loss in the first half 2025 of £(103.8) million excludes
£0.8 million of intercompany transactions relating to discontinued
operations.
3. Adjusted measures are presented on a basis consistent with prior periods and
exclude amortisation of intangible assets on acquisition, to present the
performance of the group's acquired businesses consistent with its other
businesses; and any exceptional and other adjusting items which do not reflect
underlying trading performance. Further detail on the reconciliation between
operating and adjusted measures can be found in Note 2 "Segmental Analysis".
Please refer to the basis of presentation on page 27 for further information.
4. Discontinued operations relate to Close Brothers Asset Management, which has
been classified as 'discontinued operations' in the group's income statement
for the 2024 and 2025 financial years in line with the requirements of IFRS 5.
The related assets and liabilities are classified as held for sale on the
group's balance sheet at 31 January 2025. Statutory profit from discontinued
operations in the first half 2025 of £1.1 million excludes £(0.8) million of
intercompany transactions.
5. Refer to Note 4 "Earnings per Share" for the calculation of basic and adjusted
earnings per share.
6. Return on opening equity and return on tangible equity have been restated for
first half 2024 to exclude discontinued operations.
7. Net interest margin and bad debt ratio calculated on an annualised basis.
8. Loan book includes operating lease assets.
9. NAV and TNAV per share for H1 24 and H1 25 include discontinued operations.
10. Pro-forma CET1 capital ratio as at 31 January 2025, reflecting the estimated
benefit of c.120 basis points in relation to sale of CBAM. Please refer to
page 26 for further information.
Strategic Highlights: Delivering on our Capital Actions and Strengthening our
Underlying Business
• In March 2024, we announced a range of management actions aimed at
strengthening the group's available CET1 capital by approximately £400
million by the end of the 2025 financial year. As a result of these actions,
approximately £360 million of CET1 capital has been generated or preserved as
of 31 January 2025 (relative to the capital trajectory projected at the time)
• The sale of CBAM completed on 28 February 2025 and is estimated to generate a
profit on disposal of approximately £59 million and increase the group's CET1
ratio by c.120 bps on a pro-forma basis as at 31 January 2025 from 12.2% to
13.4%. The transaction has simplified the group and allows us to sharpen our
focus on our ongoing lending business
• Significant progress has been made on implementing cost management
initiatives, as we continue to focus on optimising our cost base, with an
additional c.£5 million of annualised savings now expected to be delivered.
This increases the estimated total annualised savings to c.£25 million by the
end of the current financial year, up from £20 million previously
• We continue to evaluate a range of additional potential management actions to
further optimise RWAs, including potential risk transfer of assets in Motor
Finance and other portfolios, together with a continuous review of our
businesses and portfolios and other tactical actions
Financial Performance
• Operating income reduced 1% to £390.0 million (H1 2024: £394.5 million),
with a marginal decline in Banking and lower interest income in Group (central
functions) more than offsetting higher income in Winterflood
• Adjusted operating expenses rose marginally to £267.0 million (H1 2024:
£264.7 million), as lower costs, reflecting recent cost initiatives in both
Banking and Winterflood, were more than offset by higher Group (central
functions) expenses
• Adjusted operating profit decreased 15% to £74.9 million (H1 2024: £88.1
million), driven by an increase in impairment charges, as well as a marginal
decline in income and slightly higher costs
• The group reported a statutory operating loss before tax of £103.8 million
(H1 2024: statutory operating profit before tax of £87.0 million), primarily
driven by a £165 million provision in relation to motor finance commissions
as well as the impact of complaints handling and other operational and legal
costs incurred in relation to motor finance commissions
• Group return on average tangible equity ("RoTE")(1) decreased to 7.4% (H1
2024: 9.9%)
• In Banking, the loan book reduced 3% in the first half to £9.8 billion (31
July 2024: £10.1 billion), driven by seasonality and selective lending, as we
sought to optimise risk weighted assets and further strengthened our capital
position. The net interest margin remained strong at 7.3% (H1 2024: 7.5%).
Adjusted operating profit reduced to £104.1 million (H1 2024: £111.7
million) primarily reflecting an increase in the bad debt ratio to 1.0% (H1
2024: 0.9%), which remains below our long-term average, mainly driven by the
ongoing review of provisions and coverage across our loan portfolios and
compares to a relatively low charge in the comparative period
• Notwithstanding the reduction in the loan book, we continued to benefit from
the diversity of our Banking businesses, with customer demand remaining robust
and good growth in portfolios including Transport, Motor Finance Ireland and
Materials Handling
• In Winterflood, market conditions have remained unfavourable and the business
delivered an operating loss of £0.8 million (H1 2024: £2.6 million operating
loss); Winterflood Business Services ("WBS") income increased 22% to £9.5
million (H1 2024: £7.8 million), with assets under administration ("AuA") up
27% to £17.5 billion (H1 2024: £13.8 billion)
• We maintained a strong balance sheet position with our Common Equity Tier 1
("CET1") ratio at 12.2% (13.4% on a pro-forma basis) at 31 January 2025 (31
July 2024: 12.8%), significantly above our applicable requirement of 9.7%,
despite the impact of the £165 million provision
• We recognised £177.9 million of adjusting items (H1 2024: £nil), consisting
of a £165.0 million provision relating to motor finance commissions, £8.4
million reflecting complaints handling and other operational and legal costs
incurred in relation to motor finance commissions, £4.0 million of impairment
of intangible assets, £0.4 million of restructuring costs and £0.1 million
of amortisation of intangible assets on acquisition
• Operating profit before tax from discontinued operations (CBAM) was £4.7
million (H1 2024: £6.3 million). Statutory profit from discontinued
operations of £1.1 million (H1 2024: £5.0 million)
• Given the continued significant uncertainty regarding the outcome of the FCA's
review of motor finance commission arrangements and the Supreme Court appeals
relating to motor finance commissions and any potential financial impact as a
result, the group will not pay an interim dividend in respect of the first
half of the 2025 financial year
Guidance
In Banking, we are encouraged by the robust underlying profit performance
delivered in the first half
• We will resume selective loan book growth, subject to demand, with modest
growth expected in the second half of the 2025 financial year. The loan book
at 31 July 2025 is expected to remain broadly flat year-on-year
• We expect the full-year net interest margin to be around 7%, slightly below
the first half exit rate of 7.1%
• Banking adjusted operating expenses in the 2025 financial year expected to
increase by c.1% on the prior year
• Estimated total annualised cost savings of c.£25 million by the end of the
current financial year, up from £20 million previously
• The bad debt ratio is expected to remain below our long-term average of 1.2%
in the 2025 financial year
While short-term trading conditions remain challenging, we are confident that
Winterflood remains well positioned to benefit when market conditions return.
• Remain focused on diversifying revenue streams
• Expect to grow AuA in WBS to over £20 billion by 2026
We expect Group (central functions) net expenses to be between £55 million
and £60 million in the 2025 financial year, reflecting elevated professional
fees and expenses as well as a decline in interest income
With respect to items recognised as adjusting
• We estimate costs associated with complaints handling and other operational
and legal costs to be c.£22 million in the 2025 financial year
• We expect to incur £2-3 million of restructuring costs in the 2025 financial
year
In the near-term, we expect to maintain our CET1 capital ratio around the top
end of our medium-term target range of 12% to 13%, balancing growth and
resilience.
The reinstatement of dividends will be reviewed once there is further clarity
on the financial impact of the FCA review of motor finance commission
arrangements and the Supreme Court appeals.
1. Group return on average tangible equity calculated as adjusted operating
profit attributable to ordinary shareholders divided by average total
shareholder's equity, excluding intangible assets and other equity
instruments. Prior year numbers have been restated to exclude discontinued
operations.
Enquiries
Camila Sugimura Close Brothers Group plc 020 3857 6577
Sam Cartwright H/Advisors Maitland 07827 254 561
A virtual presentation to analysts and investors will be held today at 9.30 am
followed by a Q&A session. A webcast and dial-in facility will be
available by registering at
https://webcasts.closebrothers.com/results/HalfYearResults2025.
Financial Calendar (Provisional)
The enclosed provisional financial calendar below is updated on a regular
basis throughout the year. Please refer to our website www.closebrothers.com
(http://www.closebrothers.com) for up-to-date details.
Event Date
Third quarter trading update 21 May 2025
Financial year end 31 July 2025
Preliminary results 2025 September 2025
About Close Brothers
Close Brothers is a leading UK merchant banking group providing lending,
deposit taking and securities trading. We employ approximately 3,000 people,
principally in the United Kingdom and Ireland. Close Brothers Group plc is
listed on the London Stock Exchange.
Chief Executive's Statement
I was honoured to assume the position of Group chief executive in January, and
I step into this role with a clear focus and determination to address both the
challenges and opportunities that lie ahead. We have taken decisive actions to
navigate today's volatile environment, and I firmly believe in the strength of
our core business and the attributes that have defined this group.
We have made significant progress in strengthening our capital position,
achieving a pro-forma CET1 capital ratio of 13.4% at 31 January 2025,
following the sale of CBAM and despite the impact of a £165 million provision
relating to motor finance commissions. This reflects our commitment to
resilience and ensuring we can navigate the current environment with
confidence. I want to thank our customers, colleagues, and shareholders for
their continued support.
Despite the short-term impact of the motor finance commissions uncertainty on
our financial performance, our core banking model remains resilient. We
continue to deliver a robust underlying profit in our Banking business.
At our core, we have been here to serve our customers, deliver excellent
service, provide specialist expertise and build strong, lasting relationships
since 1878. Today we are a trusted partner to UK SMEs, millions of customers,
and our dedicated colleagues. Our banking model is more relevant than ever,
and aligned with the UK government's growth agenda, which places a strong
emphasis on supporting SMEs. Through every economic cycle, we have stood by
our customers, and that will not change.
That said, I recognise that the returns we generate today are not where they
need to be, and this must change. That is why I am committed to challenging
ourselves and our businesses to drive meaningful improvements. We must build
on our strong foundations while making the right strategic choices for
long-term success. My priorities include focusing on greater simplification,
improving operational efficiency, and driving sustainable growth to ensure we
resume the delivery of higher levels of returns.
The sale of CBAM has simplified the group and allows us to sharpen our focus
on our ongoing business. We are actively evaluating our lending mix and
portfolios to ensure they maximise returns. While we have made progress on
cost savings, our efficiency metrics must improve and there is more to be
done. I have initiated a review to drive a step-change in operational
efficiency and cost reduction. These will focus on simplification and
modernisation of technology platforms, leveraging of offshore capabilities and
cost transformation of centrally provided services. A more efficient, focused
group will allow us to reinvest in areas with the greatest growth potential.
Looking ahead, we see many opportunities across our markets, and are actively
evaluating ways to drive growth within our Banking businesses. We remain
committed to markets that offer attractive and sustainable risk adjusted
returns.
Alongside a stronger capital position, these steps will create a more
efficient and resilient business, one that delivers greater value for
shareholders and continues to support customers, as we have through many
cycles.
Our goal is to ensure that, once the motor finance commissions uncertainty has
been resolved, the group is well positioned to generate strong, sustainable
returns.
With an experienced leadership team and our relentless commitment to
supporting our customers, I am confident in our ability to navigate the road
ahead. I look forward to sharing further updates in the months to come.
Financial Performance
We reported a statutory operating loss before tax of £103.8 million (H1 2024:
statutory operating profit of £87.0 million), primarily driven by the £165
million provision in relation to motor finance commissions. On an adjusted
basis, excluding the impact from certain items which do not reflect the
underlying performance of our business, the group's operating profit decreased
15% to £74.9 million (H1 2024: £88.1 million) driven by an increase in
impairment charges, as well as a marginal decline in income and slightly
higher costs.
In Banking, adjusted operating profit reduced to £104.1 million (H1 2024:
£111.7 million), as a reduction in costs was more than offset by an increase
in impairment charges and a marginal decline in income, primarily driven by
the impact of the temporary pause in UK motor lending. The net interest margin
remained strong at 7.3% and credit performance was resilient, with the bad
debt ratio 20 basis points below the long-term average at 1.0%. Winterflood
delivered an operating loss of £0.8 million (H1 2024: operating loss of £2.6
million), with trading income down as the business continues to navigate a
challenging market environment. WBS continued to see good momentum, with
income rising 22% to £9.5 million and AuA up 27% to £17.5 billion.
The group maintained a strong capital, funding and liquidity position. Our
CET1 capital ratio was 12.2% at 31 January 2025 (31 July 2024: 12.8%). On a
pro-forma basis, reflecting the sale of CBAM, our CET1 capital ratio was
13.4%. Our funding base reduced modestly to £12.7 billion (31 July 2024:
£13.0 billion) at 31 January 2025, and we continued to have strong access to
funding markets, with retail deposits increasing by 12% in the first six
months of the financial year. We adhere to a conservative funding strategy,
borrowing long and lending short. Additionally, we have consciously maintained
a higher level of liquidity, with a 12-month average liquidity coverage ratio
("LCR") of 953%, substantially above regulatory requirements, as at 31 January
2025.
Delivering on our Capital Actions
In March 2024, we announced a number of management actions aimed at
strengthening the group's available CET1 capital by approximately £400
million by the end of the 2025 financial year. These actions have largely been
implemented and, as a result, approximately £360 million of CET1 capital has
been generated or preserved as of 31 January 2025 (relative to the capital
trajectory projected at the time).
In March 2024 we took the difficult decision to cancel payment of the 2024
dividend, allowing us to retain c.£100 million of CET1 capital in the 2024
financial year. We have since generated an additional c.£50 million of CET1
capital in the first half of the 2025 financial year, prior to the provision
in relation to motor finance commissions. Given the continued significant
uncertainty regarding the outcome of the FCA's review of motor finance
commission arrangements and the Supreme Court appeals, the group will not pay
an interim dividend in respect of the first half of the 2025 financial year.
We have been lending more selectively to optimise RWAs. Since March 2024, we
estimate that a significant volume of additional loans, meeting our credit and
pricing requirements, could have been underwritten. This approach is reflected
in the year-on-year decline of 1% in our loan book as at 31 January 2025.
Relative to our projections at the time, we have mitigated RWA growth by
c.£710 million, equivalent to c.£90 million of CET1 capital preservation.
While we are disappointed not to have been able to pursue these opportunities,
we remain confident in our ability to continue to support our customers and
selectively grow the loan book in the second half of the financial year,
subject to demand.
We have implemented cost management initiatives to partially offset the
financial pressure from capital actions. These initiatives, focusing on
Technology, Suppliers and Property, and People, are now expected to deliver
total annualised savings of c.£25 million by the end of the current financial
year. We remain committed to executing further cost savings as we recognise
there is more we can achieve in enhancing our future operational efficiency.
We successfully completed the sale of CBAM on 28 February 2025. This
transaction is expected to increase the group's CET1 capital by c.£120
million or c.120 basis points on a pro-forma basis as at 31 January 2025.
The estimated CET1 capital ratio benefit excludes any immediate reduction in
operational risk RWAs associated with the CBAM business. The group expects a
further capital benefit over the next three years of up to c.25 basis points
to our CET1 capital ratio on a pro-forma basis as at 31 January 2025, due to a
reduction in operational risk RWAs.
Overall, the implemented management actions have significantly strengthened
the group's capital, resulting in a pro-forma CET1 capital ratio of 13.4% at
31 January 2025, significantly above our applicable regulatory requirement of
9.7%.
In the near-term, we expect to maintain our CET1 capital ratio around the top
end of our medium-term target range of 12% to 13%. We will resume selective
loan book growth, subject to demand. At the same time, we will continue to
evaluate additional potential RWA optimisation opportunities to maintain
resilience and flexibility, including a potential risk transfer of assets in
Motor Finance and other portfolios, a continuous review of our businesses and
portfolios and other tactical actions.
As previously stated, the decision to reinstate dividends will be reviewed by
the board once there is further clarity on the financial impact of the FCA
review of motor finance commissions and the Supreme Court appeals.
Mike Morgan
Chief Executive
Overview of Developments in relation to Motor Finance Commissions
On 11 January 2024, the Financial Conduct Authority ("FCA") announced a review
into historical motor finance discretionary commission arrangements ("DCAs").
This review was prompted by high numbers of complaints from customers across
the market and followed the Financial Ombudsman Service's ("FOS") publication,
also on 11 January 2024, of its first two decisions upholding customer
complaints relating to DCAs against two other lenders in the market.
On 25 October 2024, the Court of Appeal published its judgment in respect of
Hopcraft v Close Brothers Limited ("CBL") ("Hopcraft") upholding the appeal
brought against CBL. This case, initially determined in CBL's favour, was
heard in early July 2024 alongside two other claims against another lender.
The group disagrees with the Court of Appeal's findings and, on 11 December
2024, CBL obtained permission to appeal to the Supreme Court. The other lender
has also obtained permission to appeal and all cases will be heard at a
hearing scheduled for 1 to 3 April 2025 ("the Supreme Court appeals"). As has
been reported, a number of interested parties applied to intervene in the
Supreme Court appeals. The Supreme Court has granted permission to intervene
in the appeals to the FCA and the National Franchised Dealers Association
("NFDA").
On 11 March 2025, the FCA announced that it is no longer planning a further
announcement in May 2025 on next steps in its review of historical motor
finance commissions, as previously announced, and instead the FCA will confirm
within six weeks of the Supreme Court's decision if it will be proposing a
redress scheme and, if so, how it will take this forward. The FCA also stated
that, depending on the Supreme Court's decision, the FCA may also consult
separately on changes to its rules.
For an overview of commission models operated by Close Brothers Motor Finance
over the years, please refer to page 10 of the group's Annual Report 2024
available on the Investor Relations website.
Provisioning Assessment in relation to Motor Finance Commissions
In light of recent developments in relation to motor finance commissions, the
group has reviewed its accounting assessment of these matters. As a result,
the group recognised a provision in relation to motor finance commissions of
£165 million in the first half. This includes estimates for certain potential
operational and legal costs, as well as estimates for potential remediation
for affected customers. The provision is based on probability weighted
scenarios using various assumptions. These include, for example, commission
models, rates and time periods in scope of any regulatory redress scheme, as
well as response and uphold rates.
The provision is the outcome of a thorough assessment, representing the
group's current evaluation based on available information and recent
developments. There remains significant uncertainty as to the range of
outcomes from the Supreme Court appeals and the FCA's ongoing review of motor
finance commissions and, therefore, the ultimate cost to the group could be
materially higher or lower than the provision taken.
Additional details are set out in Note 15 on page 66.
As a result of the provision taken, the group's CET1 capital ratio reduced by
c.150 bps from 13.7% to 12.2% at 31 January 2025.
Update on Temporary Pause in Motor Finance and Other Changes Implemented
As previously announced, we temporarily paused UK motor finance lending on 25
October 2024. Since 2 November 2024, we have gradually resumed new business
origination, with all of our lending channels live from January 2025. We
expect underwriting volumes to return to levels seen prior to the October
pause by Q4 of the 2025 financial year. All new business is written with
updated documentation and processes to ensure disclosure of, and customer
consent to, our relationship with brokers and commission amounts on finance
agreements before customers enter into credit agreements. We have also
implemented measures to verify credit brokers' compliance with these new
requirements. Used car finance demand remains strong and in line with
pre-Hopcraft levels. We estimate the impact from the pause in UK motor finance
lending and other related changes to have been a c.£100 million reduction in
new business volumes, which would translate to an adverse loan book impact of
c.£80 million and c.£4 million reduction in adjusted operating profit (at 31
July 2025).
While the potential future applicability of the judgment to other
intermediated lending businesses remains unclear, we have reviewed
documentation and processes and continue to collaborate with brokers and other
intermediaries to update disclosures and procedures where appropriate.
The group operates various distribution models across our business. In Retail,
most of our Motor and Premium Finance business is through intermediaries. In
Commercial and Property Finance, we operate predominantly through our own
direct sales teams.
Update on Claims and Complaints
The group is subject to a number of claims through the courts regarding
historical motor finance commission arrangements. As noted above, the Supreme
Court granted CBL permission to appeal Hopcraft in December 2024, with the
hearing scheduled for three days from 1 to 3 April 2025.
As of 31 January 2025, where individual cases were adjudicated in County
Court, the courts found that there was no demonstrable customer harm and hence
no compensation to pay in the majority of decided cases for Close Brothers.
Nevertheless, there have been only a limited number of adjudicated cases at
this time and the majority of cases have been stayed pending a determination
of the Supreme Court appeals.
There are also a number of complaints that have been referred to the FOS for a
determination. To date, no final FOS decisions have been made upholding
complaints against Close Brothers relating to motor finance commission
arrangements. On 9 May 2024, the FOS announced that it would be unlikely to be
able to issue final decisions on motor finance commission cases for some time
due to the potential impact of an appeal regarding a judicial review
proceeding started by another lender in relation to one of its January 2024
decisions and also the hearing of the Hopcraft appeal. The FCA has also
extended the time firms have to respond to complaints about motor finance
involving both DCAs and non-DCAs until after 4 December 2025.
Since the announcement by the FCA of its review of historical motor finance
commission arrangements in January 2024, we have seen a further increase in
enquiries and complaints. We have also taken steps to enhance our operational
capabilities to respond to increased complaints volumes and potential changes
such as the implementation of a consumer redress scheme, if required. In the
first half of 2025, we have incurred £8.4 million of costs associated with
complaints handling and other operational and legal costs in relation to motor
finance commissions. This included increased resourcing to manage complaints
and legal expenses. In the 2025 financial year, we estimate these costs will
be c.£22 million, ahead of the previously provided guidance of £10-15
million as a result of additional costs associated with the Supreme Court
appeals. We continue to monitor the impact on our current handling of these
complaints to ensure we have the appropriate resources to respond effectively.
Temporary Impacts of Motor Finance Commissions on the Group's Financial
Performance
We estimate that the group's total operating expenses for this financial year
will be impacted by approximately £200 million in direct and indirect costs
associated with the motor finance commissions uncertainty. This includes
elevated Group (central functions) expenses related to professional and
advisory fees of c.£10 million, complaints handling and other operational and
legal costs amounting to c.£22 million recognised as an adjusting item, as
well as a £165 million provision taken in the first half, which has also been
recognised as an adjusting item. Some of these costs are temporary and are
expected to diminish once the uncertainties in relation to motor finance
commissions are resolved.
Financial Overview
Summary Group Income Statement1
First half 2025 First half Change
£ million 2024 %
£ million
Operating income 390.0 394.5 (1)
Adjusted operating expenses (267.0) (264.7) 1
Impairment losses on financial assets (48.1) (41.7) 15
Adjusted operating profit 74.9 88.1 (15)
Banking 104.1 111.7 (7)
Banking excluding Novitas 101.5 111.5 (9)
Commercial 45.2 50.9 (11)
Of which: Novitas 2.6 0.2 n/a
Retail 16.8 19.0 (12)
Property 42.1 41.8 1
Winterflood (0.8) (2.6) (69)
Group (central functions) (28.4) (21.0) 35
Adjusting items:
Provision in relation to motor finance commissions (165.0) - n/a
Complaints handling and other operational and legal costs incurred in relation (8.4) - n/a
to motor finance commissions
Impairment of intangible assets (4.0) - n/a
Restructuring costs (0.4) - n/a
Amortisation of intangible assets on acquisition (0.1) - n/a
Operating (loss)/profit before tax(2) (103.0) 88.1 (217)
Tax (9.1) (23.2) (61)
(Loss)/profit after tax from continuing operations (112.1) 64.9 (273)
Profit from discontinued operations, net of tax3 0.3 3.9 (93)
(Loss)/profit after tax (111.8) 68.8 (262)
Group summary income statement to statutory income statement reconciliation
Intercompany transactions relating to discontinued operations
Operating income 0.6 0.5
Adjusted operating expenses (1.4) (1.6)
Adjusted operating loss (0.8) (1.1)
Group Income Statement reconciliation
Operating (loss)/profit before tax (103.0) 88.1
Plus: intercompany transactions related to discontinued operations (0.8) (1.1)
Statutory operating (loss)/profit before tax (103.8) 87.0
Profit from discontinued operations, net of tax 0.3 3.9
Less: intercompany transactions related to discontinued operations 0.8 1.1
Statutory profit from discontinued operations 1.1 5.0
Adjusted basic earnings per share (continuing operations only)4 30.9p 43.4p
Basic earnings per share (continuing operations only)4 (82.8p) 42.6p
Basic earnings per share (continuing and discontinued operations)3,4 (82.1p) 46.0p
Ordinary dividend per share - -
Return on opening equity(5) 6.1% 8.5%
Return on average tangible equity(5) 7.4% 9.9%
1. Adjusted measures are presented on a basis consistent with prior periods and
exclude discontinued operations and amortisation of intangible assets on
acquisition, to present the performance of the group's acquired businesses
consistent with its other businesses; and any exceptional and other adjusting
items which do not reflect underlying trading performance. Further detail on
the reconciliation between operating and adjusted measures can be found in
Note 2 "Segmental Analysis". Please refer to the basis of presentation on page
27 for further information.
2. Statutory operating loss in the first half 2025 of £(103.8) million excludes
£0.8 million of intercompany transactions relating to discontinued
operations.
3. Discontinued operations relate to Close Brothers Asset Management, which has
been classified as 'discontinued operations' in the group's income statement
for the 2024 and 2025 financial years in line with the requirements of IFRS 5.
The related assets and liabilities are classified as held for sale on the
group's balance sheet at 31 January 2025. Statutory profit from discontinued
operations in the first half 2025 of £1.1 million excludes £(0.8) million of
intercompany transactions.
4. Refer to Note 4 "Earnings per Share" for the calculation of basic and adjusted
earnings per share.
5. Return on opening equity and return on tangible equity have been restated for
first half 2024 to exclude discontinued operations
Financial Performance
Statutory Operating Profit
The group reported a statutory operating loss before tax of £103.8 million
(H1 2024: statutory operating profit of £87.0 million), primarily driven by
the £165 million provision in relation to motor finance commissions. The
decrease also reflected the impact of complaints handling and other
operational and legal costs incurred in relation to motor finance commissions,
lower profitability in the Banking division and an increase in Group (central
functions) net expenses.
Adjusted Operating Profit
Adjusted operating profit decreased 15% to £74.9 million (H1 2024: £88.1
million), driven by higher impairment charges, as well as a marginal decline
in income and a slight increase in costs.
Banking adjusted operating profit reduced to £104.1 million (H1 2024: £111.7
million), as an increase in impairment charges and a marginal decline in
income more than offset lower costs. Excluding Novitas, Banking adjusted
operating profit decreased to £101.5 million (H1 2024: £111.5 million).
Winterflood delivered an operating loss of £0.8 million (H1 2024: operating
loss of £2.6 million) as the business continues to navigate a challenging
market environment. Group (central functions) net expenses, which include the
central functions such as finance, legal and compliance, risk and human
resources, increased to £28.4 million (H1 2024: £21.0 million). This was
driven primarily by an increase in professional fees and expenses associated
with the impact on the group of the FCA's ongoing review and the Supreme Court
appeals and lower interest income received on cash balances.
As outlined at the Full Year 2024 results, we continue to expect Group
(central functions) net expenses to be between £55 million and £60 million
in the 2025 financial year, of which operating expenses associated with the
impact on the group of motor finance commissions are estimated to be c.£10
million.
Return on opening equity reduced to 6.1% (H1 2024: 8.5%) and return on average
tangible equity decreased to 7.4% (H1 2024: 9.9%)(5).
Operating Income
Operating income decreased marginally to £390.0 million (H1 2024: £394.5
million), with a marginal decline in Banking and a reduction in interest
income in Group (central functions) more than offsetting higher income in
Winterflood.
Income in the Banking division decreased 1%, primarily driven by impact of the
temporary pause in UK motor lending on business volumes, as changes were
implemented by the business to ensure compliance with the current legal
requirements. Income in Winterflood increased 1% as the business delivered a
resilient performance in challenging market conditions and saw strong growth
in Winterflood Business Services.
Income decreased in the Group (central functions) to £(7.3) million (H1 2024:
£(5.0) million). This was driven by lower interest income received on cash
balances.
Operating Expenses
Adjusted operating expenses rose marginally to £267.0 million (H1 2024:
£264.7 million), as lower costs reflecting recent cost initiatives in both
Banking and Winterflood were more than offset by higher Group (central
functions) expenses.
In the Banking division, costs reduced 1% as we realised c.£6 million of
savings on BAU staff costs, as well as reduced investment spend compared to
the elevated level incurred in the prior year. This was partly offset by wage
inflation and costs incurred on technology and expanding capabilities across
the business, including in Motor Finance Ireland. Winterflood's costs
decreased 4%, reflecting disciplined cost management, lower operational
expenses following a cost review and the absence of dual-running property
costs incurred in the prior year. Expenses in the Group (central functions)
rose to £21.1 million (H1 2024: £16.0 million), primarily driven by an
increase in professional fees and expenses associated with the impact on the
group of the FCA's ongoing review and the Supreme Court appeals.
Overall, the group's expense/income ratio was broadly stable at 68% (H1 2024:
67%), whilst the compensation ratio remained at 36% (H1 2024: 36%).
Impairment Charges and IFRS 9 Provisioning
Impairment charges increased to £48.1 million (H1 2024: £41.7 million),
corresponding to a bad debt ratio of 1.0% (H1 2024: 0.9%). Excluding Novitas,
impairment charges rose to £47.2 million (H1 2024: £39.6 million),
equivalent to a bad debt ratio of 1.0% (H1 2024: 0.8%). The rise in impairment
charges was mainly driven by the ongoing review of provisions and coverage
across our loan portfolios, including single name provisions in Property, and
impacts of macroeconomic forecast updates in our Motor Finance business. This
compares to a relatively low charge in the comparative period (H1 2024) which
included specific model refinements. Credit quality remains resilient and bad
debt ratio remains comfortably below our long-term average of 1.2%. Overall,
provision coverage increased to 4.7% (31 July 2024: 4.3%), with provision
coverage increasing to 2.4% (31 July 2024: 2.3%) excluding Novitas.
Since the 2024 financial year end, we have updated the macroeconomic scenarios
to reflect the latest available information regarding the macroeconomic
environment and improved overall outlook, although the weightings assigned to
them remain unchanged. At 31 January 2025, there was a 30% weighting to the
strong upside, 32.5% weighting to the baseline, 20% weighting to the mild
downside, 10.5% weighting to the moderate downside and 7% weighting to the
protracted downside.
Whilst we have not seen a significant impact on credit performance, we
continue to monitor closely the evolving impacts of inflation and cost of
living on our customers. We remain confident in the quality of our loan book,
which is predominantly secured or structurally protected, prudently
underwritten, diverse, and supported by the deep expertise of our people.
Looking forward, we expect the bad debt ratio for the 2025 financial year to
remain below our long-term average of 1.2%.
Adjusting Items
We recognised £177.9 million of adjusting items in the first half of 2025 (H1
2024: £nil), consisting of a £165.0 million provision relating to motor
finance commissions, £8.4 million reflecting complaints handling and other
operational and legal costs incurred in relation to motor finance commissions,
£4.0 million of impairment of intangible assets, £0.4 million of
restructuring costs and £0.1 million of amortisation of intangible assets on
acquisition.
As outlined above, in light of recent developments in relation to motor
finance commissions, the group has reviewed its accounting assessment of these
matters. As a result, we have recognised a provision of £165.0 million in
relation to motor finance commissions, which includes estimates for certain
potential operational and legal costs, as well as estimates for potential
remediation for affected customers. This provision is based on probability
weighted scenarios using various assumptions, including, for example,
commission models, rates and time periods in scope of any regulatory redress
scheme, as well as response and uphold rates.
We incurred £8.4 million of complaints handling expenses and other
operational and legal costs in relation to motor finance commissions,
including increased resourcing to manage complaints and legal expenses. We
estimate these costs will be c.£22 million for the full 2025 financial year,
ahead of the previously provided guidance of £10-15 million as a result of
additional costs associated with the Supreme Court appeals.
We also recognised £4.0 million of impairment of intangible assets relating
to the carrying value of goodwill and software in the Vehicle Hire and Brewery
Rentals businesses.
In addition, we incurred £0.4 million of restructuring costs, primarily
relating to redundancy and associated costs. We have continued to make good
progress on streamlining the workforce through the consolidation of roles
across our businesses and functions, as well as through the management of
vacancies. We expect to incur £2-3 million of restructuring costs in the 2025
financial year, lower than the previously provided guidance of £5-10 million
as we continue to implement cost management actions to improve future
efficiency, whilst postponing some restructuring activities in the immediate
term as we focus on protecting the organisation.
Tax Expense
The tax expense was £9.1 million (H1 2024: £23.2 million). The effective tax
rate for the period is (8.8%) (six months ended 31 January 2024: 26.3%),
representing the best estimate of the annual effective tax rate expected for
the full year and including the £165.0 million provision in relation to motor
finance commissions recognised in the period (£159.6 million net of
tax). Excluding the provision, the effective tax rate would have been
approximately 24%.
The standard UK corporation tax rate for the financial year is 25.0% (six
months ended 31 January 2024: 25.0%; year ended 31 July 2024: 25.0%). The
effective tax rate, excluding the provision in relation to motor finance
commissions, is below the UK corporation tax rate primarily due to tax relief
on coupons on other equity instruments.
Profit from Discontinued Operations
Following the announcement on 19 September 2024 and the receipt of the
required regulatory approvals, the group completed the sale of CBAM to funds
managed by Oaktree Capital Management, L.P., on 28 February 2025. Additional
details are set out on page 26. The group anticipates an estimated gain on
disposal of approximately £59 million in the 2025 financial year.
In the first half of the 2025 financial year, profit from discontinued
operations net of tax was £0.3 million (H1 2024: £3.9 million).
Earnings Per Share
Adjusted basic earnings per share ("AEPS") for continuing operations decreased
to 30.9p (H1 2024: 43.4p) and basic earnings per share ("EPS") for continuing
operations decreased to (82.8p) (H1 2024: 42.6p).
Basic earnings per share ("EPS") for continuing and discontinued operations
reduced to (82.1p) (H1 2024: 46.0p).
Both the adjusted and basic EPS calculation include the payment of the coupon
related to the Fixed Rate Resetting Additional Tier 1 Perpetual Subordinated
Contingent Convertible Securities ("AT1"), at an annual rate of 11.125%, on 29
November 2024. The associated coupon is due on 29 May and 29 November of each
year, with any AT1 coupons paid deducted from retained earnings, reducing the
profit attributable to ordinary shareholders.
Dividend
Given the continued significant uncertainty regarding the outcome of the FCA's
review of motor finance commission arrangements and the Supreme Court appeals
and any potential financial impact as a result, the group will not pay an
interim dividend in respect of the first half of the 2025 financial year.
As previously stated, the decision to reinstate dividends will be reviewed by
the board once there is further clarity on the financial impact of the FCA
review of motor finance commissions and the ongoing Supreme Court appeals.
Summary Group Balance Sheet
31 January 2025 31 July 2024
£ million £ million
Loans and advances to customers and operating lease assets1 9,833.0 10,098.7
Treasury assets2 2,427.9 2,300.9
Market-making assets3 1,163.9 691.8
Assets classified as held for sale 160.0 -
Other assets 853.4 989.4
Total assets 14,438.2 14,080.8
Deposits by customers 8,727.2 8,693.6
Borrowings4 2,258.1 2,339.2
Market-making liabilities3 1,106.2 631.6
Liabilities classified as held for sale 60.1 -
Other liabilities 575.9 573.9
Total liabilities 12,727.5 12,238.3
Equity(5) 1,710.7 1,842.5
Total liabilities and equity 14,438.2 14,080.8
1. Includes operating lease assets of £263.6 million (31 July 2024: £267.9
million).
2. Treasury assets comprise cash and balances at central banks and debt
securities held to support the Banking division.
3. Market-making assets and liabilities comprise settlement balances, long and
short trading positions and loans to or from money brokers.
4. Borrowings comprise debt securities in issue, loans and overdrafts from banks
and subordinated loan capital.
5. Equity includes the group's £200.0 million Fixed Rate Reset Perpetual
Subordinated Contingent Convertible Securities (AT1 securities), net of £2.4
million transaction costs, which are classified as an equity instrument under
IAS 32.
The group maintained a strong balance sheet and continues to take a prudent
approach to managing its financial resources. The fundamental structure of the
balance sheet remains unchanged, with most of the assets and liabilities
relating to our Banking activities. Loans and advances make up the majority of
assets. Other items on the balance sheet include treasury assets held for
liquidity purposes, and settlement balances in Winterflood. Intangibles,
property, plant and equipment, and prepayments are included as other assets.
Liabilities are predominantly made up of customer deposits and both secured
and unsecured borrowings to fund the loan book.
Total assets increased 3% to £14.4 billion (31 July 2024: £14.1 billion),
mainly reflecting higher market-making and Treasury assets, partly offset by
the loan book reduction. Total liabilities were 4% higher at £12.7 billion
(31 July 2024: £12.2 billion), driven primarily by higher market-making
liabilities. Both market-making assets and liabilities, which related to
trading activity at Winterflood, were higher due to higher counterparty
positions at the end of the period. Assets and liabilities classified as held
for sale have been recognised in respect of the discontinued operations, which
relate to CBAM.
Total equity reduced 7% to £1.7 billion (31 July 2024: £1.8 billion),
primarily reflecting the impact of the £165 million provision in relation to
motor finance commissions on the retained earnings. The group's return on
assets decreased to 0.6% (H1 2024: 0.9% excluding discontinued operations).
Group Capital
31 January 2025 31 July 2024
£ million £ million
Common Equity Tier 1 capital 1,257.3 1,374.8
Tier 1 capital 1,457.3 1,574.8
Total capital 1,657.3 1,774.8
Risk weighted assets 10,340.8 10,701.2
Common Equity Tier 1 capital ratio (transitional) 12.2% 12.8%
CET1 capital ratio (transitional) pro-forma after CBAM disposal(1) 13.4% n/a
Tier 1 capital ratio (transitional) 14.1% 14.7%
Total capital ratio (transitional) 16.0% 16.6%
Leverage ratio2 11.7% 12.7%
1. Pro-forma CET1 capital ratio as at 31 January 2025, reflecting the estimated
benefit of c.120 basis points in relation to sale of CBAM. Please refer to
page 26 for further information.
2. The leverage ratio is calculated as tier 1 capital as a percentage of total
balance sheet assets excluding central bank claims, adjusting for certain
capital deductions, including intangible assets, and off-balance sheet
exposures, in line with the UK leverage framework under the UK Capital
Requirements Regulation.
Movements in Capital and Other Regulatory Metrics
The CET1 capital ratio reduced from 12.8% to 12.2%, driven primarily by the
£159.6 million provision (net of tax) in relation to motor finance
commissions (-c.155bps) offset by profits in the period excluding the
provision (c.50bps). There was also an AT1 coupon payment (-c.10bps) and a
decrease in IFRS 9 transitional arrangements (-c.5bps). This was partly offset
by a reduction in RWAs (c.45bps) and a decrease in intangible assets deducted
from capital (c.10bps).
CET1 capital decreased 9% to £1,257.3 million (31 July 2024: £1,374.8
million), driven by the statutory loss in the first half (£111.8 million),
which was primarily driven by the £159.6 million provision (net of tax) in
relation to motor finance commissions offset by profits in the period of
£47.8 million. There was also an AT1 coupon payment of £11.1 million and a
decrease in the transitional IFRS 9 add-back to capital of £5.8 million. This
was partly offset by a reduction in intangible assets deducted from capital of
£11.5 million.
Tier 1 capital and Total capital both decreased 7% to £1,457.3 million and
£1,657.3 million respectively (31 July 2024: £1,574.8 million and £1,774.8
million respectively), largely reflecting the provision taken in relation to
motor finance commissions.
RWAs decreased 3% to £10.3 billion (31 July 2024: £10.7 billion), primarily
driven by a reduction in loan book RWAs (£241.6 million), and a reduction in
securitisation RWAs following a change to implement Securitisation
Standardised Approach for Motor Finance Ireland (£55.1 million).
As a result, CET1, tier 1 and total capital ratios were 12.2% (31 July 2024:
12.8%), 14.1% (31 July 2024: 14.7%) and 16.0% (31 July 2024: 16.6%),
respectively. On a pro-forma basis, reflecting the estimated benefit from the
CBAM disposal, at 31 January 2025, the CET1, tier 1 and total capital ratios
would have been 13.4%, 15.3% and 17.2%, respectively.
The applicable CET1, tier 1 and total capital ratio requirements, including
Capital Requirements Directive ("CRD") buffers but excluding any applicable
Prudential Regulation Authority ("PRA") buffer, were 9.7%, 11.4% and 13.7%,
respectively, at 31 January 2025. Accordingly, we continue to have headroom
significantly above the applicable requirements of c.250bps in the CET1
capital ratio, c.270bps in the tier 1 capital ratio and c.230bps in the total
capital ratio.
The leverage ratio, which is a transparent measure of capital strength not
affected by risk weightings, decreased to 11.7% (31 July 2024: 12.7%) largely
reflecting the provision taken in relation to motor finance commissions.
The group applies IFRS 9 regulatory transitional arrangements which allow
banks to add back to their capital base a proportion of the IFRS 9 impairment
charges during the transitional period. Our capital ratios are presented on a
transitional basis after the application of these arrangements. On a fully
loaded basis, without their application, the CET1, tier 1 and total capital
ratios would be 12.1%, 14.0% and 16.0%, respectively and the leverage ratio
would be 11.7%.
The PRA Policy Statement PS 9/24 Implementation of the Basel 3.1 standards
near-final part 2 was published on 12 September 2024, with the majority of
rules applicable to the group remaining unchanged, including the proposed
removal of the small and medium-sized enterprises ("SME") supporting factor,
new conversion factor for cancellable facilities and new market risk rules.
Following a PRA announcement in January 2025, the implementation of the final
regulations has been further postponed to 1 January 2027. We continue to
expect implementation to result in an increase of up to c.10% in the group's
RWAs calculated under the standardised approach. However, the PRA has proposed
to apply an SME lending adjustment as part of Pillar 2a, to ensure that the
removal of the SME support factor does not result in an increase in overall
capital requirements for SME lending. Whilst this adjustment is subject to PRA
confirmation and a resulting restatement of the group's total capital
requirements, we would reasonably expect the UK implementation of Basel 3.1 to
have a less significant impact on the group's capital headroom position than
initially anticipated.
As outlined previously, following the submission of our initial application
(in December 2020) to transition to the Internal Ratings Based ("IRB")
approach, the application successfully moved to Phase 2 of the process in
March 2022 and engagement with the regulator continues. Our Motor Finance,
Property Finance and Energy portfolios, where the use of models is most
mature, were submitted with our initial application, with work on the
subsequent portfolios in progress.
Capital Outlook
The sale of CBAM completed on 28 February 2025, and is estimated to generate a
profit on disposal of approximately £59 million and increase the group's CET1
ratio by c.120 bps on a pro-forma basis as at 31 January 2025 from 12.2% to
13.4%.
In the near-term, we expect to maintain our CET1 capital ratio around the top
end of our medium-term target range of 12% to 13%. We will resume selective
loan book growth, subject to demand. At the same time, we will continue to
evaluate additional potential RWA optimisation opportunities to maintain
resilience and flexibility, including a potential risk transfer of assets in
Motor Finance and other portfolios, should it be needed, a continuous review
of our businesses and portfolios and other tactical actions.
As previously stated, the decision to reinstate dividends will be reviewed by
the board once there is further clarity on the financial impact of the FCA
review of motor finance commissions and the ongoing Supreme Court appeals.
Group Funding(1)
31 January 2025 31 July 2024
£ million £ million
Customer deposits 8,727.2 8,693.6
Secured funding 1,113.3 1,205.1
Unsecured funding2 1,188.8 1,219.1
Equity 1,710.7 1,842.5
Total available funding3 12,740.0 12,960.3
Total funding as a percentage of loan book4 130% 128%
Average maturity of funding allocated to loan book5 18 months 20 months
1. Numbers relate to core funding and exclude working capital facilities at the
business level.
2. Unsecured funding excludes £51.9 million (31 July 2024: £55.1m - prior year
comparative has been restated following a misstatement. The figure reported in
the FY 2024 ARA was £55.7m) of non-facility overdrafts included in borrowings
and includes £95.8 million (31 July 2024: £140.0 million) of undrawn
facilities.
3. Includes £250 million of funds raised via a senior unsecured bond with a
five-year tenor by Close Brothers Group plc, the group's holding company, in
June 2023, with proceeds currently used for general corporate purposes.
4. Total funding as a percentage of loan book includes £263.6 million (31 July
2024: £267.9 million) of operating lease assets in the loan book figure.
5. Average maturity of total available funding, excluding equity and funding held
for liquidity purposes.
Our Treasury function is focused on managing funding and liquidity to support
the Banking businesses, as well as interest rate risk. Our Savings business,
which was integrated into the Retail business in the 2024 financial year,
provides simple and straightforward savings products to both individuals and
businesses, whilst being committed to providing the highest level of customer
service.
Our conservative approach to funding is based on the principle of "borrow
long, lend short", with a spread of maturities over the medium and longer
term, ahead of a shorter average loan book maturity. We have maintained a
prudent maturity profile, with the average maturity of funding allocated to
the loan book at 18 months (31 July 2024: 20 months), ahead of the average
loan book maturity at 15 months (31 July 2024: 16 months).
Our funding draws on a wide range of wholesale and deposit markets including
several public debt securities at both group and operating company level, as
well as public and private secured funding programmes and a diverse mix of
customer deposits. This broad funding base reduces concentration risk and
ensures we can adapt our position through the cycle.
Total funding reduced in the first half to £12.7 billion (31 July 2024:
£13.0 billion), which accounted for 130% (31 July 2024: 128%) of the loan
book at the balance sheet date, as scheduled repayments on secured funding and
a reduction in unsecured funding was offset in part by higher customer
deposits as we actively continue to grow our retail customer deposit base. The
average cost of funding in Banking was maintained at 5.5% (2024: 5.5%), as
interest rates remained broadly stable at a higher level. We are well
positioned to continue benefiting from our diverse funding base and the
strength of our Savings franchise.
While customer deposits were stable at £8.7 billion (31 July 2024: £8.7
billion), we saw a change in the mix as we have actively sought to grow our
retail deposit base. Retail customer deposits increased 12% to £6.4 billion
(31 July 2024: £5.7 billion), with non-retail deposits reducing 22% to £2.3
billion (31 July 2024: 3.0 billion). In line with our prudent and conservative
approach to funding, our funding is predominantly term, with only 13% of total
deposits available on demand and 60% having at least three months to maturity.
At 31 January 2025, approximately 86% of retail deposits were protected by the
Financial Services Compensation Scheme (including third party platform).
Secured funding decreased 8% to £1.1 billion (31 July 2024: £1.2 billion) as
a result of scheduled repayments for our Motor Finance securitisations. Our
remaining drawings under the Term Funding Scheme for Small and Medium-sized
Enterprises ("TFSME") amount to £110 million, which will mature in October
2025 and which we expect to replace in line with our diverse funding profile,
dependent on market conditions and demand.
Unsecured funding, which includes senior unsecured and subordinated bonds and
undrawn committed revolving facilities, remained broadly stable at £1.2
billion (31 July 2024: £1.2 billion).
We continue to leverage the benefits from the previous investment in our
customer deposit platform, which has provided us with scalability and enabled
us to diversify our product offering. Deposits held through this platform now
stand at over £6.6 billion. The introduction of Easy Access has provided us
access to a large potential deposit pool, with balances of over £800 million
(at 31 January 2025) less than two years after launch. We remain focused on
growing our retail funding base from a variety of segments, further optimising
our cost of funding and maturity profile.
Our credit ratings continue to reflect the group's inherent financial
strength, including its funding and liquidity profile, diversified business
model and consistent risk appetite, notwithstanding the current uncertainty.
Moody's Investors Services ("Moody's") ratings for CBG and CBL are A3/P2 and
A1/P1 respectively (at 15 November 2024) with ratings placed on "Review for
downgrade" in light of the potential risks in relation to motor finance
commissions. Moody's ratings for Close Brothers Group's senior unsecured and
subordinated debt are A3 (at 15 November 2024). Fitch Ratings ("Fitch") Issuer
Default Ratings ("IDRs") for CBG and CBL are BBB+/F2 with a "rating watch
negative" (at 19 February 2025).
Group Liquidity
31 January 2025 31 July 2024
£ million £ million
Cash and balances at central banks 1,852.3 1,584.0
Sovereign and central bank debt(1) 304.4 383.7
Supranational, sub-sovereigns and agency ("SSA") bonds 143.0 145.5
Covered bonds 128.2 187.7
Treasury assets 2,427.9 2,300.9
1. There was £34.5 million encumbered sovereign and central bank debt and
covered bonds at 31 January 2025 (31 July 2024: £nil).
The group continues to adopt a conservative stance on liquidity, ensuring it
is comfortably ahead of both internal risk appetite and regulatory
requirements.
In light of the significant uncertainty regarding the outcome of the FCA's
review of historical motor finance commission arrangements, we have
consciously maintained a higher level of liquidity, with the majority of our
large, high quality liquid asset portfolio held in cash and government bonds.
During the first half, treasury assets increased 6% to £2.4 billion (31 July
2024: £2.3 billion) and were predominantly held on deposit with the Bank of
England.
We regularly assess and stress test the group's liquidity requirements and
continue to exceed the liquidity coverage ratio ("LCR") regulatory
requirements, with a 12-month average LCR to 31 January 2025 of 953% (31 July
2024: 1,034%). In addition to internal measures, we monitor funding risk based
on the CRR rules for the net stable funding ratio ("NSFR"). The four-quarter
average NSFR to 31 January 2025 was 140.1% (31 July 2024: 134.4%) driven by
increased retail deposits.
Business Review
Banking
Key Financials
First half First half Change
2025 2024 %
£ million £ million
Operating income 362.7 365.3 (1)
Adjusted operating expenses (210.5) (211.8) (1)
Impairment losses on financial assets (48.1) (41.8) 15
Adjusted operating profit 104.1 111.7 (7)
Adjusted operating profit, pre provisions for impairment losses 152.2 153.5 (1)
Adjusting items:
Provision in relation to motor finance commissions (165.0) - n/a
Complaints handling and other operational and legal costs incurred in relation (8.4) - n/a
to motor finance commissions
Impairment of intangible assets (4.0) - n/a
Restructuring costs (0.4) - n/a
Amortisation of intangible assets on acquisition (0.1) - n/a
Statutory operating (loss)/profit (73.8) 111.7 (166)
Net interest margin 7.3% 7.5%
Expense/income ratio 58% 58%
Bad debt ratio 1.0% 0.9%
Return on net loan book 2.1% 2.3%
Return on opening equity 9.1% 12.3%
Closing loan book and operating lease assets 9,833.0 9,893.0 (1)
Key Financials (Excluding Novitas)
First half First half Change
2025 2024 %
£ million £ million
Operating income 356.1 360.3 (1)
Adjusted operating expenses (207.4) (209.2) (1)
Impairment losses on financial assets (47.2) (39.6) 19
Adjusted operating profit 101.5 111.5 (9)
Adjusted operating profit, pre provisions for impairment losses 148.7 151.1 (2)
Net interest margin 7.2% 7.5%
Expense/income ratio 58% 58%
Bad debt ratio 1.0% 0.8%
Closing loan book and operating lease assets 9,764.1 9,830.3 (1)
Robust Profit Performance Reflecting our Focus on Costs and Resilient Credit
Quality
The Banking division has faced an uncertain market backdrop in the first half,
with the resilience of SMEs further tested by upcoming changes from the UK
Budget, and consumer affordability continuing to be challenged. Whilst the
regulatory environment has also introduced significant uncertainty, the
resilience of our businesses and our people have driven a robust performance
overall and we are confident in the opportunities for our businesses going
forward.
Banking adjusted operating profit reduced to £104.1 million (H1 2024: £111.7
million), as an increase in impairment charges and a marginal decline in
income more than offset lower costs.
On a statutory basis, we delivered an operating loss of £(73.8) million (H1
2024: operating profit of £111.7 million), mainly reflecting the provision of
£165.0 million in relation to motor finance commissions, which includes
estimates for certain potential operational and legal costs, as well as
estimates for potential remediation for affected customers. We also recognised
£12.9 million of other adjusting items, which included £8.4 million of
complaints handling expenses and other operational and legal costs incurred in
relation to motor finance commissions, reflecting increased resourcing to
manage complaints and legal expenses, £4.0 million of impairment of
intangible assets and £0.1 million of amortisation of intangible assets on
acquisition. In addition, we incurred £0.4 million of restructuring costs,
primarily relating to redundancy and associated costs, as we continued to make
progress on streamlining our workforce.
The loan book reduced 3% in the first half to £9.8 billion (31 July 2024:
£10.1 billion), driven by seasonality and the selective lending previously
highlighted, as we sought to optimise risk weighted assets and further
strengthened our capital position. This led to a lower loan book across all
Banking businesses. Excluding the businesses in run-off, Novitas and the
legacy Republic of Ireland Motor Finance business, the loan book was stable
year-on-year but declined 2% in the first half to £9.7 billion (31 January
2024: £9.7 billion, 31 July 2024: £9.9 billion).
Operating income decreased 1% to £362.7 million (H1 2024: £365.3 million),
mainly driven by the impact of the temporary pause in UK motor lending, as
well as the run-off of the legacy Republic of Ireland Motor Finance business.
The temporary pause to lending in UK Motor Finance is expected to have a c.£5
million impact on income and a c.£4m impact on adjusted operating profit in
the 2025 financial year.
The net interest margin remained strong at 7.3% (H1 2024: 7.5%), as we
maintained our focus on pricing discipline. On an underlying basis, excluding
a year-on-year increase in Novitas income, as well as favourable movements in
derivatives, the net interest margin reduced to 7.2% (H1 2024: 7.6%), driven
by margin pressures on new business as a result of increased funding costs for
SMEs in the higher rate environment.
We are well positioned to maintain a strong net interest margin but expect to
see some pressure in the second half of the year from temporary factors and
competitive new business margins. As a result, we expect the full-year net
interest margin to be around 7%, slightly below the first half exit rate of
7.1%.
Adjusted operating expenses reduced 1% to £210.5 million (H1 2024: £211.8
million), as we realised c.£6 million of savings on BAU staff costs, as well
as reduced investment spend compared to the elevated level incurred in the
prior year. This was partly offset by wage inflation and costs incurred on
technology and expanding capabilities across the business, including in Motor
Finance Ireland. The expense/income ratio remained stable at 58% (H1 2024:
58%), while the compensation ratio marginally declined to 31% (H1 2024: 32%).
As outlined in March 2024, we have mobilised cost management initiatives and
these are now expected to deliver an additional c.£5 million in annualised
savings by the end of the current financial year. This increases the estimated
total annualised savings to c.£25 million by the end of the current financial
year (excluding costs to achieve), up from £20 million previously. Of the
c.£25 million in annualised savings, we expect c.£17 million to be
recognised in the 2025 Full Year income statement.
These cost management initiatives are well advanced, with significant progress
made over the first half of this year. Our technology transformation
programme, initiated in 2023, is focused on simplifying and modernising our
technology estate, consolidating and increasing our use of strategic partners,
whilst creating a more digitally enabled and agile IT environment that is
secure, resilient and sustainable. The programme has now entered a second
phase and to date, we have reduced our technology headcount by c.30% since the
2023 financial year, removed approximately 120 IT applications and
decommissioned over a quarter of servers from our technology estate, and our
migration to the Cloud is underway, reducing costs and increasing flexibility.
From a Suppliers and Property perspective, we have exited two of our London
premises, with the removal of c.800 desks, and consolidation is underway
elsewhere across the UK. By the end of the 2025 financial year, we will have
reduced the property footprint of the Banking division by approximately one
third. We are achieving improved commercial outcomes with our strategic
partners, rationalising our supplier base and continuing to prudently use
offshore services.
On the People side, we have continued to adjust our workforce as we drive
increased efficiency and effectiveness. We have made good progress on
streamlining the workforce through the consolidation of roles across our
businesses and functions, as well as through the management of vacancies. In
the first half, we incurred £0.4 million of restructuring costs, which
continues to be recognised as an adjusting item, primarily relating to
redundancy and associated costs. We expect to incur £2-3 million of
restructuring costs in the 2025 financial year, lower than the previously
provided guidance of £5-10 million as we continue to implement cost
management actions to improve future efficiency, whilst postponing some
restructuring activities in the immediate term as we focus on protecting the
organisation.
Banking adjusted operating expenses in the 2025 financial year are expected to
increase by c.1% on the prior year. Higher staff costs, wage inflation, and
spend on technology and expansion of capabilities across the business are
expected to be largely offset by cost savings achieved by our initiatives and
reduced investment spend.
Looking forward, we are committed to executing further cost savings and have
initiated a review to drive a step change in operational efficiency and cost
reduction. Options under consideration include further consolidation and
rationalisation of centrally provided services, additional technology
simplification and rationalisation, further selected outsourcing and
offshoring through strategic partners and targeted investment in new
technologies to augment our business model, including automation and
artificial intelligence.
Impairment charges increased to £48.1 million (H1 2024: £41.8 million),
corresponding to a bad debt ratio of 1.0% (H1 2024: 0.9%). Excluding Novitas,
impairment charges rose to £47.2 million (H1 2024: £39.6 million),
equivalent to a bad debt ratio of 1.0% (H1 2024: 0.8%). The rise in impairment
charges was mainly driven by the ongoing review of provisions and coverage
across our loan portfolios, including single name provisions in Property, and
impacts of macroeconomic forecast updates in our Motor Finance business. This
compares to a relatively low charge in the comparative period (H1 2024) which
included specific model refinements. Credit quality remains resilient and bad
debt ratio remains comfortably below our long-term average of 1.2%.
Overall, provision coverage increased to 4.7% (31 July 2024: 4.3%), driven
primarily by the impacts of interest accrual on Stage 3 loans in Novitas, as
well as higher coverage in the Retail and Property businesses. Excluding
Novitas, the coverage ratio increased slightly to 2.4% (31 July 2024: 2.3%).
Whilst we have not seen a significant impact on credit performance, we
continue to monitor closely the evolving impacts of inflation and cost of
living on our customers. We remain confident in the quality of our loan book,
which is predominantly secured or structurally protected, prudently
underwritten, diverse, and supported by the deep expertise of our people.
Looking forward, we expect the bad debt ratio for the 2025 financial year to
remain below our long-term average of 1.2%.
Update on Progress Relating to Novitas
The decision was made to wind down Novitas and withdraw from the legal
services financing market following a strategic review in July 2021, which
concluded that the overall risk profile of the business was no longer
compatible with our long-term strategy and risk appetite. As announced in
2023, we have accelerated our efforts to resolve the issues surrounding this
business. We continue to pursue formal legal action issued against one of the
After the Event ("ATE") insurers and in September 2024 issued a claim against
a second insurer.
In the first half, we recognised impairment charges of £0.9 million (H1 2024:
£2.2 million) in relation to Novitas, primarily as a result of legal costs
associated with the insurer disputes. While we will continue to review
provisioning levels in light of future developments, including the experienced
credit performance of the book and the outcome of the group's initiated legal
action, we believe the provisions adequately reflect the remaining risk of
credit losses for the Novitas loan book (£68.9 million net loan book at 31
January 2025), with the provisions representing 77.5% coverage of the gross
loan book.
In addition, in line with IFRS 9 requirements, a proportion of the expected
credit loss is expected to unwind, over the estimated time to recovery period,
to interest income. The group remains focused on maximising the recovery of
remaining loan balances, either through successful outcome of cases or
recourse to the customers' ATE insurers, whilst complying with its regulatory
obligations and always focusing on ensuring good customer outcomes.
Loan Book Analysis
31 January 2025 31 July 2024 Change
£ million £ million %
Commercial 5,027.1 5,101.6 (1)
Commercial - Excluding Novitas 4,958.2 5,039.2 (2)
Asset Finance 3,607.6 3,655.4 (1)
Invoice and Speciality Finance 1,419.5 1,446.2 (2)
Invoice and Speciality Finance - Excluding Novitas 1,350.6 1,383.8 (2)
Retail 2,871.7 3,041.9 (6)
Motor Finance1 1,914.1 2,016.0 (5)
Premium Finance 957.6 1,025.9 (7)
Property 1,934.2 1,955.2 (1)
Closing loan book and operating lease assets2 9,833.0 10,098.7 (3)
Closing loan book and operating lease assets - Excluding Novitas 9,764.1 10,036.3 (3)
1. The Motor Finance loan book includes £58.0 million (31 July 2024: £92.8
million) relating to the Republic of Ireland Motor Finance business, which is
in run-off following the cessation of our previous partnership in the Republic
of Ireland from 30 June 2022.
2. Includes operating lease assets of £263.6 million (31 July 2024: £267.9
million).
Loan Book Decline as we Lend Selectively, although Optimistic about
Opportunities
Customer demand has remained robust and we have underwritten c.£3.5 billion
of new business in the first half. The loan book declined 3% in the first half
to £9.8 billion (31 July 2024: £10.1 billion), driven by seasonality and
selective lending. Excluding the businesses in run-off, Novitas and the legacy
Republic of Ireland Motor Finance business, the loan book was stable
year-on-year although declined 2% in the first half to £9.7 billion (31
January 2024: £9.7 billion, 31 July 2024: £9.9 billion).
The Commercial loan book reduced 1% to £5.0 billion (31 July 2024: £5.1
billion). In Asset Finance, we delivered strong growth in our Transport and
Materials Handling portfolios, although overall the loan book declined 1%
reflecting our focus on selective lending to optimise risk weighted assets,
alongside lower new business in some of our other portfolios. Invoice and
Speciality Finance reduced 2%, driven by the usual seasonal decline seen in
the first half of the year, although utilisation levels are elevated on the
prior year period, reflecting continued customer activity. Excluding Novitas,
the Commercial book declined 2% to £5.0 billion (31 July 2024: £5.0
billion).
The Retail loan book declined 6% to £2.9 billion (31 July 2024: £3.0
billion). Motor Finance reduced 5%, largely reflecting the temporary pause in
new lending following the Court of Appeal's judgment in Hopcraft and the
measures taken to selectively lend. We also saw some impact from the run-off
of the legacy Republic of Ireland motor loan book, which was offset in part by
good growth in Motor Finance Ireland following the acquisition of Bluestone
Motor Finance last year. The Motor Finance Ireland loan book stood at £56.0
million at 31 January 2025 (31 July 2024: £38.8 million). Premium Finance
declined 7%, reflecting the usual seasonal decline seen in the first half and
the competitive market environment.
The legacy Republic of Ireland Motor Finance business, which is in run-off,
accounted for 3% of the Motor Finance loan book (31 July 2024: 5%) and less
than 1% of the Banking loan book (31 July 2024: 1%).
The Property loan book remained relatively flat in the first half of the year
but increased 5% year-on-year. Our undrawn pipeline has reduced to c.£720
million (31 July 2024: c.£850 million), reflecting a reduction in customer
demand and a more challenging economic environment.
We will resume selective loan book growth, subject to demand, with modest
growth expected in the second half of the 2025 financial year. The loan book
at 31 July 2025 is expected to remain broadly flat year-on-year.
Banking: Commercial
First half 2025 First half 2024 Change
£ million £ million %
Operating income 165.2 168.5 (2)
Adjusted operating expenses (103.9) (103.0) 1
Impairment losses on financial assets (16.1) (14.6) 10
Adjusted operating profit 45.2 50.9 (11)
Adjusted operating profit, pre provisions for impairment losses 61.3 65.5 (6)
Adjusting items:
Restructuring costs (0.1) - n/a
Impairment of intangible assets (4.0) - n/a
Amortisation of intangible assets on acquisition - -
Statutory operating profit 41.1 50.9 (19)
Net interest margin 6.5% 6.8%
Expense/income ratio 63% 61%
Bad debt ratio 0.6% 0.6%
Closing loan book and operating lease assets1 5,027.1 5,028.5 (0)
Commercial Key Metrics Excluding Novitas
First half 2025 First half 2024 Change
£ million £ million %
Operating income 158.6 163.5 (3)
Adjusted operating expenses (100.8) (100.4) 0
Impairment losses on financial assets (15.2) (12.4) 23
Adjusted operating profit 42.6 50.7 (16)
Adjusted operating profit, pre provisions for impairment losses 57.8 63.1 (8)
Net interest margin 6.3% 6.7%
Expense/income ratio 64% 61%
Bad debt ratio 0.6% 0.5%
Closing loan book and operating lease assets1 4,958.2 4,965.8 (0)
1. Operating lease assets of £263.6 million (31 January 2024: £282.0 million).
Good Demand in Commercial, as we Continued to Support our SME Customers
The Commercial businesses provide specialist, predominantly secured lending
principally to the SME market and include Asset Finance and Invoice and
Speciality Finance. We finance a diverse range of sectors, with Asset Finance
offering commercial asset financing, hire purchase and leasing solutions
across a broad range of assets including commercial vehicles, machine tools,
contractors' plant, printing equipment, company car fleets, energy project
finance, and aircraft and marine vessels. Asset Finance also includes our
Vehicle Hire and Brewery Rentals businesses. The Invoice and Speciality
Finance business provides debt factoring, invoice discounting and asset-based
lending, and also includes Novitas. As previously announced, Novitas ceased
lending to new customers in July 2021.
Whilst we saw some positive sentiment in the early part of the first half,
this has been a challenging period overall for SME businesses, with their
resilience tested by ongoing market uncertainty and tax changes to be
introduced following the UK Budget. In Asset Finance, the marketplace has
remained competitive, with borrower appetite varied across sectors and overall
sentiment impacted by an uncertain outlook and higher borrowing costs, driving
some softening in demand and pressure on new business margins. In the Invoice
Finance market, we have seen some changes in the competitive environment and
our strong offering and service has enabled us to win new clients. Overall,
our Commercial businesses continued to benefit from the diversity of our
offering. Our growth initiatives continued to prove successful, as the
Materials Handling team delivered healthy new business volumes and our lending
limit was increased under the UK government's Growth Guarantee Scheme. Our
restructured Broker and Professional Solutions business is receiving positive
feedback from brokers in response to its newly launched proposition and
recently won an industry award.
Adjusted operating profit for Commercial decreased to £45.2 million (H1 2024:
£50.9 million), mainly driven by a marginal reduction in income and higher
impairment charges. Before provisions for impairment losses, adjusted
operating profit reduced 6% to £61.3 million (H1 2024: £65.5 million),
reflecting a decline in income and higher costs.
We saw an increase in adjusted operating profit in Novitas (H1 2025: £2.6
million, H1 2024: £0.2 million), which is currently in run-off. This was
primarily driven by higher income, reflecting lower funding costs and higher
interest accruals driven by the partial unwind of the expected credit loss,
coupled with lower impairment charges.
Excluding Novitas, adjusted operating profit decreased 16% to £42.6 million
(H1 2024: £50.7 million).
On a statutory basis, operating profit decreased to £41.1 million (H1 2024:
£50.9 million). This reflects the recognition of £4.0 million of impairment
of intangible assets relating to the carrying value of goodwill and software
in the Vehicle Hire and Brewery Rentals businesses, as well as £0.1 million
of restructuring costs.
Operating income reduced 2% to £165.2 million (H1 2024: £168.5 million)
driven by lower utilisation levels in the Vehicle Hire and Brewery Rentals
businesses, losses on de-fleeting activities in Vehicle Hire and reduced
service fee income, partially offset by an increase in Novitas income. The net
interest margin declined to 6.5% (H1 2024: 6.8%), reflecting the impact of
lower utilisation in Vehicle Hire and Brewery Rentals, reduced service fee
income and continued pressure on new business margins. Excluding Novitas, the
net interest margin decreased to 6.3% (H1 2024: 6.7%).
Adjusted operating expenses increased marginally to £103.9 million (H1 2024:
£103.0 million), mainly driven by higher costs in relation to Novitas, as the
prior period benefitted from a one-off credit of £1.5 million, partially
offset by lower investment spend. As a result, the Commercial expense/income
ratio increased to 63% (H1 2024: 61%).
We continue to benefit from the investment made in our Asset Finance
transformation programme, which was completed last financial year. This has
introduced a single technology platform across the business and has
standardised processes, leading to a better customer and colleague experience,
whilst providing a platform for scalable growth.
Impairment charges increased to £16.1 million (H1 2024: £14.6 million)
driven by provisions against certain individual exposures, partly offset by a
reduction in Stage 3 loans in Invoice Finance. Provision coverage increased to
6.1% (31 July 2024: 5.7%), driven primarily by the impacts of interest accrual
on Stage 3 loans in Novitas.
Excluding Novitas, there was an increase in impairment charges to £15.2
million (H1 2024: £12.4 million). This corresponded to a bad debt ratio of
0.6% (H1 2024: 0.5%) and a broadly stable coverage ratio (excluding Novitas)
of 1.5% (31 July 2024: 1.4%).
Banking: Retail
First half 2025 First half 2024 Change
£ million £ million %
Operating income 128.8 131.8 (2)
Adjusted operating expenses (88.8) (90.8) (2)
Impairment losses on financial assets (23.2) (22.0) 5
Adjusted operating profit 16.8 19.0 (12)
Adjusted operating profit, pre provisions for impairment losses 40.0 41.0 (2)
Adjusting items:
Provision in relation to motor finance commissions (165.0) - n/a
Complaints handling and other operational and legal costs incurred in relation (8.4) - n/a
to motor finance commissions
Restructuring costs (0.2) - n/a
Amortisation of intangible assets on acquisition (0.1) - n/a
Statutory operating profit/(loss) (156.9) 19.0 n/a
Net interest margin 8.7% 8.7%
Expense/income ratio 69% 69%
Bad debt ratio 1.6% 1.5%
Closing loan book1 2,871.7 3,025.9 (5)
1. The Motor Finance loan book includes £58.0 million (31 January 2024: £144.5
million) relating to the legacy Republic of Ireland Motor Finance business,
which is in run-off following the cessation of our previous partnership in the
Republic of Ireland from 30 June 2022.
Remain Focused on Prioritising our Margins and Underwriting Discipline in a
Challenging Environment
The Retail businesses provide intermediated finance, through motor dealers,
motor finance brokers and insurance brokers. Finance is provided to both
individuals and to a broad spectrum of UK businesses.
The market backdrop continued to present challenges in the first half, with
significant uncertainty in relation to the FCA's motor finance work and the
Court of Appeal's judgment in Hopcraft. Although the Motor Finance business
was impacted by the pause in lending in October 2024, we have remained focused
on providing excellent service to our customers and partners, with all of our
business lending channels live from January 2025. We are seeing good growth in
Motor Finance Ireland following the acquisition of Bluestone Motor Finance
(Ireland) DAC in October 2023. Furthermore, as part of our ongoing
investments, we continue to strengthen our existing relationships with Motor
Finance partners through the integration of our Decision in Principle ("DiP")
technology. The tool supports customers to establish their borrowing capacity
before applying for a loan. This technology has opened up additional routes to
market and will play a key role in ensuring that we continue to have a strong
proposition wherever the consumer chooses finance.
The Premium Finance business operates in a mature market where we have seen
some softening in demand. We have started the rollout of a Digital
Commission Disclosure Consent ("CDC") solution across our partner base. We
continue to monitor our delivery of good outcomes in respect of Consumer Duty
and are engaging with the FCA as required as part of the premium finance
Market Study.
Adjusted operating profit for Retail reduced to £16.8 million (H1 2024:
£19.0 million). Before provisions for impairment losses, adjusted operating
profit decreased 2% to £40.0 million (H1 2024: £41.0 million).
In light of recent developments in relation to motor finance commissions, the
group has reviewed its accounting assessment of these matters, as previously
stated. As a result, the group has recognised a provision in relation to motor
finance commissions of £165.0 million. On a statutory basis, Retail delivered
an operating loss of £156.9 million (H1 2024: £19.0 million operating
profit) mainly reflecting the provision of £165.0 million in relation to
motor finance commissions, which includes estimates for certain potential
operational and legal costs, as well as estimates for potential remediation
for affected customers, and £8.4 million of complaints handling and other
operational and legal costs incurred in relation to motor finance commissions.
Operating income decreased 2% to £128.8 million (H1 2024: £131.8 million),
mainly driven by the temporary pause in UK motor lending following the Court
of Appeal's judgment in Hopcraft and loan book moderation measures. This was
partially offset by good growth in Close Brothers Motor Finance in Ireland.
The net interest margin remained stable at 8.7% (H1 2024: 8.7%) as lower fee
income and lower margin loan book mix was offset by favourable costs of funds
in Premium Finance.
Adjusted operating expenses reduced 2% to £88.8 million (H1 2024: £90.8
million), driven by cost management initiatives previously outlined and higher
investment spend in the prior year period. The expense/income ratio remained
stable at 69% (H1 2024: 69%) with neutral operating leverage.
Impairment charges increased to £23.2 million (H1 2024: £22.0 million),
driven primarily by the impacts of macroeconomic forecast updates in our Motor
Finance business. The bad debt ratio increased to 1.6% (H1 2024: 1.5%), with
the provision coverage ratio increasing to 3.3% (31 July 2024: 3.0%), driven
by higher coverage on Stage 3 loans.
Banking: Property
First half 2025 First half 2024 Change
£ million £ million %
Operating income 68.7 65.0 6
Adjusted operating expenses (17.8) (18.0) (1)
Impairment losses on financial assets (8.8) (5.2) 69
Adjusted operating profit 42.1 41.8 1
Adjusted operating profit, pre provisions for impairment losses 50.9 47.0 8
Adjusting items:
Restructuring costs (0.1) - n/a
Statutory operating profit 42.0 41.8 0
Net interest margin 7.1% 7.3%
Expense/income ratio 26% 28%
Bad debt ratio 0.9% 0.6%
Closing loan book 1,934.2 1,838.6 5
Healthy Drawdowns Despite a Difficult Market Backdrop
Property comprises Property Finance and Commercial Acceptances. The Property
Finance business is focused on specialist residential development finance to
established SME housebuilders and professional developers in the UK for ground
up and refurbishment projects. Property Finance also provides limited funding
for commercial assets. Commercial Acceptances provides bridging and short-term
loans for auction properties, small refurbishment and residential development
projects.
The first half of the year has presented a difficult market backdrop for SME
developers, with interest rates remaining at elevated levels, customer
affordability being challenged and limited housing delivery. Nevertheless, we
delivered a solid financial performance, supported by our relationship-led
proposition and excellent customer service. We are also seeing encouraging
green shoots, with government rhetoric positive on housebuilding, customer
demand remaining strong and a liquid mortgage market. We are making the most
of a number of growth opportunities, through expanding our presence in the
regions outside of London and the South East and bringing in expertise to
expand our product range as we move into other residential asset classes such
as Build-to-Rent and student accommodation.
Adjusted operating profit rose 1% to £42.1 million (H1 2024: £41.8 million),
as income growth and a reduction in operating expenses more than offset an
increase in impairments. Before provisions for impairment losses, operating
profit increased 8% to £50.9 million (H1 2024: £47.0 million).
On a statutory basis, operating profit was stable at £42.0 million (H1 2024:
£41.8 million).
Operating income rose 6% to £68.7 million (H1 2024: £65.0 million), driven
by year-on-year loan book growth, although the net interest margin decreased
to 7.1% (H1 2024: 7.3%), mainly reflecting lower interest margins due to loan
book mix.
Adjusted operating expenses reduced 1% to £17.8 million (H1 2024: £18.0
million), reflecting lower staff costs. As a result, the expense/income
ratio decreased to 26% (H1 2024: 28%).
Impairment charges increased to £8.8 million (H1 2024: £5.2 million),
corresponding to a bad debt ratio of 0.9% (H1 2024: 0.6%). This was driven
primarily by an ongoing review of individually assessed provisions. The
provision coverage ratio increased to 3.4% (31 July 2024: 3.0%), driven by
elevated Stage 3 provisions.
The Property loan book is conservatively underwritten. We work with
experienced, professional developers, predominantly SMEs with a focus on
delivering mid-priced family housing, and have minimal exposure to the prime
central London market, with our regional loan book making up over 50% of the
Property Finance portfolio. Our long track record, expertise and quality of
service ensure the business remains resilient to competition and continues to
generate high levels of repeat business.
Winterflood
Key Financials
First half 2025 First half 2024 Change
£ million £ million %
Operating income 34.6 34.2 1
Operating expenses (35.4) (36.9) (4)
Impairment gains on financial assets - 0.1 n/a
Operating (loss) (0.8) (2.6) (69)
Average bargains per day ('000) 55 52
Operating margin (2%) (8%)
Return on opening equity (1.5%) (4.1%)
Loss days 1 3
Winterflood Business Services assets under administration (£ billion) 17.5 13.8
Challenging Market Conditions Continued to Impact Trading Income
Winterflood is a leading UK liquidity provider, delivering high-quality
execution services to platforms, stockbrokers, wealth managers and
institutional investors, as well as providing corporate advisory services to
investment trusts and outsourced dealing and custody services via Winterflood
Business Services ("WBS").
Over the first half, Winterflood continued to navigate a volatile
macroeconomic environment, with investor sentiment shaped by persistent
inflation, evolving interest rate expectations and geopolitical uncertainty.
While inflation has begun to moderate, market confidence has yet to fully
stabilise, with UK-focused equities continuing to experience net outflows.
These factors have impacted Winterflood's trading income and as a result, it
delivered an operating loss of £0.8 million (H1 2024: operating loss of £2.6
million).
Operating income increased 1% to £34.6 million (H1 2024: £34.2 million),
with growth in WBS more than offsetting a decline in trading income.
Trading income decreased 6% to £24.0 million (H1 2024: £25.6 million)
reflecting challenging market conditions. Despite this, we incurred only one
loss day (H1 2024: three loss days) as we remained focused on risk management
and benefited from the expertise of our traders. Whilst equity market
performance was mixed, with the FTSE 100 and FTSE 250 delivering moderate
gains, the AIM-listed stocks lagged due to subdued investor confidence.
Average daily bargains in the period were 55k, up 6% year-on-year (H1 2024:
52k).
Income from the Investments Trusts corporate business declined to £1.1
million (H1 2024: £1.7 million), reflecting a challenging fundraising
environment with low issuance.
WBS continued to see good momentum, with income rising 22% to £9.5 million
(H1 2024: £7.8 million). Assets under administration ("AuA") increased 27% to
£17.5 billion (H1 2024: £13.8 billion), supported by net inflows and
positive market movements in the period. WBS remains focused on developing its
client relationships and investing in its award-winning proprietary technology
to provide highly scalable and bespoke solutions for clients. WBS is well
positioned for further growth, both organically and supported by a healthy
pipeline of clients, and expects to grow AuA to over £20 billion by 2026.
Operating expenses reduced 4% to £35.4 million (H1 2024: £36.9 million),
reflecting lower operational expenses following a cost review undertaken last
financial year and the absence of dual-running property costs incurred in the
prior year.
We continue to make strong progress in Winterflood Retail Access Platform
("WRAP") using in-house technology and expertise. This is an end-to-end retail
distribution platform that enables retail investors to participate in capital
markets transactions such as initial public offerings and secondary
fundraisings through retail intermediaries, across both equity and fixed
income instruments. Since inception, WRAP has raised over £100 million from
retail investors and has been mandated on 34 transactions, working with 15
different banks and brokers.
While macroeconomic and geopolitical uncertainties persist, the robust
pipeline of clients for WBS supports Winterflood's broader growth strategy.
With inflation and interest rates moderating, we anticipate a gradual
improvement in investor confidence and trading activity. We are confident that
Winterflood remains well positioned to benefit when market conditions return.
Discontinued Operations (Asset Management)
Key Financials1
First half 2025 First half 2024 Change
£ million £ million %
Investment management 66.5 61.3 8
Advice and other services 14.8 14.0 6
Other income2 1.1 1.0 10
Operating income 82.4 76.3 8
Adjusted operating expenses(1) (77.6) (70.0) 11
Impairment losses on financial assets (0.1) - n/a
Operating profit from discontinued operations 4.7 6.3 (25)
Adjusting items:
Amortisation of intangible assets on acquisition (0.6) (0.6) -
Disposal and transaction costs (2.4) - n/a
Profit from discontinued operations before tax(3) 1.7 5.7 (70)
Tax (1.4) (1.8) (22)
Profit from discontinued operations, net of tax(4) 0.3 3.9 (92)
Less: intercompany transactions related to discontinued operations 0.8 1.1 (27)
Statutory profit from discontinued operations 1.1 5.0 (78)
Revenue margin (bps) 77 84
Operating margin 6% 8%
Return on opening equity 5.2% 7.6%
1. Adjusted measures are presented on a basis consistent with prior periods and
exclude amortisation of intangible assets on acquisition, to present the
performance of the group's acquired businesses consistent with its other
businesses; and any exceptional and other adjusting items which do not reflect
underlying trading performance. Further detail on the reconciliation between
operating and adjusted measures can be found in Note 2 "Segmental analysis".
2. Other income includes net interest income and expense, income on principal
investments and other income.
3. Profit from discontinued operations before tax per segmental analysis note 2
in the first half 2025 of £2.5 million excludes £0.8 million of intercompany
transactions.
4. Discontinued operations relate to Close Brothers Asset Management, which has
been classified as 'discontinued operations' in the group's income statement
for the 2024 and 2025 financial years in line with the requirements of IFRS 5.
The related assets and liabilities are classified as held for sale on the
group's balance sheet at 31 January 2025. Statutory profit from discontinued
operations in the first half 2025 of £1.1 million excludes £(0.8) million of
intercompany transactions.
Sale Agreement with Oaktree
On 19 September 2024, we announced the sale of CBAM to funds managed by
Oaktree Capital Management, L.P. ("Oaktree") for an equity value of up to
£200 million. Following receipt of the required regulatory approvals, the
transaction completed on 28 February 2025.
The equity value of up to £200 million included £172 million of cash paid at
completion of the transaction (comprising an upfront cash consideration of
approximately £146 million paid by Oaktree to Close Brothers and a dividend
of approximately £26 million paid by CBAM to Close Brothers); and up to £28
million of contingent deferred consideration in the form of preference shares.
Financial Impact on the Group
The group anticipates an estimated gain on disposal of approximately £59
million. This estimate is based on the difference between the upfront cash
consideration of £146 million plus the fair value of c.£21 million for the
£28 million of contingent deferred consideration in the form of preference
shares, and CBAM's net asset value of £100 million as at the completion date
(net of a dividend of approximately £26 million paid by CBAM to Close
Brothers), as well as transaction costs of c.£8 million. Any subsequent
changes in the fair value of the contingent deferred consideration after the
completion date will be recognised in the group's income statements going
forward.
The estimated CET1 benefit of c.120 basis points is based on financials as at
31 January 2025 on a pro-forma basis. This calculation is based on a tangible
net asset value of £43 million and assumes an immediate reduction in credit
risk RWAs associated with the CBAM business, as well as the estimated capital
benefit expected to be recognised in respect of the estimated gain on sale
described above. The estimated CET1 benefit from the sale excludes any
immediate reduction in operational risk RWAs associated with the CBAM
business. The group expects a further capital benefit over the next three
years of up to c.25 basis points to its CET1 capital ratio as at 31 January
2025 on a pro-forma basis, due to a reduction in these operational risk RWAs.
Performance in the Six Months to 31 January 2025
Total operating income rose 8% to £82.4 million (H1 2024: £76.3 million),
reflecting positive market movements, with growth in AuM delivered by the
bespoke investment management business resulting in higher investment
management and financial planning income. This was partially offset by lower
net inflows. The revenue margin reduced to 77 bps (H1 2024: 84 bps) primarily
due to a change in the mix of business into lower margin passive and fixed
income products and a move to larger client size with a typically lower fee
margin.
Adjusted operating expenses increased 11% to £77.6 million (H1 2024: £70.0
million), reflecting inflation-related salary increases and non-staff costs.
The expense/income ratio grew to 94% (H1 2024: 92%), with the compensation
ratio also increasing to 64% (H1 2024: 63%).
Operating profit from discontinued operations decreased 25% to £4.7 million
(H1 2024: £6.3 million) as growth in income was more than offset by higher
costs. The operating margin reduced to 6% (H1 2024: 8%), corresponding to 13%
(H1 2024: 15%) when excluding the costs related to the hiring of investment
managers and the associated AuM in the bespoke investment management business.
Profit from discontinued operations before tax was £1.7 million (H1 2024:
£5.7 million) mainly reflecting £2.4m of disposal costs.
Over the period, net inflows decreased to £160 million (H1 2024: £732
million) and delivered a net inflow rate of 2% (H1 2024: 9%). This was mainly
due to higher inflows seen in H1 2024 related to the initial migration period
of assets from bespoke investment managers and higher outflows seen in H1 2025
reflecting the uncertain backdrop and the CBAM sale process.
Total managed assets increased 6% to £20.6 billion (31 July 2024: £19.3
billion), driven by positive market performance. Total client assets, which
includes advised and managed assets, also increased by 6% to £21.7 billion
(31 July 2024: £20.4 billion).
Movement in Client Assets
Six months to 12 months to Six months to
31 January 31 July 31 January
2025 2024 2024
£ million £ million £ million
Opening managed assets 19,331 16,419 16,419
Inflows 1,356 3,231 1,621
Outflows (1,196) (1,928) (889)
Net inflows 160 1,303 732
Market movements 1,083 1,609 524
Total managed assets 20,574 19,331 17,675
Advised only assets 1,154 1,091 872
Total client assets(1) 21,728 20,422 18,547
Annualised net flows as % of opening managed assets 2% 8% 9%
1. Total client assets include £5.6 billion of assets (31 July 2024: £5.3
billion) that are both advised and managed.
Basis of Presentation
Results are presented both on a statutory and an adjusted basis to aid
comparability between periods. Adjusted measures are presented on a basis
consistent with prior periods and exclude the provision in relation to motor
finance commissions, costs associated with complaints handling and other
operational and legal costs incurred in relation to motor finance commissions,
restructuring costs, amortisation of intangible assets on acquisition and
profit from discontinued operations of £0.3 million, to present the
performance of the group's acquired businesses consistent with its other
businesses; and any exceptional and other adjusting items which do not reflect
underlying trading performance. Discontinued operations relate to CBAM, which
has been classified as a discontinued operation in the group's income
statement for the 2024 and 2025 financial years. The related assets and
liabilities are classified as held for sale on the group's balance sheet at 31
January 2025. The adjusting items are presented within administrative expenses
on a statutory basis. Please refer to Note 2 "Segmental Analysis" for further
details on items excluded from the adjusted performance metrics.
Principal Risks and Uncertainties
The group faces a number of risks in the normal course of business. To manage
these effectively, a consistent approach is adopted based on a set of
overarching principles, namely:
• adhering to our established and proven business model;
• implementing an integrated risk management approach based on the concept
of "three lines of defence"; and
• setting and operating within clearly defined risk appetites, monitored
with defined metrics and limits.
At the core of the group's risk management framework are the group's principal
risks which are the risks that have been identified as those most material in
the delivery of the group's strategic objectives. A detailed description of
each, including an overview of our risk management and mitigation approach, is
disclosed on pages 74 to 116 of the 2024 Annual Report. The Annual Report can
be accessed via the Investor Relations home page on the group's website at
www.closebrothers.com (https://www.closebrothers.com) .
The principal risks are listed below and are subject to ongoing review to
ensure that the framework remains aligned to the prevailing risk
environment. In the current macroeconomic and operating environment, we
remain vigilant to developments in our principal risk profile and proactively
monitor a suite of emerging risks which reflect broader market uncertainties.
A summary of the group's principal risks is detailed below:
Business and strategic risk - The group operates in an environment where it is
exposed to various independent influencing factors. Its profitability can be
impacted by the broader UK economic climate; front-line sales performance;
changes in technology, regulation and customer behaviour; cost movements; and
competition from traditional and new players. All of these can vary in both
nature and extent across its divisions.
Changes in these factors may affect the Banking division's ability to advance
loans or products as it seeks to maintain its desired risk and reward
criteria, impact levels of trading activity at Winterflood, or result in
additional investment requirements and higher costs across the group.
Capital risk - The group is required to hold sufficient regulatory capital
(including equity and other loss-absorbing debt instruments) to enable it to
operate effectively. This includes meeting minimum regulatory requirements,
operating within risk appetites set by the board and supporting its strategic
goals. As explained above, the group has recognised a provision in relation to
motor finance commissions of £165 million which has an impact on its capital
position. There remains significant uncertainty as to the range of outcomes
from the Supreme Court appeals and FCA's ongoing review of motor commissions
and, therefore, the ultimate cost to the group could be materially higher or
lower than the provision taken. In March 2024 the group announced a range of
management actions aimed at strengthening the group's available CET1 capital
by approximately £400 million by the end of the 2025 financial year. As a
result of these actions, approximately £360 million of CET1 capital has been
generated or preserved as of 31 January 2025 (relative to the capital
trajectory projected at the time). These actions include the decision to not
pay any dividend payments, RWA optimisation including loan book growth
moderation, cost management initiatives and the sale of Close Brothers Asset
Management which was completed on 28 February 2025. We continue to evaluate a
range of additional potential management actions to further optimise RWAs,
including potential risk transfer of assets in Motor Finance and other
portfolios, should it be needed, together with a continuous review of our
businesses and portfolios and other tactical actions. Any decision to
reinstate dividends will be reviewed by the board once there is further
clarity on the FCA review of motor commissions and the ongoing Supreme Court
appeals, with such decision seeking to ensure that sufficient capital is
retained in the group.
Conduct risk - The group is exposed to conduct risk in its provision of
products and services to customers both directly and via its intermediaries,
and through other business activities that enable delivery. The regulatory
change agenda continues at pace and is expected in the near term to continue
to enhance consumer protection. Regulatory expectations, including with
respect to retail customer savings and borrowing, and trading activities,
continue to evolve with impact on the group's businesses in each of these
markets. Failure to evidence delivery of good customer outcomes may lead to
reputational harm, legal or regulatory sanctions and/or customer redress.
Where actual customer harm has been identified, the company is taking steps to
address this, including through its response to the FCA's Borrowers in
Financial Difficulty review for which remedial action is materially
progressed.
Credit risk - As a lender to businesses and individuals, the bank is primarily
exposed to credit losses if customers are unable to repay loans and
outstanding interest and fees. The group also has exposure to counterparties
including those with which it places deposits or trades, and a small number of
derivative contracts to hedge interest rate and foreign exchange exposures.
Whilst credit performance remains resilient, we continue to monitor closely
the evolving economic conditions and the impacts on our customers. We remain
confident in the quality of our loan book, which is predominantly secured,
prudently underwritten, diverse, and supported by the deep expertise of our
people.
Funding and liquidity risk - The Banking division's access to funding remains
key to support our lending activities and the liquidity requirements of the
group. Funding and liquidity are measured and monitored on a daily basis with
issues escalated as appropriate. During this period the bank has closely
monitored how the uncertainties and developments relating to motor commissions
have impacted its funding and liquidity position. The bank's 'borrow long,
lend short' funding approach provides significant resilience against short- to
medium-term liquidity shocks and accordingly there have been minimal impacts
to the bank's liquidity position. In addition to its prudent funding model,
the bank holds significant amounts of liquid assets to ensure it is well
positioned to manage through any liquidity pressure should it arise in the
future.
Legal and regulatory risk - The group is subject to the laws and regulations
of the various jurisdictions in which it operates. This exposure includes
risks of breaching financial services regulations and laws, as well as action
resulting from contractual breach and litigation (including direct customer
claims based on regulatory breaches). Failure to comply with existing legal or
regulatory requirements, or to adapt to changes in a timely fashion in the
course of the provision of products and services, may result in legal and
regulatory risk. Changes could also affect our financial performance, capital,
liquidity and access to markets in which we operate.
With an increased regulatory focus on protecting customers, any failure to
implement and/or adapt to these changes quickly may expose the group to
reputational harm, legal or regulatory sanctions and/or customer redress
requirements.
A primary development within the period includes the Court of Appeal ruling in
Johnson, Wrench and Hopcraft in which the Court of Appeal set a higher bar for
the disclosure of and consent to commissions than required by current FCA
rules, or regulatory requirements in force at the time of the case in
question. It requires the disclosure of and the customer's consent to, not
only the existence and nature of the commission, but also the amount of the
commission. We disagree with the Court of Appeal's judgment and are appealing
it to the Supreme Court.
A further development emerging within the period is the FCA's ongoing Premium
Finance Market Study. Following the FCA publishing its draft terms of
reference as MS24/2.1 in October 2024, the business continues to engage with
the FCA through this process. The business awaits the outcomes of the Market
Study to understand any subsequent impacts which may arise.
Non-traded market risk - Changes in market prices such as interest rates,
credit spreads and foreign exchange rates have the potential to impact the
value of assets or liabilities outside the trading book. Our current outlook
on non-traded market risk remains broadly unchanged since the last reporting
period.
Operational risk - The group is exposed to various operational risks through
its day-to-day operations, all of which have the potential to result in
financial loss or adverse impact. Losses typically crystallise as a result of
inadequate or failed internal processes, people, models and systems, or as a
result of external factors, including but not limited to Cyber and Information
Security. Impacts to the business, customers, third parties and the markets in
which the group operates are considered within a maturing framework for
resilient delivery of important business services.
Operational risk is a core component of the Enterprise Risk Management
Framework and its management is embedded in day-to-day business activities.
Requirements and responsibilities are set out in the Operational Risk Policy
and supporting standards and procedures as part of the framework to identify,
assess, mitigate, monitor and report the operational risks, events and issues
that could impact the achievement of business objectives or impact core
business processes.
Businesses are responsible for the day-to-day management of operational risk,
with oversight from the risk and compliance function, and independent
assurance activities undertaken by group internal audit. The group's exposure
to operational risk is impacted through the need to engage with innovative,
dynamic third parties; delivery of new products and services; and effective
use of reliable data in a changing external environment, to support delivery
of the group's strategic objectives.
The outlook for operational risk continues to be under upward pressure.
Scenario analysis is used to assess how severe but plausible operational risks
will affect the group, providing a forward-looking basis for evaluating and
managing operational risk exposures. In parallel, close monitoring continues
on external factors and impacts which could arise from geo-political events
and the legal and regulatory environment.
Reputational risk - Protection and effective stewardship of the group's
reputation are fundamental to its long-term success. Detrimental stakeholder
perception could lead to impairment of the group's current business and future
goals. The group remains exposed to potential reputational risk in the course
of its usual activities, such as through employee, supplier or intermediary
conduct, the provision of products and services, crystallisation of another
risk type, or as a result of changes outside its influence.
Media coverage of the FCA review of motor commissions, the Court of Appeal
judgement in Hopcraft, and the group's appeal of the judgement to the Supreme
Court has increased inherent reputational risk. The outlook for reputational
risk will remain heightened as the timeline for FCA review of motor
commissions continues to be extended, with FCA announcing it plans to confirm
its next steps in its review within six weeks of the Supreme Court's decision
and not in May 2025 as previously stated.
Traded Market risk - Traded market risk in the group only arises in
Winterflood, whose core business is to provide liquidity and interact with the
market on a principal basis, holding positions in financial instruments as a
result of its client facilitation activity. Winterflood operates as a market
maker in equities, exchange-traded products, investment trusts and sovereign
and corporate bonds, operating across three primary markets: the United
Kingdom, North America and Europe. For hedging purposes, derivatives are also
traded, although these are limited to listed futures in UK equity and fixed
income markets and FX forwards. Geopolitical uncertainty is likely to be the
key driver of the volatility in Winterflood's market risk exposures over the
coming 12 months.
Climate risk - Running alongside the suite of principal risks is climate risk,
which the group categorises as a cross-cutting risk, as the impacts arising
from climate change have the ability to impact across the spectrum of
principal risks. Climate risk represents a continued area of focus, and the
group continues to closely monitor government and regulatory developments in
parallel to managing its own carbon footprint and supporting its customers to
manage their climate risk impacts. Climate risk is embedded within the
group's risk management framework, ensuring effective oversight. Climate
disclosures are disclosed on pages 33 to 54 of the 2024 Annual Report.
Emerging and evolving risks
In addition to day-to-day management of its principal risks, the group
utilises an established framework to monitor its portfolio for emerging risks,
consider broader market uncertainties, and support its organisational
readiness to respond. Group-level emerging risks are monitored by the Group
Risk and Compliance Committee on an ongoing basis, with key themes and
patterns of deterioration monitored via several sub-risks.
Current group level emerging risks include economic and geopolitical
uncertainty (including US political risk), medium to long-term transitional
climate risks, legal and regulatory change, supply chain risks, change
execution risk, strategic disruption.
Directors' Responsibility Statement
Each of the Directors confirms that, to the best of their knowledge:
• the condensed consolidated interim financial statements ("interim
financial statements") have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as contained in
UK-adopted International Accounting Standards ("IAS");
• the half year results include a fair review of the information
required by Disclosure and Transparency Rule 4.2.7R (indication of important
events during the first six months of the financial year and their impact on
the interim financial statements, and a description of principal risks and
uncertainties for the remaining six months of the financial year); and
• the half year results include a fair review of the information
required by Disclosure and Transparency Rule 4.2.8R (disclosure of related
parties transactions that have taken place during the first six months of the
current financial year and that have materially affected the financial
position or performance of the company, and any changes in the related parties
transactions described in the last Annual Report that could do so).
The Directors of Close Brothers Group plc as at the date of this report are as
listed on pages 124 to 126 of the company's 2024 Annual Report, subject to the
following change: Adrian Sainsbury ceased to be a Director of the company on 6
January 2025. A list of current Directors is maintained on the company's
website www.closebrothers.com.
On behalf of the board
Michael N.
Biggs
Michael B. Morgan
Chairman
Chief Executive
18 March 2025
Independent review report to Close Brothers Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Close Brothers Group plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Half Year
Results of Close Brothers Group plc for the 6 month period ended 31 January
2025 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
• the consolidated balance sheet as at 31 January 2025;
• the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
• the consolidated statement of cash flows for the period then ended;
• the consolidated statement of changes in equity for the period then
ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Close
Brothers Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
18 March 2025
Consolidated Income Statement
For the six months ended 31 January 2025
Six months ended 31 January Year ended 31 July
2025 2024(1) 2024(1)
Unaudited Unaudited Audited
Note £ million £ million £ million
Interest income 576.8 559.9 1,137.8
Interest expense (283.8) (268.2) (556.6)
Net interest income 293.0 291.7 581.2
Fee and commission income 59.0 61.5 123.1
Fee and commission expense (9.5) (10.5) (21.0)
Gains less losses arising from dealing in securities 25.3 25.2 53.2
Other income 64.8 67.0 132.2
Depreciation of operating lease assets and other direct costs (42.0) (39.9) (81.4)
Non-interest income 97.6 103.3 206.1
Operating income 390.6 395.0 787.3
Administrative expenses before adjusting items (268.4) (266.3) (532.2)
Impairment of intangible assets 9 (4.0) - -
Amortisation of intangible assets on acquisition 9 (0.1) - (0.2)
Provision in relation to the BiFD review - - (17.2)
Restructuring costs 15 (0.4) - (3.1)
Provision in relation to motor commissions 15 (165.0) - -
Complaints handling and other operational and legal costs incurred in relation 15 (8.4) - (6.9)
to motor finance commissions
Total administrative expenses (446.3) (266.3) (559.6)
Impairment losses on financial assets 6 (48.1) (41.7) (98.8)
Total operating expenses (494.4) (308.0) (658.4)
Operating (loss)/profit before tax (103.8) 87.0 128.9
Tax 3 (9.1) (23.2) (38.0)
(Loss)/profit after tax from continuing operations (112.9) 63.8 90.9
Profit from discontinued operations, net of tax 22 1.1 5.0 9.5
(Loss)/profit after tax (111.8) 68.8 100.4
Attributable to
Shareholders (122.9) 68.8 89.3
Other equity owners 13 11.1 - 11.1
(111.8) 68.8 100.4
From continuing operations
Basic earnings per share 4 (82.8) p 42.6p 53.3p
Diluted earnings per share 4 (82.7) p 42.6p 53.2p
From continuing and discontinued operations
Basic earnings per share (82.1) p 46.0p 59.7p
Diluted earnings per share (82.0) p 46.0p 59.5p
Interim dividend per share 5 - - -
Final dividend per share 5 - - -
1. Comparative information restated following the classification of Close
Brothers Asset Management as discontinued operations. See Notes 2 and 22.
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2025
Six months ended 31 January Year ended 31 July
2025 2024 2024
Unaudited Unaudited Audited
£ million £ million £ million
Profit after tax (111.8) 68.8 100.4
Items that may be reclassified to income statement
Currency translation losses (0.2) (0.2) (0.5)
Losses on cash flow hedging (11.5) (14.0) (29.8)
Losses on financial instruments classified at fair value through other (6.5) (2.5) (3.6)
comprehensive income
Tax relating to items that may be reclassified 5.0 4.6 9.8
(13.2) (12.1) (24.1)
Items that will not be reclassified to income statement
Defined benefit pension scheme (losses)/gains (0.1) 0.1 -
(0.1) 0.1 -
Other comprehensive expense, net of tax (13.3) (12.0) (24.1)
Total comprehensive income (125.1) 56.8 76.3
Attributable to
Shareholders (136.2) 56.8 65.2
Other equity owners 13 11.1 - 11.1
(125.1) 56.8 76.3
Consolidated Balance Sheet
At 31 January 2025
31 January 2025 31 July 2024
Unaudited Audited
Note £ million £ million
Assets
Cash and balances at central banks 1,852.3 1,584.0
Settlement balances 1,104.5 627.5
Loans and advances to banks 284.5 293.7
Loans and advances to customers 6 9,569.4 9,830.8
Debt securities 7 590.7 740.5
Equity shares 8 22.5 27.4
Loans to money brokers against stock advanced 30.2 22.5
Derivative financial instruments 100.6 101.4
Intangible assets 9 197.6 266.0
Property, plant and equipment 10 329.6 349.6
Current tax assets 29.6 36.4
Deferred tax assets 19.4 14.3
Prepayments, accrued income and other assets 147.3 186.7
Assets classified as held for sale 22 160.0 -
Total assets 14,438.2 14,080.8
Liabilities
Settlement balances and short positions 11 1,077.2 614.9
Deposits by banks 12 93.6 138.4
Deposits by customers 12 8,727.2 8,693.6
Loans and overdrafts from banks 12 196.0 165.6
Debt securities in issue 12 1,870.8 1,986.4
Loans from money brokers against stock advanced 29.0 16.7
Derivative financial instruments 118.7 129.0
Accruals, deferred income and other liabilities 15 363.6 306.5
Subordinated loan capital 12 191.3 187.2
Liabilities classified as held for sale 22 60.1 -
Total liabilities 12,727.5 12,238.3
Equity
Called up share capital 38.0 38.0
Retained earnings 1,510.6 1,634.4
Other equity instrument 13 197.6 197.6
Other reserves (35.5) (27.5)
Total shareholders' and other equity owners' equity 1,710.7 1,842.5
Total equity 1,710.7 1,842.5
Total equity and liabilities 14,438.2 14,080.8
Consolidated Statement of Changes in Equity
For the six months ended 31 January 2025
Other reserves
Called up share capital Retained earnings Other equity instrument FVOCI reserve Share-based payments reserve Exchange movements reserve Cash flow hedging reserve Total attributable to shareholders and other equity owners Total equity
£ million £ million £ million £ million £ million £ million £ million £ million £ million
At 1 August 2023 38.0 1,608.5 - (2.7) (32.0) (1.3) 34.4 1,644.9 1,644.9
(audited)
Profit for the period - 68.8 - - - - - 68.8 68.8
Other comprehensive (expense)/income - 0.1 - (1.8) - (0.2) (10.1) (12.0) (12.0)
Total comprehensive income for the year - 68.9 - (1.8) - (0.2) (10.1) 56.8 56.8
Dividends paid (Note 5) - (67.1) - - - - - (67.1) (67.1)
Shares purchased - - - - (3.6) - - (3.6) (3.6)
Shares released - - - - 3.6 - - 3.6 3.6
Other movements - 0.1 197.6 - (0.5) - - 197.2 197.2
Income tax - - - - - - - - -
At 31 January 2024 38.0 1,610.4 197.6 (4.5) (32.5) (1.5) 24.3 1,831.8 1,831.8
(unaudited)
Profit for the period - 31.6 - - - - - 31.6 31.6
Other comprehensive expense/(income) - (0.1) - (0.8) - 0.1 (11.3) (12.1) (12.1)
Total comprehensive income for the year - 31.5 - (0.8) - 0.1 (11.3) 19.5 19.5
Dividends paid (Note 5) - - - - - - - - -
Shares purchased - - - - 0.1 - - 0.1 0.1
Shares released - - - - 1.0 - - 1.0 1.0
Other equity instrument issued (Note 13) - - 197.6 - - - - 197.6 197.6
Coupon paid on other equity instrument (Note 13) - (11.1) - - - - - (11.1) (11.1)
Other movements - 3.6 (197.6) - (2.4) - - (196.4) (196.4)
Income tax - - - - - - - - -
At 31 July 2024 38.0 1,634.4 197.6 (5.3) (33.8) (1.4) 13.0 1,842.5 1,842.5
(audited)
Loss for the period - (111.8) - - - - - (111.8) (111.8)
Other comprehensive expense - (0.1) - (4.7) - (0.2) (8.3) (13.3) (13.3)
Total comprehensive income for the year - (111.9) - (4.7) - (0.2) (8.3) (125.1) (125.1)
Dividends paid (Note 5) - - - - - - - - -
Shares purchased - - - - - - - - -
Shares released - - - - 2.4 - - 2.4 2.4
Other equity instrument issued (Note 13) - - - - - - - - -
Coupon paid on other equity instrument (Note 13) - (11.1) - - - - - (11.1) (11.1)
Other movements - (0.8) - - 2.8 - - 2.0 2.0
Income tax - - - - - - - - -
At 31 January 2025
(unaudited) 38.0 1,510.6 197.6 (10.0) (28.6) (1.6) 4.7 1,710.7 1,710.7
Consolidated Cash Flow Statement
For the six months ended 31 January 2025
Six months ended 31 January Year ended 31 July
2025 2024 2024
Unaudited Unaudited Audited
Note £ million £ million £ million
Net cash inflow/(outflow) from operating activities 17(a) 346.0 (394.0) (382.0)
Net cash (outflow)/inflow from investing activities
Purchase of:
Property, plant and equipment (1.9) (8.4) (14.2)
Intangible assets - software (13.3) (15.7) (30.3)
Subsidiaries, net of cash acquired 17(b) (0.5) (11.2) (15.4)
Sale of:
Equity shares held for investment - - 0.2
Subsidiaries 17(c) - 0.2 0.9
(15.7) (35.1) (58.8)
Net cash inflow/(outflow) before financing activities 330.3 (429.1) (440.8)
Financing activities
Purchase of own shares for employee share award schemes - (3.6) (3.5)
Equity dividends paid - (67.1) (67.1)
Interest paid on subordinated loan capital and debt financing (11.7) (11.7) (23.4)
Payment of lease liabilities (7.4) (7.9) (16.5)
Issuance of Additional Tier 1 ("AT1") capital securities - 200.0 200.0
Costs arising on issue of AT1 - (2.4) (2.4)
AT1 coupon payment (11.1) - (11.1)
Net increase/(decrease) in cash 300.1 (321.8) (364.8)
Cash and cash equivalents at beginning of year 1,844.5 2,209.3 2,209.3
Cash and cash equivalents at end of year 17(d) 2,144.6 1,887.5 1,844.5
The Notes
1. Basis of Preparation and Accounting Policies
The half year results have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority and the
condensed consolidated interim financial statements ("interim financial
statements") have been prepared in accordance with UK-adopted International
Accounting Standards. These include International Accounting Standard ("IAS")
34 'Interim Financial Reporting', which specifically addresses the contents of
interim financial statements. The interim financial statements incorporate the
individual financial statements of Close Brothers Group plc and the entities
it controls, using the acquisition method of accounting.
The half year results are unaudited and do not constitute statutory accounts
within the meaning of Section 434 of the companies Act 2006. However, the
information has been reviewed by the group's auditor, PricewaterhouseCoopers
LLP, and their report appears above. The half year results for the six months
ended 31 January 2024 presented as comparatives are also unaudited.
The financial information for the year ended 31 July 2024 contained within
this half year report does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. A copy of those statutory accounts,
which have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006, has been
delivered to the Registrar of Companies. PricewaterhouseCoopers LLP has
reported on those accounts. The report of the auditor on those statutory
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under Section 498(2) or (3) of the Companies Act
2006.
The accounting policies used are consistent with those set out on pages 199 to
204 of the Annual Report 2024, except for an additional policy relating to
discontinued operations.
The results of discontinued operations are shown as:
• a single amount on the face of the consolidated income statement
comprising the post-tax profit or loss of discontinued operations; and
• post-tax gain or loss recognised either on measurement to fair value
less costs to sell or on the disposal of the discontinued operation.
A discontinued operation is a CGU or a group of CGUs that either has been
disposed of, or is classified as held for sale, and represents a separate
major line of business or geographical area of operations, is part of a single
coordinated plan to dispose of a separate major line of business or
geographical area of operations or is a subsidiary acquired exclusively with a
view to resale.
Intercompany transactions between continuing and discontinued operations have
been eliminated on consolidation in the consolidated income statement.
However, they have been presented gross in the segmental analysis in Note 2 to
reflect management's view of segmental performance.
Going concern
The directors acknowledge that the risk landscape is constantly evolving and
as such continually review the group's principal and emerging risks. A key
area of focus in the first half of the 2025 financial year has been the
Financial Conduct Authority ("FCA") review of historical motor finance
commission arrangements and the Supreme Court appeal, and their impact on the
group's activities.
In accordance with the relevant accounting standards, since the FCA's
announcement of its review in January 2024, the group had continued to assess
whether a provision for motor commissions is required. Based on all available
information, including recent market developments in relation to motor
commissions, the group has recognised a provision of £165 million in its H1
2025 results. This provision is based on probability weighted scenarios using
various assumptions and includes estimates for certain potential operational
and legal costs, as well as estimates for potential customer redress. Refer to
Note 15 for further information regarding the assumptions used and sensitivity
of those assumptions.
In light of the prevailing uncertainty as to the range of outcomes from the
Supreme Court appeals and the FCA's ongoing review of motor commissions, the
group recognises the need to plan for a range of possible outcomes, and
continues to prioritise maintaining a strong capital position, balance sheet,
and prudent approach to managing its financial resources.
As part of the directors' consideration of the appropriateness of adopting the
going concern basis, the directors have reviewed the group's operating plan to
June 2026, being 15 months from the date of approval of the financial
statements. This is in line with the assessment period (15 months) reviewed as
part of the FY24 going concern assessment.
The directors have considered a range of forward-looking scenario analyses,
similar to those considered in the FY24 assessment (refer to page 117 of the
FY24 Annual Report and Accounts). As an update to the FY24 assessment, the
'severe but plausible' redress provision used in the stressed going concern
scenario was derived by applying a 100% weighting to the most severe of the
probability weighted scenarios used to calculate the existing motor finance
commission redress provision described in Note 15.
Given the significant uncertainty as to the range of possible outcomes in
respect of motor finance commissions, the directors also considered whether
any more severe but plausible scenarios existed that would be reasonably
likely to have a materially worse outcome for the Group and concluded that
this was not plausible.
The modelling output of all scenarios considered highlights the resilient
capital position, and capacity to absorb losses and increases in RWAs beyond
the impacts modelled, strengthened by modelled management actions.
The group continues to have a strong and conservative business model, lending
in a variety of sectors across a diverse range of assets. The group remains
well positioned in each of its businesses, is soundly funded, and has strong
levels of liquidity. The group maintains strong headroom to minimum regulatory
requirements to withstand the downside scenario elements. In making their
going concern assessment, the directors have also considered the operational
agility and resilience of the group. The directors continually expect to
maintain a high level of operational and system performance.
Under all scenarios the group continues to operate with sufficient levels of
capital for the next 15 months from the reporting date, with the group's
capital ratios in excess of minimum regulatory requirements.
Separately from managing the group capital position the group adopts a
conservative approach to funding and liquidity risk and seeks to maintain a
funding and liquidity position characterised by preserving a simple and
transparent balance sheet, sustaining a diverse range of funding sources and
holding a prudent level of high-quality liquidity. As such, the weighted
average maturity of its funding is longer than the weighted average maturity
of its lending portfolio. The board reviewed these factors when concluding
upon going concern.
As part of the liquidity management process the Banking division also uses a
suite of internally developed liquidity stress scenarios to monitor its
potential liquidity exposure daily and determine its high-quality liquid asset
requirements. This ensures that the Banking division remains within risk
appetite and identifies potential areas of vulnerability. These stresses are
formally approved by the Asset and Liability Committee, Group Risk and
Compliance Committee and board and cover both idiosyncratic and market wide
stresses. The Bank adopts the most severe stress to determine the amount of
liquidity it needs to hold. As at 31 January 2025 the Bank held sufficient
liquidity resources to meet the applicable stress.
In conclusion, the directors have determined that they have a reasonable
expectation that the group as a whole have adequate resources to continue as a
going concern for a period of at least 12 months from the date of approval of
the financial statements. Accordingly, they continue to adopt the going
concern basis in preparing the interim results.
Critical accounting judgements and estimates
The reported results of the group are sensitive to the judgements, estimates
and assumptions underlying the application of its accounting policies and
preparation of its financial statements. UK company law and IFRS require the
directors, in preparing the group's financial statements, to select suitable
accounting policies, apply them consistently and make judgements, estimates
and assumptions that are reasonable.
The group's estimates and assumptions are based on historical experience and
reasonable expectations of future events and are reviewed on an ongoing basis.
Actual results in the future may differ from the amounts estimated due to the
inherent uncertainty.
The group's critical accounting judgements, made in applying its accounting
policies, and the key sources of estimation uncertainty that may have a
significant risk of causing a material adjustment within the next financial
year are set out below.
The impact of climate change on the group's judgements, estimates and
assumptions has been considered in preparing these financial statements. While
no material impact has been identified, climate risk continues to be monitored
on an ongoing basis.
Critical accounting judgements
The critical accounting judgements of the group, which relate to expected
credit loss provisions calculated under IFRS 9 and Motor Finance commission
arrangements, are as follows:
• Establishing the criteria for a significant increase in credit risk;
• Determining the appropriate definition of default;
• Determining whether the criteria for the recognition of a provision under IAS
37 'Provisions, Contingent Liabilities and Contingent Assets' have been met in
relation to Motor Finance commission arrangements; and
• Determining the impact of the FCA's motor commissions review on the group's
goodwill impairment assessment.
Information on the first two accounting judgements can be found below, while
further information on the third and fourth judgements can be found in Note 15
and Note 9 respectively.
Significant increase in credit risk
Assets are transferred from Stage 1 to Stage 2 when there has been a
significant increase in credit risk since initial recognition. Typically, the
group assesses whether a significant increase in credit risk has occurred
based on a quantitative and qualitative assessment, with a "30 days past due"
backstop.
Due to the diverse nature of the group's lending businesses, the specific
indicators of a significant increase in credit risk vary by business and may
include some or all of the following factors:
• quantitative assessment: the lifetime probability of default ("PD") has
increased by more than an agreed threshold relative to the equivalent at
origination. Thresholds are based on a fixed number of risk grade movements
which are bespoke to each business to ensure that the increased risk since
origination is appropriately captured;
• qualitative assessment: events or observed behaviour indicate credit
deterioration. This includes a wide range of information that is reasonably
available including individual credit assessments of the financial performance
of borrowers as appropriate during routine reviews, plus forbearance and watch
list information; or
• backstop criteria: the "30 days past due" backstop is met.
Definition of default
The definition of default is an important building block for expected credit
loss models and is considered a key judgement. A default is considered to have
occurred if any unlikeliness to pay criterion is met or when a financial asset
meets a "90 days past due" backstop. While some criteria are factual (e.g.
administration, insolvency or bankruptcy), others require a judgemental
assessment of whether the borrower has financial difficulties which are
expected to have a detrimental impact on their ability to meet contractual
obligations. A change in the definition of default may have a material impact
on the expected credit loss provision.
Key sources of estimation uncertainty
The key sources of estimation uncertainty of the group relate to expected
credit loss provisions, goodwill and Motor Finance commission arrangements and
are as follows:
• Two key model estimates, being time to recover periods and recovery rates,
underpinning the expected credit loss provision of Novitas. These were also
key estimates in the prior year;
• Forward-looking macroeconomic information incorporated into expected credit
loss models. This was also a key estimate in the prior year;
• Adjustments by management to model calculated expected credit losses due to
limitations in the group's expected credit loss models or input data, which
may be identified through ongoing model monitoring and validation of models.
This was also a key estimate in the prior year; and
• Estimate of future cash flow forecasts in the calculation of value in use for
the testing of goodwill for impairment in relation to the Winterflood
Securities and Motor Finance cash generating units. Additional disclosures can
be found in Note 9.
• Certain assumptions applied in the calculation of the provision relating to
Motor commissions. These assumptions are the scenarios selected, the
weightings applied, the levels of redress and the response and uphold rates.
Additional disclosures can be found in Note 15.
Novitas loans
Novitas provided funding to individuals who wished to pursue legal cases. The
majority of the Novitas portfolio, and therefore provision, relates to civil
litigation cases. To protect customers in the event that their case failed, it
was a condition of the Novitas loan agreements that an individual purchased an
After the Event ("ATE") insurance policy which covered the loan.
As previously announced, following a strategic review, in July 2021 the group
decided to cease permanently the approval of lending to new customers across
all of the products offered by Novitas and withdraw from the legal services
financing market. Since that time, the Novitas loan book has been in run-off,
and the business has continued to work with solicitors and insurers, with a
focus on supporting existing customers and managing the existing book to
ensure good customer outcomes, where it is within Novitas' ability to do so.
In the financial year under review, management has maintained its assumptions
for time to recover, and expected recovery rates which continue to
appropriately reflect ongoing dialogue with customers' insurers. These reflect
management's latest assessment of negotiations with customers' insurers and
the current timeline of litigation proceedings.
Based on the current position, the majority of loans in the portfolio continue
to be assessed as credit-impaired and are considered Stage 3. Expected credit
losses for the portfolio have been calculated by comparing the gross loan
balance to expected cash flows discounted at the original effective interest
rate, over an appropriate time to recover period. In line with IFRS 9, a
proportion of the expected credit loss is expected to unwind, over the
estimated time to recover period, to interest income, which reflects the
requirement to recognise interest income on Stage 3 loans on a net basis.
Since 31 July 2024, expected credit loss provisions have increased by £15.9
million to £236.6 million (31 July 2024: £220.7 million). This increase is
primarily a result of interest accrual on civil litigation accounts, for which
a full loss provision is applied.
Given that the majority of the Novitas portfolio is in Stage 3, the key
sources of estimation uncertainty for the portfolio's expected credit loss
provision are time to recover periods and recovery rates for the civil
litigation portfolio. On this basis, management assessed and completed
sensitivity analysis when compared to the expected credit loss provision for
Novitas of £236.6 million (31 July 2024: £220.7 million).
At 31 January 2025, a 10% absolute deterioration or improvement in recovery
rates would increase or decrease the ECL provision by £14.6 million.
Separately, a 12-month improvement in the time to recover period would reduce
the ECL provision by £14.7 million, while a 12-month delay in the time to
recover period would increase the ECL provision by £12.0 million.
Further detail on the impairment provision is included in Note 6.
Forward-looking information
Determining expected credit losses under IFRS 9 requires the incorporation of
forward-looking macroeconomic information that is reasonable, supportable and
includes assumptions linked to economic variables that impact losses in each
portfolio. The introduction of macroeconomic information introduces additional
volatility to provisions.
In order to calculate forward-looking provisions, economic scenarios are
sourced from Moody's Analytics. These cover a range of plausible economic
paths that are used in conjunction with PD, EAD and LGD parameters for each
portfolio to assess expected credit loss provisions across a range of
conditions. An overview of these scenarios using key macroeconomic indicators
is provided on page 45. Ongoing benchmarking of the scenarios to other
economic providers is carried out monthly to provide management with comfort
on Moody's Analytics scenario paths.
Five different projected economic scenarios are currently considered to cover
a range of possible outcomes. These include a baseline scenario, which
reflects the best view of future economic events. In addition, one upside
scenario and three downside scenario paths are defined relative to the
baseline. Management assigns the scenarios a probability weighting to reflect
the likelihood of specific scenarios, and therefore loss outcomes,
materialising, using a combination of quantitative analysis and expert
judgement.
The impact of forward-looking information varies across the group's lending
businesses because of the differing sensitivity of each portfolio to specific
macroeconomic variables.
This is reflected through the development of bespoke macroeconomic models that
recognise the specific response of each business to the macroeconomic
environment.
The modelled impact of macroeconomic scenarios and their respective weightings
is reviewed by business experts in relation to stage allocation and coverage
ratios at the individual and portfolio level, incorporating management's
experience and knowledge of customers, the sectors in which they operate, and
the assets financed.
This includes assessment of the reaction of the ECL in the context of the
prevailing and forecast economic conditions, for example where currently
higher interest rates and inflationary conditions exist compared to recent
periods.
Economic forecasts have evolved over the course of 2024 and reflect the mixed
external backdrop observed. Forecasts deployed in IFRS 9 macroeconomic models
are updated on a monthly basis. At 31 January 2025, the latest baseline
scenario forecasts gross domestic product ("GDP") growth of 1.4% in calendar
year 2025 and an average base rate of 4.3% across calendar year 2025. Consumer
Price Index ("CPI") inflation is forecast to be 2.7% in calendar year 2025 in
the baseline scenario.
At 31 January 2025, the scenario weightings were: 30% strong upside, 32.5%
baseline, 20% mild downside, 10.5% moderate downside and 7% protracted
downside. As economic forecasts are considered to appropriately recognise
developments in the macroeconomic environment, no change has been made to the
weightings assigned to the scenarios since 31 July 2024.
Given the current economic uncertainty, further analysis has been undertaken
to assess the appropriateness of the five scenarios used. This included
benchmarking the baseline scenario to consensus economic views, as well as
consideration of an additional forecast related to stagflation, which could be
considered as an alternative downside scenario.
Compared to the scenarios in use in the expected credit losses calculation,
the stagflation scenario includes a longer period of higher interest rates
coupled with a shallower but extended impact on GDP. Due to the relatively
short tenor of the portfolios, the stagflation scenario is considered to be of
less relevance than those deployed. This is supported by the fact that, due to
the higher severity of recessionary factors in the existing scenarios, using
the stagflation scenario instead of the moderate or protracted downside
scenario would result in lower expected credit losses.
The final scenarios deployed reflect slight improvement in the UK economic
outlook relative to 31 July 2024. Under the baseline scenario, UK headline CPI
inflation is expected to increase during 2025 before resuming its decline from
its 2022 peak towards the Bank of England 2% target. Aligned to falls in
inflation since 2022, the Bank of England base rate is forecast to gradually
reduce in all scenarios. House price outlook has improved across all
scenarios, recognising more resilient housing market performance than
previously anticipated. Unemployment rate forecasts have marginally
deteriorated compared to 31 July 2024.
The tables below show economic assumptions within each scenario, and the
weighting applied to each at 31 January 2025. The metrics shown are key UK
economic indicators, chosen to describe the economic scenarios. These are the
main metrics used to set scenario paths, which then influence a wide range of
additional metrics that are used in expected credit loss models. The first
tables show the forecasts of the key metrics for the scenarios utilised for
calendar years 2025 and 2026. The subsequent tables show averages and
peak-to-trough ranges for the same key metrics over the five-year period from
2025 to 2029.
Scenario forecasts and weights
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
2025 2026 2025 2026 2025 2026 2025 2026 2025 2026
At 31 January 2025
UK GDP growth 1.4 % 1.5 % 3.9 % 2.7 % (1.1) % 0.6 % (2.1) % (0.9) % (2.7) % (2.3) %
UK unemployment 4.4 % 4.5 % 3.9 % 3.7 % 4.8 % 4.8 % 5.5 % 7.1 % 6.2 % 8.3 %
UK HPI growth 2.2 % 3.9 % 16.6 % 7.0 % (5.1) % 3.1 % (9.0) % (5.6) % (15.2) % (9.6) %
BoE base rate 4.3 % 3.3 % 4.5 % 3.4 % 3.9 % 2.4 % 3.6 % 1.7 % 3.1 % 1.3 %
Consumer Price Index 2.7 % 2.3 % 2.8 % 2.3 % 0.1 % 1.8 % (0.6) % 1.1 % (1.5) % 0.9 %
Weighting 32.5% 30% 20% 10.5% 7%
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
2024 2025 2024 2025 2024 2025 2024 2025 2024 2025
At 31 July 2024
UK GDP growth 1.0 % 1.2 % 1.8 % 3.9 % 0.3 % (1.4) % (0.1) % (3.9) % (0.3) % (5.4) %
UK unemployment 4.4 % 4.5 % 4.2 % 4.0 % 4.5 % 4.9 % 4.7 % 6.6 % 4.8 % 7.8 %
UK HPI growth 0.7 % 3.2 % 7.1 % 13.3 % (2.3) % (2.6) % (4.1) % (9.2) % (6.0) % (16.4) %
BoE base rate 5.1 % 4.2 % 5.2 % 4.4 % 5.0 % 3.5 % 5.0 % 2.9 % 4.8 % 2.3 %
Consumer Price Index 2.5 % 2.1 % 2.6 % 2.2 % 1.6 % 0.4 % 1.1 % (0.5) % 0.7 % (1.0) %
Weighting 32.5% 30% 20% 10.5% 7%
Notes:
UK GDP growth: National Accounts Annual Real Gross Domestic Product,
Seasonally Adjusted - year-on-year change (%)
UK unemployment: ONS Labour Force Survey, Seasonally Adjusted - Average (%)
UK HPI growth: Average nominal house prices, Land Registry, Seasonally
Adjusted - Q4-to-Q4 change (%)
BoE base rate: Bank of England base rate - Average (%)
Consumer Price Index: ONS, All items, annual inflation - Q4-to-Q4 change (%)
Five-year average (calendar years 2025 to 2029)
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
At 31 January 2025
UK GDP growth 1.7% 2.5% 1.2% 0.8% 0.8%
UK unemployment 4.6% 3.9% 4.8% 6.7% 7.7%
UK HPI growth 2.5% 3.9% 0.8% (0.8)% (3.3)%
BoE base rate 3.0% 3.1% 2.7% 2.0% 1.4%
Consumer Price Index 2.2% 2.2% 1.6% 1.2% 0.9%
Weighting 32.5% 30% 20% 10.5% 7%
Five-year average (calendar years 2024 to 2028)
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
At 31 July 2024
UK GDP growth 1.5% 2.3% 1.1% 0.6% 0.4%
UK unemployment 4.6% 4.0% 4.8% 6.6% 7.4%
UK HPI growth 2.5% 4.2% 0.9% (1.0)% (3.5)%
BoE base rate 3.5% 3.6% 3.2% 2.5% 2.0%
Consumer Price Index 2.1% 2.2% 1.5% 1.2% 0.8%
Weighting 32.5% 30% 20% 10.5% 7%
Notes:
UK GDP growth: National Accounts Annual Real Gross Domestic Product,
Seasonally Adjusted - CAGR (%)
UK unemployment: ONS Labour Force Survey, Seasonally Adjusted - Average (%)
UK HPI growth: Average nominal house prices, Land Registry, Seasonally
Adjusted - CAGR (%)
BoE base rate: Bank of England base rate - Average (%)
Consumer Price Index: ONS, All items, annual inflation - CAGR (%)
The forecasts represent an economic view at 31 January 2025. Further economic
developments, and their impact on scenarios and weightings, are subject to
ongoing monitoring by management.
These periods have been included as they demonstrate the short, medium and
long-term outlooks for the key macroeconomic indicators which form the basis
of the scenario forecasts. The portfolio has an average residual maturity of
15 months, with 99% of loan value having a maturity of five years or less.
The tables below provide a summary for the five-year period (calendar years
2025 to 2029) of the peak-to-trough range of values of the key UK economic
variables used within the economic scenarios at 31 January 2025 and 31 July
2024.
Five-year period (calendar year 2025 to 2029)
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
Peak Trough Peak Trough Peak Trough Peak Trough Peak Trough
At 31 January 2025
UK GDP growth 8.8 % 0.4 % 13.0 % 1.5 % 6.3 % (1.9) % 4.3 % (3.9) % 3.9 % (5.5) %
UK unemployment 4.8 % 4.3 % 4.4 % 3.6 % 4.9 % 4.6 % 7.3 % 4.6 % 8.5 % 4.8 %
UK HPI growth 12.9 % 0.1 % 26.0 % 2.0 % 3.9 % (5.4) % (1.5) % (14.1) % (2.3) % (23.3) %
BoE base rate 4.6 % 2.5 % 4.7 % 2.5 % 4.5 % 2.0 % 4.5 % 1.0 % 4.4 % 0.5 %
Consumer Price Index 2.8 % 2.0 % 2.9 % 2.0 % 2.1 % 0.1 % 2.0 % (0.7) % 1.9 % (1.5) %
Weighting 32.5% 30% 20% 10.5% 7%
Five-year period (calendar year 2024 to 2028)
Baseline Upside (strong) Downside (mild) Downside (moderate) Downside (protracted)
Peak Trough Peak Trough Peak Trough Peak Trough Peak Trough
At 31 July 2024
UK GDP growth 7.7 % 0.7 % 11.8 % 0.7 % 5.5 % (1.4) % 2.8 % (4.2) % 2.2 % (6.3) %
UK unemployment 4.8 % 4.3 % 4.3 % 3.7 % 4.9 % 4.3 % 7.4 % 4.3 % 8.6 % 4.3 %
UK HPI growth 13.3 % 0.7 % 27.2 % 0.7 % 4.4 % (5.7) % 0.9 % (14.2) % 0.9 % (23.4) %
BoE base rate 5.3 % 2.5 % 5.3 % 2.5 % 5.3 % 2.1 % 5.3 % 1.1 % 5.3 % 0.6 %
Consumer Price Index 3.6 % 2.0 % 3.6 % 2.0 % 3.6 % (0.4) % 3.6 % (1.1) % 3.6 % (2.0) %
Weighting 32.5% 30% 20% 10.5% 7%
Notes:
UK GDP growth: Maximum and minimum quarterly GDP as a percentage change from
start of period (%)
UK unemployment: Maximum and minimum unemployment rate (%)
UK HPI growth: Maximum and minimum average nominal house price as a percentage
change from start of period (%)
BoE base rate: Maximum and minimum Bank of England base rate (%)
Consumer Price Index: Maximum and minimum inflation rate over the five-year
period (%)
The following charts below represent the quarterly forecast data included in
the above tables incorporating actual metrics up to 31 January 2025. The dark
blue line shows the baseline scenario, while the other lines represent the
various upside and downside scenarios.
Scenario sensitivity analysis
The expected credit loss provision is sensitive to judgements and estimations
made with regard to the selection and weighting of multiple economic
scenarios. As a result, management has assessed and considered the sensitivity
of the provision as follows:
• For the majority of the portfolios, the modelled expected credit loss
provision has been recalculated under the upside strong and downside
protracted scenarios described above, applying a 100% weighting to each
scenario in turn. The change in provision requirement is driven by the
movement in risk metrics under each scenario and resulting impact on stage
allocation.
• Expected credit losses based on a simplified approach, which do not utilise a
macroeconomic model and require expert judgement, are excluded from the
sensitivity analysis.
• In addition to the above, key considerations for the sensitivity analysis are
set out below, by segment:
- In Commercial, the sensitivity analysis excludes Novitas, which is subject to
a separate approach, as it is deemed more sensitive to credit factors than
macroeconomic factors.
- In Retail, the sensitivity analysis does not apply further stress to the
expected credit loss provision on loans and advances to customers in Stage 3,
because the measurement of expected credit losses is considered more sensitive
to credit factors specific to the borrower than the macroeconomic scenarios.
- In Property, the sensitivity analysis excludes individually assessed
provisions, and certain sub-portfolios which are deemed more sensitive to
credit factors than the macroeconomic scenarios.
Based on the above analysis, at 31 January 2025, application of 100% weighting
to the upside strong scenario would decrease the expected credit loss by
£22.3 million whilst application of 100% weighting to the downside protracted
scenario would increase the expected credit loss by £41.6 million, driven by
the aforementioned changes in risk metrics and stage allocation of the
portfolios.
When performing sensitivity analysis there is a high degree of estimation
uncertainty. On this basis, 100% weighted expected credit loss provisions
presented for the upside and downside scenarios should not be taken to
represent the lower or upper range of possible and actual expected credit loss
outcomes. The recalculated expected credit loss provision for each of the
scenarios should be read in the context of the sensitivity analysis as a whole
and in conjunction with the disclosures provided in note 6. The modelled
impact presented is based on gross loans and advances to customers at 31
January 2025; it does not incorporate future changes relating to performance,
growth or credit risk. In addition, given the change in the macroeconomic
conditions, underlying modelled provisions and methodology, and refined
approach to adjustments, comparison between the sensitivity results at 31
January 2025 and 31 July 2024 is not appropriate.
The economic environment remains uncertain and future impairment charges may
be subject to further volatility, including from changes to macroeconomic
variable forecasts impacted by sustained cost of living pressures and ongoing
geopolitical tensions.
Use of Adjustments
Limitations in the group's expected credit loss models or input data may be
identified through ongoing model monitoring and validation of models. In
certain circumstances, management make appropriate adjustments to
model-calculated expected credit losses. These adjustments are based on
management judgements or quantitative back-testing to ensure expected credit
loss provisions adequately reflect all known information. These adjustments
are generally determined by considering the attributes or risks of a financial
asset which are not captured by existing expected credit loss model outputs.
Management adjustments are actively monitored, reviewed and incorporated into
future model developments where applicable.
Macroeconomic forecasts continue to react to a range of external factors
including the implementation of the Government's economic policy following the
Autumn Budget, broader policies aimed at addressing cost of living and
inflationary pressures, and the ongoing conflict in Ukraine. In response, our
use of adjustments has continued to be an area of focus.
In particular, adjustments were held across the previous two financial years
in response to improvements in macroeconomic forecasts that resulted in
releases in modelled provisions. A number of these releases were considered
premature or counterintuitive by management and adjustments were applied as a
result. Portfolio performance has been closely monitored during the first half
of the financial year under review, over which modelled provisions have
increased and external forecasts have remained broadly stable. As a result,
the value of macroeconomic adjustments in place relative to 31 July 2024 has
reduced to £2.1 million (31 July 2024: £2.4 million).
At 31 January 2025, £(5.3) million (31 July 2024: £(1.5) million) of the
expected credit loss provision was attributable to adjustments, which reflect
a combination of positive and negative adjustments related to individual
accounts or portfolios where modelled provisions are not considered
appropriate.
The need for adjustments will continue to be monitored as new information
emerges which might not be recognised in existing models.
2. Segmental Analysis
The directors manage the group by class of business and present the segmental
analysis on that basis. The group's activities are presented in five (2024:
five) operating segments: Commercial, Retail, Property, Securities and Asset
Management (presented as discontinued operations).
In the segmental reporting information that follows, Group consists of central
functions as well as various non-trading head office companies and
consolidation adjustments and is set out in order that the information
presented reconciles to the consolidated income statement. The Group balance
sheet primarily includes treasury assets and liabilities comprising cash and
balances at central banks, debt securities, customer deposits and other
borrowings.
Divisions continue to charge market prices for the limited services rendered
to other parts of the group. Funding charges between segments take into
account commercial demands. More than 90% of the group's activities, revenue
and assets are located in the UK.
Banking
Commercial Retail Property Securities Group Continuing operations Discontinued operations(1) Total
£ million £ million £ million £ million £ million £ million £ million £ million
Summary income statement for the six months ended 31 January 2025
Net interest income/(expense) 116.5 117.2 67.1 (1.2) (7.2) 292.4 0.6 293.0
Non-interest income 48.7 11.6 1.6 35.8 (0.1) 97.6 - 97.6
Operating income/(expense) 165.2 128.8 68.7 34.6 (7.3) 390.0 0.6 390.6
Administrative expenses (89.7) (78.5) (15.1) (33.2) (20.0) (236.5) (1.4) (237.9)
Depreciation and amortisation (14.2) (10.3) (2.7) (2.2) (1.1) (30.5) - (30.5)
Impairment losses on financial assets (16.1) (23.2) (8.8) - - (48.1) - (48.1)
Total operating expenses before adjusting items (120.0) (112.0) (26.6) (35.4) (21.1) (315.1) (1.4) (316.5)
Adjusted operating profit/(loss)(2) 45.2 16.8 42.1 (0.8) (28.4) 74.9 (0.8) 74.1
Impairment of intangible assets (4.0) - - - - (4.0) - (4.0)
Amortisation of intangible assets on acquisition - (0.1) - - - (0.1) - (0.1)
Provision in relation to the BiFD review - - - - - - - -
Restructuring costs (0.1) (0.2) (0.1) - - (0.4) - (0.4)
Provision in relation to motor commissions - (165.0) - - - (165.0) - (165.0)
Complaints handling and other operational and legal costs incurred in relation - (8.4) - - - (8.4) - (8.4)
to motor finance commissions
Operating profit/(loss) before tax from continuing operations 41.1 (156.9) 42.0 (0.8) (28.4) (103.0) (0.8) (103.8)
Operating profit/(loss) before tax from discontinued operations(3) - - - - (2.4) (2.4) 4.9 2.5
External operating income/(expense) 266.6 189.2 114.1 34.8 (214.1) 390.6 - 390.6
Inter segment operating (expense)/income (101.4) (60.4) (45.4) (0.2) 206.8 (0.6) 0.6 -
Segment operating income/(expense) 165.2 128.8 68.7 34.6 (7.3) 390.0 0.6 390.6
1. Discontinued operations represent the Asset Management division sold on 28
February 2025 - see Note 22. Operating loss before tax of £0.8 million
relates to the intercompany transactions between Asset Management and other
segments, which have been separated out for segmental reporting and eliminated
for statutory reporting.
2. Adjusted operating profit/(loss) is stated before the following adjusting
items and tax: impairment and amortisation of intangible assets, provision in
relation to the BiFD review, restructuring costs, provision in relation to
motor commissions and complaints handling and other operational and legal
costs incurred in relation to motor commissions. More information on the
adjusting items can be found in Notes 9, 15 and 16.
3. Operating expenses include £2.4 million of directly attributable transaction
costs relating to the disposal of CBAM.
The Commercial operating segment above includes Novitas, which ceased lending
to new customers in July 2021 following a strategic review. Novitas recorded
an operating loss of £2.0 million (six months ended 31 January 2024: gain of
£0.2 million; year ended 31 July 2024: loss of £0.1 million), driven by
impairment losses of £0.9 million (six months ended 31 January 2024: £2.2
million; year ended 31 July 2024: £6.4 million).
Novitas' income was £6.6 million (six months ended 31 January 2024: £5.0
million; year ended 31 July 2024: £11.0 million) and expenses were £3.0
million (six months ended 31 January 2024: £2.6 million; year ended 31 July
2024: £4.8 million). In line with IFRS 9's requirement to recognise interest
income on Stage 3 loans on a net basis, income includes the partial unwinding
over time of the expected credit loss recognised following the transfer of the
majority of loans to Stage 3.
As set out in Note 22 "Discontinued operations and assets and liabilities
classified as held for sale" and Note 23 "Post Balance Sheet Event", the group
announced it entered into an agreement to sell Close Brothers Asset Management
("CBAM"), one of the group's operating segments, to Oaktree on 19 September
2024 following a comprehensive strategic review, and completed the sale on 28
February 2025. CBAM's financial results are presented within this note as
discontinued operations.
Banking
Commercial Retail Property Securities Group(2) Continuing operations Discontinued operations(3) Total
£ million £ million £ million £ million £ million £ million £ million £ million
Summary balance sheet information at the 31 January 2025
Total assets¹ 5,027.1 2,871.7 1,934.2 1,305.6 3,114.0 14,252.6 185.6 14,438.2
Total liabilities - - - 1,215.8 11,451.1 12,666.9 60.6 12,727.5
1. Total assets for the Banking operating segments comprise the loan book and
operating lease assets only. The Commercial operating segment includes the net
loan book of Novitas of £68.9 million.
2. Balance sheet includes £3,117.6 million assets and £11,353.5 million
liabilities attributable to the Banking division primarily comprising the
treasury balances described in the second paragraph of this note.
3. Discontinued operations represent the Asset Management division sold on 28
February 2025 - see Note 22. The assets and liabilities of Asset Management
presented in this table include intercompany balances for the purposes of
segmental reporting.
Equity is allocated across the group as set out below. Banking division
equity, which is managed as a whole rather than on a segmental basis, reflects
loan book and operating lease assets of £9,833.0 million, in addition to
assets and liabilities of £3,117.6 million and £11,353.5 million
respectively primarily comprising treasury balances which are included within
the Group column above.
Banking Securities Group Continuing operations Discontinued operations Total
£ million £ million £ million £ million £ million £ million
Equity at 31 January 2025
Equity 1,597.1 89.8 (101.2) 1,585.7 125.0 1,710.7
Banking
Commercial Retail Property Securities Group Continuing operations Discontinued operations(1) Total
£ million £ million £ million £ million £ million £ million £ million £ million
Summary income statement for the six months ended 31 January 2024
Net interest income/(expense) 115.6 117.3 63.2 0.1 (5.0) 291.2 0.5 291.7
Non-interest income 52.9 14.5 1.8 34.1 - 103.3 - 103.3
Operating income/(expense) 168.5 131.8 65.0 34.2 (5.0) 394.5 0.5 395.0
Administrative expenses (90.9) (80.4) (15.7) (34.0) (14.8) (235.8) (1.6) (237.4)
Depreciation and amortisation (12.1) (10.4) (2.3) (2.9) (1.2) (28.9) - (28.9)
Impairment losses on financial assets (14.6) (22.0) (5.2) 0.1 - (41.7) - (41.7)
Total operating expenses before amortisation of intangible assets on (117.6) (112.8) (23.2) (36.8) (16.0) (306.4) (1.6) (308.0)
acquisition
Adjusted operating profit/(loss)(2) 50.9 19.0 41.8 (2.6) (21.0) 88.1 (1.1) 87.0
Amortisation of intangible assets on acquisition - - - - - - - -
Operating profit/(loss) before tax from continuing operations 50.9 19.0 41.8 (2.6) (21.0) 88.1 (1.1) 87.0
Operating profit/(loss) before tax from discontinued operations - - - - - - 6.8 6.8
External operating income/(expense) 257.9 187.0 109.4 34.2 (193.5) 395.0 395.0
Inter segment operating (expense)/income (89.4) (55.2) (44.4) - 188.5 (0.5) 0.5 -
Segment operating income/(expense) 168.5 131.8 65.0 34.2 (5.0) 394.5 0.5 395.0
1. Discontinued operations represent the Asset Management division sold on 28
February 2025 - see Note 22. Operating loss before tax of £1.1 million
relates to the intercompany transactions between Asset Management and other
segments, which have been separated out for segmental reporting and eliminated
for statutory reporting.
2. Adjusted operating profit/(loss) is stated before amortisation of intangible
assets on acquisition and tax.
Banking
Commercial Retail Property Securities Group Continuing operations Discontinued operations(1) Total
£ million £ million £ million £ million £ million £ million £ million £ million
Summary income statement for the year ended 31 July 2024
Net interest income/(expense) 228.8 234.4 129.0 (0.4) (11.5) 580.3 0.9 581.2
Non-interest income 100.8 28.0 3.9 73.4 - 206.1 - 206.1
Operating income/(expense) 329.6 262.4 132.9 73.0 (11.5) 786.4 0.9 787.3
Administrative expenses (182.3) (156.6) (30.0) (68.9) (31.6) (469.4) (3.0) (472.4)
Depreciation and amortisation (26.1) (20.7) (4.9) (5.9) (2.2) (59.8) - (59.8)
Impairment losses on financial assets (31.7) (47.2) (20.0) 0.1 - (98.8) - (98.8)
Total operating expenses before amortisation of intangible assets on (240.1) (224.5) (54.9) (74.7) (33.8) (628.0) (3.0) (631.0)
acquisition
Adjusted operating profit/(loss)(2) 89.5 37.9 78.0 (1.7) (45.3) 158.4 (2.1) 156.3
Amortisation of intangible assets on acquisition - (0.2) - - - (0.2) - (0.2)
Provision in relation to the BiFD review (0.6) (16.6) - - - (17.2) - (17.2)
Restructuring costs (2.2) (0.6) (0.3) - - (3.1) - (3.1)
Complaints handling and other operational and legal costs incurred in relation - (6.9) - - - (6.9) - (6.9)
to motor commissions
Operating profit/(loss) before tax from continuing operations 86.7 13.6 77.7 (1.7) (45.3) 131.0 (2.1) 128.9
Operating profit/(loss) before tax from discontinued operations - - - - - - 13.1 13.1
External operating income/(expense) 517.0 376.7 224.7 73.0 (404.1) 787.3 - 787.3
Inter segment operating (expense)/income (187.4) (114.3) (91.8) - 392.6 (0.9) 0.9 -
Segment operating income/(expense) 329.6 262.4 132.9 73.0 (11.5) 786.4 0.9 787.3
1. Discontinued operations represent the Asset Management division sold on 28
February 2025 - see Note 22. Operating loss before tax of £2.1 million
relates to the intercompany transactions between Asset Management and other
segments, which have been separated out for segmental reporting and eliminated
for statutory reporting.
2. Adjusted operating profit/(loss) is stated before amortisation of intangible
assets on acquisition, provision in relation to the BiFD review, restructuring
costs, complaints handling and other operational and legal costs incurred in
relation to motor commissions and tax.
Banking
Commercial Retail Property Securities Group² Continuing operations Discontinued operations Total
£ million £ million £ million £ million £ million £ million £ million £ million
Summary balance sheet information at 31 July 2024
Total assets¹ 5,101.6 3,041.9 1,955.2 825.0 2,965.1 13,888.8 192.0 14,080.8
Total liabilities - - - 734.6 11,433.5 12,168.1 70.2 12,238.3
1. Total assets for the Banking operating segments comprise the loan book and
operating lease assets only. The Commercial operating segment includes the net
loan book of Novitas of £62.4 million.
2. Balance sheet includes £2,970.1 million assets and £11,358.1 million
liabilities attributable to the Banking division primarily comprising the
treasury balances described in the second paragraph of this note.
Equity is allocated across the group as set out below. Banking division
equity, which is managed as a whole rather than on a segmental basis, reflects
loan book and operating lease assets of £10,098.7 million, in addition to
assets and liabilities of £2,970.1 million and £11,358.1 million
respectively primarily comprising treasury balances which are included within
the Group column above.
Banking Securities Group Continuing operations Discontinued operations Total
£ million £ million £ million £ million £ million £ million
Equity at 31 July 2024
Equity 1,710.7 90.4 (80.4) 1,720.7 121.8 1,842.5
3. Taxation
Six months ended 31 January Year ended 31 July
2025 2024(1) 2024(1)
£ million £ million £ million
Tax charged/(credited) to the income statement
Current tax:
UK corporation tax 10.2 20.5 35.6
Foreign tax 0.7 0.8 0.9
Adjustments in respect of previous years - - (4.9)
10.9 21.3 31.6
Deferred tax:
Deferred tax (credit)/charge for the current year (1.8) 1.9 0.6
Adjustments in respect of previous years - - 5.8
9.1 23.2 38.0
Tax on items not (credited)/charged to the income statement
Current tax relating to:
Acquisitions - - (0.4)
Deferred tax relating to:
Cash flow hedging (3.2) (3.9) (8.4)
Financial instruments classified as fair value through other comprehensive (1.8) (0.7) (1.0)
income
Currency translation losses - - (0.4)
Acquisitions - - (0.3)
(5.0) (4.6) (10.5)
Reconciliation to tax expense
UK corporation tax for the period at 25% (2024: 25%) on operating (26.0) 21.8 32.2
(loss)/profit
Disallowable items and other permanent differences(2) 37.9 1.1 7.7
Banking surcharge - 0.3 -
Tax relief on coupon on other equity instruments (2.8) - (2.8)
Prior period tax provision - - 0.9
9.1 23.2 38.0
1. Comparative information restated following the classification of Close
Brothers Asset Management as discontinued operations. See Notes 2 and 22.
2. Disallowable items and other permanent differences largely relate to the
non-deductible provision in relation to motor commissions.
The effective tax rate for the period is (8.8)% (six months ended 31 January
2024: 26.7%; year ended 31 July 2024: 29.5%), representing the best estimate
of the annual effective tax rate expected for the full year, with the
exception of the tax rate impact of the £173.4 million of provision and costs
relating to the FCA's review of historical motor finance commission
arrangements which have been recognised in the period (see Note 15 for further
detail). Excluding the provision and costs, the effective tax rate is
approximately 24.0%.
The standard UK corporation tax rate for the financial year is 25.0% (six
months ended 31 January 2024: 25.0%; year ended 31 July 2024: 25.0%). The
effective tax rate is below the UK corporation tax rate due to the motor
commissions provision and related costs being largely disallowable.
The UK government has implemented the Pillar Two global minimum tax rate of
15% and a UK domestic minimum top-up tax with effect from the group's
financial year commencing 1 August 2024. The jurisdictions in relation to
which Pillar Two tax liabilities are expected to potentially arise for the
group are the Republic of Ireland, Jersey and Guernsey, however the impact is
expected to be immaterial. The group has adopted the IAS 12 exemption from
recognition and disclosure regarding the impact on deferred tax assets and
liabilities arising from this legislation.
4. Earnings per Share
The calculation of basic earnings per share is based on the profit
attributable to shareholders and the number of basic weighted average shares.
When calculating the diluted earnings per share, the weighted average number
of shares in issue is adjusted for the effects of all dilutive share options
and awards.
Six months ended 31 January Year ended 31 July
2025 2024(1) 2024(1)
Continuing operations
Basic (82.8) p 42.6p 53.3p
Diluted (82.7) p 42.6p 53.2p
Adjusted basic(2) 30.9 p 43.4p 70.5p
Adjusted diluted(2) 30.9 p 43.4p 70.4p
Discontinued operations
Basic 0.7p 3.4p 6.4p
Diluted 0.7p 3.4p 6.3p
Continuing and discontinued operations
Basic (82.1) p 46.0p 59.7p
Diluted (82.0) p 46.0p 59.5p
1. Comparative information restated following the classification of Close
Brothers Asset Management as discontinued operations. See Notes 2 and 22.
2. Excludes the following adjusting items and the associated tax effect where
appropriate: amortisation of intangible assets on acquisition, provision in
relation to the BiFD review, restructuring costs, provision in relation to
motor commissions and complaints handling and other operational and legal
costs incurred in relation to motor commissions.
Six months ended 31 January Year ended 31 July
2025 2024(1) 2024(1)
£ million £ million £ million
(Loss)/profit attributable to shareholders (122.9) 68.8 89.3
Less profit from discontinued operations, net of tax (1.1) (5.0) (9.5)
(Loss)/profit attributable to shareholders on continuing operations (124.0) 63.8 79.8
Adjustments:
Impairment of intangible assets 4.0 - -
Amortisation of intangible assets on acquisition 0.1 - 0.2
Provision in relation to the BiFD review - - 17.2
Restructuring costs 0.4 - 3.1
Net expense within discontinued operations relating to intercompany 0.8 1.1 2.1
transactions (Note 2)
Provision in relation to motor commissions 165.0 - -
Complaints handling and other operational and legal costs incurred in relation 8.4 - 6.9
to motor finance commissions
Tax effect of adjustments (8.4) - (3.7)
Adjusted profit attributable to shareholders on continuing operations 46.3 64.9 105.6
1. Comparative information restated following the classification of Close
Brothers Asset Management as discontinued operations. See Notes 2 and 22.
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
Average number of shares
Basic weighted 149.7 149.6 149.7
Effect of dilutive share options and awards 0.2 - 0.3
Diluted weighted 149.9 149.6 150.0
5. Dividends
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
For each ordinary share
Interim dividend for previous financial year paid in April 2024: nil (April - - -
2023: 22.5p)
Final dividend for previous financial year paid in November 2024: nil - 67.1 67.1
(November 2023: 45.0p)
- 67.1 67.1
The reinstatement of dividends will be reviewed once there is further clarity
on the financial impact of the FCA review of historical motor finance
commission arrangements and the ongoing appeals.
6. Loans and Advances to Customers
(a) Maturity and classification analysis of loans and advances to
customers
The following tables set out the maturity and IFRS 9 classification analysis
of loans and advances to customers. At 31 January 2025 loans and advances to
customers with a maturity of two years or less was £7,686.7 million (31 July
2024: £7,733.6 million) representing 76.5% (31 July 2024: 75.3%) of total
gross loans and advances to customers:
On demand Within three months Between three months and one year Between one and two years Between two and five years After more than five years Total gross loans and advances to customers Impairment provisions Total net loans and advances to customers
£ million £ million £ million £ million £ million £ million £ million £ million £ million
At 31 January 2025 90.7 3,004.7 2,709.7 1,881.6 2,217.3 140.6 10,044.6 (475.2) 9,569.4
At 31 July 2024 88.5 2,888.2 2,654.9 2,102.0 2,399.1 143.9 10,276.6 (445.8) 9,830.8
31 January 2025 31 July 2024
£ million £ million
Gross loans and advances to customers
Held at amortised cost 10,027.9 10,264.8
Held at fair value through profit or loss 16.7 11.8
10,044.6 10,276.6
(b) Loans and advances to customers held at amortised cost and
impairment provisions by stage
Gross loans and advances to customers held at amortised cost by stage and the
corresponding impairment provisions and provision coverage ratios are set out
below:
Stage 2
Stage 1 Less than 30 days past due Greater than or equal to 30 days past due Total Stage 3 Total
£ million £ million £ million £ million £ million £ million
At 31 January 2025
Gross loans and advances to customers held at amortised cost
Commercial 3,728.6 872.5 37.6 910.1 417.4 5,056.1
Of which: Commercial excluding Novitas 3,728.6 872.0 37.6 909.6 112.4 4,750.6
Of which: Novitas - 0.5 - 0.5 305.0 305.5
Retail 2,586.0 275.1 11.4 286.5 97.5 2,970.0
Property 1,572.4 14.1 168.0 182.1 247.3 2,001.8
7,887.0 1,161.7 217.0 1,378.7 762.2 10,027.9
Impairment provisions
Commercial 23.3 9.0 4.8 13.8 272.1 309.2
Of which: Commercial excluding Novitas 23.3 8.5 4.8 13.3 36.0 72.6
Of which: Novitas - 0.5 - 0.5 236.1 236.6
Retail 24.6 16.3 2.6 18.9 54.8 98.3
Property 2.9 0.6 0.5 1.1 63.7 67.7
50.8 25.9 7.9 33.8 390.6 475.2
Provision coverage ratio
Commercial 0.6% 1.0% 12.8% 1.5% 65.2% 6.1%
Within which: Commercial excluding Novitas 0.6% 1.0% 12.8% 1.5% 32.0% 1.5%
Within which: Novitas - 100.0% - 100.0% 77.4% 77.4%
Retail 1.0% 5.9% 22.8% 6.6% 56.2% 3.3%
Property 0.2% 4.3% 0.3% 0.6% 25.8% 3.4%
0.6% 2.2% 3.6% 2.5% 51.2% 4.7%
Stage 2
Stage 1 Less than 30 days past due Greater than or equal to 30 days past due Total Stage 3 Total
£ million £ million £ million £ million £ million £ million
At 31 July 2024
Gross loans and advances to customers held at amortised cost
Commercial 3,877.8 801.5 33.1 834.6 400.2 5,112.6
Of which: Commercial excluding Novitas 3,877.8 800.5 33.1 833.6 118.1 4,829.5
Of which: Novitas - 1.0 - 1.0 282.1 283.1
Retail 2,815.7 221.2 9.9 231.1 90.0 3,136.8
Property 1,717.0 9.8 53.3 63.1 235.3 2,015.4
8,410.5 1,032.5 96.3 1,128.8 725.5 10,264.8
Impairment provisions
Commercial 20.9 9.6 4.2 13.8 256.0 290.7
Of which: Commercial excluding Novitas 20.9 8.6 4.2 12.8 36.3 70.0
Of which: Novitas - 1.0 - 1.0 219.7 220.7
Retail 27.7 14.8 2.2 17.0 50.2 94.9
Property 3.6 0.2 0.3 0.5 56.1 60.2
52.2 24.6 6.7 31.3 362.3 445.8
Provision coverage ratio
Commercial 0.5% 1.2% 12.7% 1.7% 64.0% 5.7%
Within which: Commercial excluding Novitas 0.5% 1.1% 12.7% 1.5% 30.7% 1.4%
Within which: Novitas -% 100.0% -% 100.0% 77.9% 78.0%
Retail 1.0% 6.7% 22.2% 7.4% 55.8% 3.0%
Property 0.2% 2.0% 0.6% 0.8% 23.8% 3.0%
0.6% 2.4% 7.0% 2.8% 49.9% 4.3%
In Commercial, the impairment coverage ratio increased to 6.1% (31 July 2024:
5.7%), reflecting the impact of Novitas Stage 3 interest accrual in line with
the requirement under IFRS 9 to recognise interest on a net basis.
Excluding Novitas, the Commercial provision coverage ratio slightly increased
to 1.5% (31 July 2024: 1.4%) as the business experienced a small PD
deterioration and material migrations from Stage 1 to Stage 2 during the
financial year. Overall net impacts of these changes were minor increases in
Stage 1 and 3 coverage, with Stage 2 remaining stable.
In Retail, the provision coverage ratio increased to 3.3% (31 July 2024:
3.0%), reflecting resilient portfolio performance in the context of sustained
macroeconomic uncertainty and heightened levels of arrears and forbearance in
the Motor Finance business as a result of persistent cost of living pressures
on customers.
In Property, the provision coverage ratio increased to 3.4% (31 July 2024:
3.0%), as a result of migrations to Stage 3 and increased individual
provisions for some existing impaired accounts during the financial year.
(c) Adjustments
By their nature, limitations in the group's expected credit loss models or
input data may be identified through ongoing model monitoring and validation
of models. In certain circumstances, management make appropriate adjustments
to model-calculated expected credit losses. Adjustments have been identified
as a key source of estimation uncertainty as set out in Note 1.
(d) Reconciliation of loans and advances to customers held at amortised
cost and impairment provisions
Reconciliation of gross loans and advances to customers and associated
impairment provisions are set out below.
New financial assets originate in Stage 1 only, and the amount presented
represents the value at origination.
Subsequently, a loan may transfer between stages, and the presentation of such
transfers is based on a comparison of the loan at the beginning of the year
(or at origination if this occurred during the year) and the end of the year
(or just prior to final repayment or write off).
Repayments relating to loans which transferred between stages during the year
are presented within the transfers between stages lines. Such transfers do not
represent overnight reclassification from one stage to another. All other
repayments are presented in a separate line.
ECL model methodologies may be updated or enhanced from time to time and the
impacts of such changes are presented on a separate line. During the year,
enhancements relating to PD assumptions were made to the models in Commercial
resulting in £48.3 million of gross loans transferring from Stage 2 to Stage
1.
Enhancements to our model suite are a contributory factor to ECL movements and
such factors have been taken into consideration when assessing any required
adjustments to modelled output and ensuring appropriate provision coverage
levels.
A loan is written off when there is no reasonable expectation of further
recovery following realisation of all associated collateral and available
recovery actions against the customer.
Stage 1 Stage 2 Stage 3 Total
£ million £ million £ million £ million
Gross loans and advances to customers held at amortised cost
At 1 August 2024 8,410.5 1,128.8 725.5 10,264.8
New financial assets originated 2,868.8 - - 2,868.8
Transfers to Stage 1 175.5 (214.5) (6.6) (45.6)
Transfers to Stage 2 (955.7) 853.3 (2.5) (104.9)
Transfers to Stage 3 (108.5) (93.4) 168.1 (33.8)
Net transfer between stages and repayments¹ (888.7) 545.4 159.0 (184.3)
Repayments while stage remained unchanged and final repayments (2,550.8) (246.5) (87.7) (2,885.0)
Changes to model methodologies 48.3 (48.3) - -
Write offs (1.1) (0.7) (34.6) (36.4)
At 31 January 2025 7,887.0 1,378.7 762.2 10,027.9
1. Repayments relate only to financial assets which transferred between stages
during the year. Other repayments are shown in the line below.
Stage 1 Stage 2 Stage 3¹ Total
£ million £ million £ million £ million
Gross loans and advances to customers held at amortised cost
At 1 August 2023 7,990.2 1,062.0 583.4 9,635.6
New financial assets originated 6,695.5 - - 6,695.5
Transfers to Stage 1 138.2 (205.2) (7.6) (74.6)
Transfers to Stage 2 (1,165.5) 904.8 (8.4) (269.1)
Transfers to Stage 3 (310.2) (130.8) 329.1 (111.9)
Net transfer between stages and repayments² (1,337.5) 568.8 313.1 (455.6)
Repayments while stage remained unchanged and final repayments (4,936.3) (501.2) (114.4) (5,551.9)
Write offs (1.4) (0.8) (56.6) (58.8)
At 31 July 2024 8,410.5 1,128.8 725.5 10,264.8
1. A significant proportion of the Stage 3 movements are driven by Novitas with
£174.4 million of transfers to Stage 3 and £37.4 million of write-offs. In
addition, £49.2 million of Novitas movements are included within 'Repayments
while stage remained unchanged and final repayments', comprised largely of
accrued interest. The accrued interest is partly offset by ECL increases
included within the adjacent ECL reconciliation, in line with IFRS 9's
requirement to recognise interest income on Stage 3 loans on a net basis.
2. Repayments relate only to financial assets which transferred between stages
during the year. Other repayments are shown in the line below.
Stage 1 Stage 2 Stage 3 Total
£ million £ million £ million £ million
Impairment provisions on loans and advances to customers held at amortised
cost
At 1 August 2024 52.2 31.3 362.3 445.8
New financial assets originated 21.5 - - 21.5
Transfers to Stage 1 1.2 (3.7) (0.6) (3.1)
Transfers to Stage 2 (8.0) 21.0 (0.8) 12.2
Transfers to Stage 3 (1.9) (8.5) 46.7 36.3
Net remeasurement of expected credit losses arising from transfer of stages (8.7) 8.8 45.3 45.4
and repayments(1)
Repayments and ECL movements while stage remained unchanged and final (14.5) (6.1) 11.2 (9.4)
repayments
Changes to model methodologies 1.4 0.5 (0.4) 1.5
Charge to the income statement (0.3) 3.2 56.1 59.0
Write offs (1.1) (0.7) (27.8) (29.6)
At 31 January 2025 50.8 33.8 390.6 475.2
1. Repayments relate only to financial assets which transferred between stages
during the year. Other repayments are shown in the line below.
Stage 1 Stage 2 Stage 3¹ Total
£ million £ million £ million £ million
Impairment provisions on loans and advances to customers held at amortised
cost
At 1 August 2023 58.1 32.2 290.3 380.6
New financial assets originated 51.7 - - 51.7
Transfers to Stage 1 0.6 (3.9) (0.7) (4.0)
Transfers to Stage 2 (13.4) 31.4 (1.1) 16.9
Transfers to Stage 3 (5.9) (12.0) 98.7 80.8
Net remeasurement of expected credit losses arising from transfer of stages (18.7) 15.5 96.9 93.7
and repayments²
Repayments and ECL movements while stage remained unchanged and final (37.7) (15.6) 26.6 (26.7)
repayments
Changes to model methodologies - - - -
Charge to the income statement (4.7) (0.1) 123.5 118.7
Write offs (1.2) (0.8) (51.5) (53.5)
At 31 July 2024 52.2 31.3 362.3 445.8
1. A significant proportion of the Stage 3 movements are driven by Novitas with
£147.6 million of transfers to Stage 3 and £11.9 million of write-offs.
2. Repayments relate only to financial assets which transferred between stages
during the year. Other repayments are shown in the line below.
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
Impairment losses relating to loans and advances to customers held at
amortised cost:
Charge to income statement arising from movement in impairment provisions 59.0 48.4 118.7
Amounts written off directly to income statement and other costs, net of (11.7) (7.4) (21.7)
discount unwind on Stage 3 loans to interest income, and recoveries
47.3 41.0 97.0
Impairment losses relating to other financial assets 0.8 0.7 1.8
Impairment losses on financial assets recognised in income statement 48.1 41.7 98.8
Impairment losses on financial assets of £48.1 million (six months ended
31 January 2024: £41.7 million; year ended 31 July 2024: £98.8 million)
include £0.9 million in relation to Novitas (six months ended 31 January
2024: £2.2 million; year ended 31 July 2024: £6.4 million).The Novitas
impairment mainly relates to legal costs incurred since 31 July 2024.
7. Debt Securities
Fair value through profit or loss Fair value through other comprehensive income Amortised cost Total
£ million £ million £ million £ million
Sovereign and central bank debt - 304.4 - 304.4
Supranational, sub-sovereigns and agency ("SSA") bonds - 143.0 - 143.0
Covered bonds - 128.2 - 128.2
Long trading positions in debt securities 8.5 - - 8.5
Other debt securities 1.4 - 5.2 6.6
At 31 January 2025 9.9 575.6 5.2 590.7
Fair value through profit or loss Fair value through other comprehensive income Amortised cost Total
£ million £ million £ million £ million
Sovereign and central bank debt - 383.7 - 383.7
Supranational, sub-sovereigns and agency ("SSA") bonds - 145.5 - 145.5
Covered bonds - 187.7 - 187.7
Long trading positions in debt securities 16.0 - - 16.0
Other debt securities 0.8 - 6.8 7.6
At 31 July 2024 16.8 716.9 6.8 740.5
Movements on the book value of sovereign and central bank debt comprise:
Six months ended 31 January Year ended 31 July
2025 2024
£ million £ million
Sovereign and central bank debt at 1 August 383.7 186.1
Additions 122.5 194.2
Redemptions (199.2) -
Currency translation differences (0.8) (1.5)
Movement in value (1.8) 4.9
Sovereign and central bank debt at the end of the period 304.4 383.7
Movements on the book value of SSA bonds comprise:
Six months ended 31 January Year ended 31 July
2025 2024
£ million £ million
SSA bonds at 1 August 145.5 -
Additions - 155.4
Redemptions - (15.2)
Currency translation differences (0.2) (0.3)
Movement in value (2.3) 5.6
SSA bonds at end of the period 143.0 145.5
Movements on the book value of covered bonds comprise:
Six months ended 31 January Year ended 31 July
2025 2024
£ million £ million
Covered bonds 1 August 187.7 106.3
Additions 15.5 139.7
Redemptions/disposals (74.5) (59.0)
Currency translation differences (0.2) (0.3)
Movement in value (0.3) 1.0
Covered bonds at end of the period 128.2 187.7
8. Equity Shares
31 January 2025 31 July 2024
£ million £ million
Long trading positions 20.7 25.8
Other equity shares 1.8 1.6
22.5 27.4
9. Intangible Assets
Goodwill Software Intangible assets on acquisition Total
£ million £ million £ million £ million
Cost
At 1 August 2023 142.5 333.2 50.4 526.1
Additions 8.0 16.1 - 24.1
Disposals - (6.1) - (6.1)
At 31 January 2024 150.5 343.2 50.4 544.1
Additions 0.3 12.0 7.3 19.6
Disposals - (6.5) (0.3) (6.8)
At 31 July 2024 150.8 348.7 57.4 556.9
Additions - 15.1 - 15.1
Disposals - (6.5) - (6.5)
Reclassification to assets held for sale(1) (47.0) (16.6) (51.7) (115.3)
At 31 January 2025 103.8 340.7 5.7 450.2
Amortisation
At 1 August 2023 47.9 167.8 46.7 262.4
Amortisation charge for the year - 18.6 0.6 19.2
Disposals - (6.0) - (6.0)
At 31 January 2024 47.9 180.4 47.3 275.6
Amortisation charge for the year - 20.3 0.8 21.1
Disposals - (5.4) (0.4) (5.8)
At 31 July 2024 47.9 195.3 47.7 290.9
Amortisation charge for the year - 19.8 0.7 20.5
Impairment charge for the year 2.1 1.9 - 4.0
Disposals - (4.1) - (4.1)
Reclassification to assets held for sale(1) (3.5) (9.2) (46.0) (58.7)
At 31 January 2025 46.5 203.7 2.4 252.6
Net book value at 31 January 2025 57.3 137.0 3.3 197.6
Net book value at 31 July 2024 102.9 153.4 9.7 266.0
Net book value at 31 January 2024 102.6 162.8 3.1 268.5
Net book value at 1 August 2023 94.6 165.4 3.7 263.7
1. Intangible assets relating to the Asset Management division have been
reclassified to assets held for sale - see Note 22.
Software includes assets under development of £34.3 million (31 January
2024: £52.2 million).
Intangible assets on acquisition relate to broker and customer relationships
and are amortised over a period of 8 to 20 years.
In the six months ended 31 January 2025, £0.1 million (six months ended
31 January 2024: £0.6 million; year ended 31 July 2024: £1.4 million) of
the amortisation charge is included in amortisation of intangible assets on
acquisition and £19.0 million (six months ended 31 January 2024: £18.6
million; year ended 31 July 2024: £38.9 million) of the amortisation charge
is included in administrative expenses shown in the consolidated income
statement.
Impairment tests for goodwill and other intangible assets
Overview
At 31 January 2025, goodwill has been allocated to eleven (31 July 2024:
nine) individual cash generating units ("CGUs"). Nine (31 July 2024: seven)
are within the Banking division, with two additional CGUs this year following
the separation of the group's Vehicle Hire and Brewery Rentals businesses from
an existing Banking CGU, one (31 July 2024: one) is the Asset Management
division and the remaining one (31 July 2024: one) is Winterflood in the
Securities division. Vehicle Hire and Brewery Rentals have been separated out
to present a more accurate position of the CGUs. The intangible assets
relating to these two new CGUs total £4.0 million, which is immaterial for
the group.
Goodwill is allocated to the CGU in which the historical acquisition occurred
and hence the goodwill originated. Further information on the performance of
each division can be found in Note 2 'Segmental Analysis'. Goodwill impairment
reviews are carried out at least annually by assessing the recoverable amount
of the group's CGUs, which is the higher of fair value less costs to sell and
value in use. Goodwill impairment reviews have been performed for 31 January
2025 in light of the current trading and regulatory environment.
Methodology
The recoverable amounts for all CGUs except Asset Management were measured
based on value in use. The methodology used to determine value in use is
fundamentally consistent with that described in Note 14 "Intangible Assets" of
the 2024 Annual Report with inputs and assumptions updated where appropriate.
The value in use calculations are sensitive primarily to changes in the
assumptions for future cash flows, which include consideration for future
capital requirements and appropriate allocation of overhead costs, and
discount rates.
The main updates to inputs and assumptions in the current reporting period
relate to cash flow forecasts. In particular, the cash flow forecasts for the
Motor Finance and Motor Finance Ireland CGUs have been extended from five to
seven years to allow the cash flows taken to perpetuity to reflect a more
normalised view given the current environment. The cash flow forecasts of
other CGUs have also been updated albeit the CGUs continue to be assessed
based on a five-year period. In addition, the allocation of overhead costs has
been reviewed and updated where appropriate following the sale of Asset
Management. Discount rates are materially consistent with the prior year with
valuation experts engaged to perform the calculations.
The Asset Management CGU is classified as discontinued operations in these
financial statements and the associated goodwill is classified within assets
held for sale. The sale of Asset Management was completed on 28 February 2025.
Please see Note 22 and Note 23 for further detail. This sale transaction has
resulted in a gain on disposal for the group, therefore, there is no goodwill
impairment relating to this CGU at 31 January 2025.
Assessment overview
At 31 January 2025, the results of the assessment indicate there is no
goodwill impairment except in relation to the Vehicle Hire and Brewery Rentals
CGUs. Following a review of the value in use of Vehicle Hire and Brewery
Rentals, the group's operating lease assets rental businesses, a total
impairment of £4.0 million, which represents the full carrying value of
goodwill and software of the two CGUs, has been recognised in the current
period and presented as a separate adjusting item. Having performed stress
tested value in use calculations, the group believes that any reasonably
possible change in the key assumptions which have been used would not lead to
the carrying value of any remaining CGU to exceed its recoverable amount
except Winterflood and Motor Finance.
Assessment of Winterflood
The Winterflood CGU, which includes goodwill of £23.3 million and other
intangible assets of £1.2 million, continued to experience challenging market
conditions and recorded a small loss in the current period. The business has a
long historical track record of trading profitably in a range of conditions
and is well positioned to take advantage when investor confidence recovers.
Nevertheless, consistent with the prior year, future market conditions remain
uncertain and as such the value in use calculation for this CGU has been
identified as a key source of estimation uncertainty as set out in Note 1.
The key source of estimation uncertainty within the Winterflood value in use
calculation relates to the expected future cash flows and if they return to
more normalised levels. The value in use of Winterflood is calculated to be
125% (31 July 2024: 136%) of carrying value, which represents a headroom of
£28 million (31 July 2024: £41 million). For the purposes of goodwill
modelling, management have projected that trading will gradually return to
more normalised levels over the medium term with appropriate growth
projections for Winterflood Business Services ("WBS") to reflect the robust
pipeline of WBS clients and its positive track record.
As noted above, the value in use is sensitive to changes in cash flow
assumptions. Winterflood's value in use includes the expected benefits of
certain in-train initiatives which would improve its value proposition. To
demonstrate this sensitivity to lower cash flows or a delay in the return to
more normalised levels, a 10% reduction in the annual cash flows to perpetuity
would reduce the value in use headroom by 38% while remaining above carrying
value. The post-tax discount rate used is 11.8% (31 July 2024: 11.5%) and it
is also an important driver of the value in use. An absolute increase of 1.0%
in the rate would reduce the value in use headroom by 52% while remaining
above carrying value.
Assessment of Motor Finance
The Motor Finance CGU, which includes goodwill of £3.0 million and other
intangible assets of £15.2 million, relates to the group's UK motor finance
business. The market and regulatory backdrop for Motor Finance remains
uncertain, therefore consistent with the prior year, the value in use
calculation for this CGU has been identified as a key source of estimation
uncertainty. The value in use of Motor Finance excludes the £165.0 million
provision for potential remediation and associated costs relating to motor
commissions described in Note 15 in line with the requirements of IAS 36.
The key source of estimation uncertainty within the Motor Finance value in use
calculation relates to the expected future cash flows, which include
consideration for the CGU's forecast capital charge, and when they return to
more normalised growth levels. While as noted previously the cash flows
exclude the provision for potential remediation and associated costs, the cash
flows may nevertheless be impacted by the uncertainty and outcome of the FCA's
review, the Court of Appeal's judgement in the Hopcraft case, the outcome of
the Supreme Court appeals and the group's strategic and capital actions
response. As described in Note 1, determining the impact on goodwill of this
matter is a critical accounting judgement. It also represents a key assumption
for the Motor goodwill impairment assessment.
The value in use of Motor is calculated to be 107% (31 July 2024: 121%) of
carrying value, which represents a headroom of £12 million (31 July 2024:
£35 million). Management's expectations on a return of the cash flows to more
normalised growth levels are in part dependent on assumptions relating to
funding, capital and customer demand. To demonstrate this sensitivity to lower
cash flows or a delay in the return to more normalised levels, a 10% reduction
in the annual cash flows to perpetuity would result in an immaterial
impairment of the £3.0 million of goodwill. However, this outcome reflects
the CGU's sensitivity and does not include all possible management actions
which may affect capital and cash flow forecasts for each CGU of the Banking
division if any further response were required in respect of the FCA review
and Supreme Court appeals. Separately, the post-tax discount rate used is
12.1% (31 July 2024: 11.9%) and an absolute increase of 1.0% in the discount
rate would result in an impairment of the £3.0 million of goodwill and
partial impairment of £6.9 million of the other intangible assets.
These scenarios for Winterflood and Motor Finance are a demonstration of
sensitivity only and do not represent management's base case scenarios where,
as stated, value in use remains above carrying value.
10. Property, Plant and Equipment
Leasehold property Fixtures, fittings and equipment Assets held under operating leases Motor vehicles Right of use assets¹ Total
£ million £ million £ million £ million £ million £ million
Cost
At 1 August 2023 21.5 65.5 449.1 0.4 94.0 630.5
Additions 0.3 8.1 41.6 - 3.5 53.5
Disposals - (5.0) (25.2) - (4.1) (34.3)
At 31 January 2024 21.8 68.6 465.5 0.4 93.4 649.7
Additions 1.0 4.8 23.1 - 6.5 35.4
Disposals (0.4) (8.3) (46.7) - (7.0) (62.4)
At 31 July 2024 22.4 65.1 441.9 0.4 92.9 622.7
Additions 0.5 2.2 28.4 - 5.1 36.2
Disposals (0.5) (3.6) (37.7) - (5.2) (47.0)
Reclassification to assets held for sale(2) (5.2) (6.8) - - (11.0) (23.0)
At 31 January 2025 17.2 56.9 432.6 0.4 81.8 588.9
Depreciation
At 1 August 2023 15.0 40.9 177.9 0.2 39.4 273.4
Depreciation and impairment charges for the year 1.1 4.4 21.6 - 7.8 34.9
Disposals - (5.1) (16.0) - (2.6) (23.7)
At 31 January 2024 16.1 40.2 183.5 0.2 44.6 284.6
Depreciation and impairment charges for the year 1.2 4.7 22.8 0.1 7.7 36.5
Disposals (0.3) (8.3) (32.3) - (7.1) (48.0)
At 31 July 2024 17.0 36.6 174.0 0.3 45.2 273.1
Depreciation and impairment charges for the year 1.2 4.7 24.1 - 7.8 37.8
Disposals (0.2) (3.6) (29.1) - (4.3) (37.2)
Reclassification to assets held for sale(2) (3.2) (4.7) - - (6.5) (14.4)
At 31 January 2025 14.8 33.0 169.0 0.3 42.2 259.3
Net book value at 31 January 2025 2.4 23.9 263.6 0.1 39.6 329.6
Net book value at 31 July 2024 5.4 28.5 267.9 0.1 47.7 349.6
Net book value at 31 January 2024 5.7 28.4 282.0 0.2 48.8 365.1
Net book value at 1 August 2023 6.5 24.6 271.2 0.2 54.6 357.1
1. Right of use assets primarily relate to the group's leasehold properties.
2 Property, plant and equipment relating to the Asset Management division have
been reclassified to assets held for sale - see Note 22.
11. Settlement Balances and Short Positions
31 January 2025 31 July 2024
£ million £ million
Settlement balances 1,066.4 600.1
Short positions in:
Debt securities 3.1 5.5
Equity shares 7.7 9.3
10.8 14.8
1,077.2 614.9
12. Financial Liabilities
On demand Within three months Between three months and one year Between one and two years Between two and five years After more than five years Total
£ million £ million £ million £ million £ million £ million £ million
Deposits by banks 0.9 42.5 50.2 - - - 93.6
Deposits by customers 1,168.6 2,351.3 3,495.8 1,198.7 512.8 - 8,727.2
Loans and overdrafts from banks 51.9 24.0 120.1 - - - 196.0
Debt securities in issue - 78.4 178.2 1,007.0 282.9 324.3 1,870.8
Subordinated loan capital¹ - 1.4 (0.4) (0.2) - 190.5 191.3
At 31 January 2025 1,221.4 2,497.6 3,843.9 2,205.5 795.7 514.8 11,078.9
On demand Within three months Between three months and one year Between one and two years Between two and five years After more than five years Total
£ million £ million £ million £ million £ million £ million £ million
Deposits by banks 0.9 53.0 84.5 - - - 138.4
Deposits by customers 706.6 2,320.7 3,397.9 1,685.2 583.2 - 8,693.6
Loans and overdrafts from banks 46.6 9.0 - 110.0 - - 165.6
Debt securities in issue - 21.9 246.6 799.0 595.3 323.6 1,986.4
Subordinated loan capital¹ - 1.4 (0.4) (0.5) - 186.7 187.2
At 31 July 2024 754.1 2,406.0 3,728.6 2,593.7 1,178.5 510.3 11,171.2
1. Comprises issuances of £200.0 million with contractual maturity date of 2031
and optional prepayment date of 2026.
Assets pledged and received as collateral
The group pledges assets for repurchase agreements and securities borrowing
agreements which are generally conducted under terms that are customary to
standard borrowing contracts.
As at 31 January 2025, the group was a participant of the Bank of England's
Term Funding Scheme with Additional Incentives for SMEs ("TFSME") and the
Indexed Long-Term Repo ("ILTR"). Under these schemes, asset finance loan
receivables of £261.9 million (31 July 2024: £404.8 million), UK gilts with
a market value of £15.0 million (31 July 2024: £Nil) and retained notes
relating to Motor Finance loan receivables of £204.9 million (31 July 2024:
£34.4 million) were positioned as collateral with the Bank of England,
against which £110.0 million (31 July 2024: £110.0 million) of cash was
drawn from the TFSME and £10.0 million (31 July 2024: £Nil) from the ILTR.
During the period ended 31 January 2025, the group has early repaid £Nil (31
July 2024: £490.0 million) against the TFSME.
The group also pledged sovereign assets with a market value of £19.5 million
(31 July 2024: £Nil) as collateral against repurchase agreements. This was
exchanged for cash and included within loans and overdrafts from banks.
The term of the TFSME transactions is four years from the date of each
drawdown but the group may choose to repay earlier at its discretion. The term
of the ILTR transaction is six months and cannot be repaid earlier. The risks
and rewards of the loan receivables remain with the group and continue to be
recognised in loans and advances to customers on the consolidated balance
sheet.
The group has securitised without recourse and restrictions £1,470.4 million
( 31 July 2024: £1,657.0 million) of its insurance premium and motor loan
receivables in return for cash and asset-backed securities in issue of
£1,285.9 million (31 July 2024: £1,453.7 million). This includes the
£204.9 million ( 31 July 2024: £34.4 million) retained notes positioned as
collateral with the Bank of England. As the group has retained exposure to
substantially all the credit risk and rewards of the residual benefit of the
underlying assets it continues to recognise these assets in loans and advances
to customers on its consolidated balance sheet.
The majority of loans and advances to customers are secured against specific
assets. Consistent and prudent lending criteria are applied across the whole
loan book with emphasis on the quality of the security provided.
As at 31 January 2025, Winterflood had pledged equity and debt securities of
£30.5 million (31 July 2024: £18.3 million) in the normal course of
business.
13. Other Equity Instrument
Other equity instrument comprises the group's £200.0 million Fixed Rate Reset
Perpetual Subordinated Contingent Convertible Securities, or Additional Tier 1
capital ("AT1"), issued on 29 November 2023. These AT1 securities are
classified as an equity instrument under IAS 32 'Financial Instruments:
Presentation' with the proceeds recognised in equity net of transaction costs
of £2.4 million.
These securities carry a coupon of 11.125%, payable semi-annually on 29 May
and 29 November of each year and have a first reset date on 29 May 2029. The
second coupon payment of £11.1 million was made on 29 November 2024. The
securities include, among other things, a conversion trigger of 7.0% Common
Equity Tier 1 capital ratio and are callable any time in the six-month period
prior to and including the first reset date or on each reset date occurring
every five years thereafter.
14. Capital
31 January 2025 31 July
2024(5)
£ million £ million
CET1 capital
Shareholders' equity per balance sheet 1,710.7 1,842.5
Regulatory adjustments to equity
Contingent convertible securities recognised as AT1 capital(1) (197.6) (197.6)
Intangible assets, net of associated deferred tax liabilities (252.3) (264.0)
Foreseeable AT1 coupon charges(2) (3.9) (3.8)
Cash flow hedging reserve (4.7) (13.0)
Pension asset, net of associated deferred tax liabilities (0.4) (0.6)
Prudent valuation adjustment (0.7) (0.8)
IFRS 9 transitional arrangements(3) 6.2 12.1
CET1 capital(4) 1,257.3 1,374.8
Additional tier 1 capital 200.0 200.0
Total tier 1 capital(4) 1,457.3 1,574.8
Tier 2 capital - subordinated debt 200.0 200.0
Total regulatory capital(4) 1,657.3 1,774.8
RWAs
Credit and counterparty credit risk 9,209.9 9,548.4
Operational risk(4) 1,044.5 1,044.5
Market risk(4) 86.4 108.3
10,340.8 10,701.2
CET1 capital ratio(4) 12.2 % 12.8 %
Tier 1 capital ratio(4) 14.1 % 14.7 %
Total capital ratio(4) 16.0 % 16.6 %
1. The contingent convertible securities are classified as an equity instrument
for accounting but treated as AT1 for regulatory capital purposes, see note
13.
2. Under CRR Article 26, a deduction for foreseeable charges has been recognised
at 31 January 2025 and 31 July 2024. The deduction at 31 January 2025 reflects
charges for the coupon on the group's contingent convertible securities.
3. The group has elected to apply IFRS 9 transitional arrangements for 31 January
2025, which allow the capital impact of expected credit losses to be phased in
over the transitional period.
4. Shown after applying IFRS 9 transitional arrangements and the CRR transitional
and qualifying own funds arrangements in force at the time. Without their
application, at 31 January 2025 the CET1 capital ratio would be 12.1%, Tier 1
capital ratio 14.0% and total capital ratio 16.0% (31 July 2024: CET1 capital
ratio 12.7%, Tier 1 capital ratio 14.6% and total capital ratio 16.5%).
5. The comparative information is unaudited.
The following table shows the movement in CET1 capital during the year:
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
CET1 capital at 1 August 1,374.8 1,310.8 1,310.8
(Loss)/profit in the period (111.8) 68.8 100.4
AT1 coupon charges (11.2) (3.0) (15.0)
IFRS 9 transitional arrangements (5.9) (16.6) (19.7)
Decrease/(increase) in intangible assets, net of associated deferred tax 11.5 (4.9) (1.2)
liabilities
Other movements in reserves recognised for CET1 capital (3.1) (2.4) (0.8)
Other movements in adjustments from CET1 capital 3.0 0.3 0.3
CET1 capital at end of period 1,257.3 1,353.0 1,374.8
15. Other Liabilities
Provision in relation to motor commissions
An overview of the developments in relation to motor finance commissions
including an update on the group's Supreme Court appeals, the FCA's review and
its most recent 11 March 2025 announcement and other claims and complaints is
set out on pages 7 and 8.
In light of recent developments and the available information, the group has
been reviewing its accounting assessment of these matters under IAS 37
'Provisions, Contingent Liabilities and Contingent Assets'. As a result, the
group recognised a provision in relation to motor finance commissions of
£165.0 million in these H1 2025 financial statements. This includes estimates
for certain potential operational and legal costs, as well as estimates for
potential remediation for affected customers.
The estimated provision is based on probability weighted scenarios using
various assumptions relating to potential outcomes of the Supreme Court
appeals and the FCA review. All scenarios selected assume a form of redress
and are considered to represent an appropriate range of potential outcomes.
Other assumptions include, for example, commission models, rates and time
periods in scope of any regulatory redress scheme, as well as response and
uphold rates and the costs to deliver any redress.
Under IAS 37, a provision must be recognised if there is a present obligation,
settlement of the obligation is probable and a reliable estimate can be made
of the amount. Determining whether a provision should be recognised under IAS
37 in relation to motor commissions represents an area of critical accounting
judgement for the group.
In addition, certain assumptions applied in the calculation of the provision
represent key sources of estimation uncertainty. These key sources of
estimation uncertainty relate to the scenarios selected, the weightings
applied, the levels of redress and the response and uphold rates. A 10%
relative increase or decrease in the assumed combined response and uphold
rates would result in a £16.5 million increase or decrease in the estimated
provision. Changes in other assumptions may also result in material changes to
the estimated provision.
The estimated provision is the outcome of a thorough assessment, representing
the group's current evaluation based on available information and recent
developments. There remains significant uncertainty as to the range of
outcomes from the Supreme Court appeals and the FCA's ongoing review of motor
finance commissions and, therefore, the ultimate cost to the group could be
materially higher or lower than the provision taken.
During the current period, the group incurred £8.4 million (six months ended
31 January 2024: £nil; year ended 31 July 2024: £6.9 million) of
complaints handling and other operational and legal costs in relation to motor
commissions, including increased resourcing to manage complaints and legal
expenses. These costs, as well as the £165.0 million provision described
above, do not reflect underlying trading performance and therefore have been
presented as a separate adjusting item and excluded from adjusted operating
profit by management.
Restructuring costs
The group incurred £0.4 million (six months ended 31 January 2024: £nil;
year ended 31 July 2024: £3.1 million) of restructuring costs in the current
period. These costs do not reflect underlying trading performance and
therefore have been presented as a separate adjusting item and excluded from
adjusted operating profit by management.
16. Contingent Liabilities
As noted above, there remains significant uncertainty as to the range of
outcomes from the Supreme Court appeals and the FCA's ongoing review of motor
commissions and, therefore, the ultimate cost to the group could be materially
higher or lower than the estimated provision in relation to motor commissions
recognised in the current period as set out in Note 15. Therefore, in addition
to such provision, there may be contingent liabilities with respect to
potential risks arising from the Hopcraft Court of Appeal judgement and
subject to the outcome of the Supreme Court appeals. The timing, scope and
quantum of any potential financial impact of these contingent liabilities on
the group cannot be reliably estimated at present.
In the normal course of the group's business, there may be contingent
liabilities relating to other complaints, legal proceedings or regulatory
reviews. These cases are not currently expected to have a material impact on
the group.
17. Consolidated Cash Flow Statement Reconciliation
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
(a) Reconciliation of operating profit before tax to net cash inflow from
operating activities
Operating (loss)/profit before tax from continuing operations (103.8) 87.0 128.9
Operating profit before tax from discontinued operations 2.5 6.8 13.1
Tax paid (10.7) (31.9) (29.6)
Depreciation, amortisation and impairment 58.3 54.1 111.7
Impairment losses on financial assets 48.2 41.7 98.8
Provision in relation to motor commissions 165.0 - -
Amortisation of de-designated cash flow hedges (9.0) (15.4) (27.9)
Decrease/(increase) in:
Interest receivable and prepaid expenses (4.9) (6.3) 5.5
Net settlement balances and trading positions (2.0) (13.2) (0.3)
Net money broker loans against stock advanced 4.6 28.1 27.0
(Decrease)/increase in interest payable and accrued expenses (14.3) (21.7) (12.7)
Net cash (outflow)/inflow from trading activities 133.9 129.2 314.5
Cash (outflow)/inflow arising from changes in:
Loans and advances to banks not repayable on demand - 11.2 24.0
Loans and advances to customers 193.4 (401.1) (699.4)
Assets let under operating leases (20.2) (31.8) (41.1)
Sovereign and central bank debt 76.7 - (194.2)
SSA - (140.9) (140.2)
Covered bonds 59.0 (80.8) (80.7)
Deposits by banks (43.7) (9.2) (1.3)
Deposits by customers 36.7 542.1 975.1
Loans and overdrafts from banks 30.4 (220.0) (492.2)
Debt securities in issue (net) (121.9) (181.5) (67.6)
Other assets less other liabilities 1.6 (11.2) 21.1
Net cash inflow/(outflow) from operating activities 346.0 (394.0) (382.0)
(b) Analysis of net cash outflow in respect of the purchase of subsidiaries
Purchase of subsidiaries, net of cash acquired (0.5) (11.2) (15.4)
(c) Analysis of net cash inflow in respect of the sale of subsidiaries
Cash consideration received - 0.2 0.9
(d) Analysis of cash and cash equivalents(1)
Cash and balances at central banks 1,852.5 1,641.7 1,584.2
Loans and advances to banks 292.1 245.8 260.3
2,144.6 1,887.5 1,844.5
1. Excludes £33.2 million (31 January 2024: £46.6 million, 31 July 2024:
£33.2 million) of cash reserve accounts and cash held in trust.
During the period ended 31 January 2025, the non-cash changes on debt
financing amounted to £16.1 million (six months ended 31 January 2024:
£21.4million; year ended 31 July 2024: £35.9 million) arising largely from
interest accretion and fair value hedging movements.
18.
Fair Value of Financial Assets and Liabilities
The fair values of the group's subordinated loan capital and debt securities
in issue are set out below.
31 January 2025 31 July 2024
Fair value Carrying value Fair value Carrying value
£ million £ million £ million £ million
Subordinated loan capital 184.3 191.3 179.4 187.2
Debt securities in issue 1,877.8 1,870.8 1,998.5 1,986.4
The fair value of gross loans and advances to customers at 31 January 2025 is
estimated to be £9,526.6 million (year ended 31 July 2024: £9,806.4
million), with a carrying value of £9,569.5 million (year ended 31 July
2024: £9,830.8 million). The fair value of deposits by customers is estimated
to be £8,733.5 million (31 July 2024: £8,691.8 million), with a carrying
value of £8,727.2 million (year ended 31 July 2024: £8,693.6 million).
These estimates are based on highly simplified assumptions and inputs and may
differ from actual amounts received or paid. The differences between fair
value and carrying value are not considered to be significant, and are
consistent with management's expectations given the nature of the Banking
business and the short average tenor of the instruments. However, the
differences have increased in comparison to the prior year in line with market
interest rates.
The group holds financial instruments that are measured at fair value
subsequent to initial recognition. Each instrument has been categorised within
one of three levels using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. These levels are
based on the degree to which the fair value is observable and are defined in
Note 26 "Financial risk management" of the 2024 Annual Report.
The instruments included within the three levels, the valuation methodologies
and the most significant inputs are consistent with those described in Note 26
of the 2024 Annual Report. The group believes that there is no reasonably
possible change to the inputs used in the valuation of these positions which
would have a material effect on the group's consolidated income
statement.
The tables below show the classification of financial instruments held at fair
value into the Level 1 to Level 3 valuation hierarchy.
Level 1 Level 2 Level 3 Total
£ million £ million £ million £ million
At 31 January 2025
Assets
Loans and advances to customers held at FVTPL - - 16.7 16.7
Debt securities:
Sovereign and central bank debt 304.4 - - 304.4
SSA bonds 143.0 - - 143.0
Covered bonds 128.2 - - 128.2
Long trading positions in debt securities 6.5 2.0 - 8.5
Equity shares 3.0 19.4 0.1 22.5
Derivative financial instruments - 96.2 4.4 100.6
Other assets - - 1.4 1.4
585.1 117.6 22.6 725.3
Liabilities
Short positions:
Debt securities 2.3 0.8 - 3.1
Equity shares 3.2 4.5 - 7.7
Derivative financial instruments - 114.1 4.6 118.7
5.5 119.4 4.6 129.5
Level 1 Level 2 Level 3 Total
£ million £ million £ million £ million
At 31 July 2024
Assets
Loans and advances to customers held at FVTPL - - 11.8 11.8
Debt securities: -
Sovereign and central bank debt 383.7 - - 383.7
SSA bonds 145.5 - - 145.5
Covered bonds 187.7 - - 187.7
Long trading positions in debt securities 13.8 2.2 - 16.0
Equity shares 5.9 21.4 0.1 27.4
Derivative financial instruments - 95.3 6.1 101.4
Contingent consideration - - 1.2 1.2
Other assets - - 0.8 0.8
736.6 118.9 20.0 875.5
Liabilities
Short positions:
Debt securities 3.3 2.2 - 5.5
Equity shares 2.2 7.1 - 9.3
Derivative financial instruments - 122.6 6.4 129.0
Contingent consideration - - 3.0 3.0
5.5 131.9 9.4 146.8
During the period, there were no transfers between Levels 1, 2 and 3 (2024: no
transfers).
Movements in financial instruments categorised as Level 3 were:
Loans and advances to customers held at FVTPL Derivative financial assets Derivative financial liabilities Equity shares Contingent consideration Other assets Total
£ million £ million £ million £ million £ million £ million £ million
At 1 August 2023 - 11.1 (11.2) 0.2 (0.8) - (0.7)
Total gains/(losses) recognised in the consolidated income statement - 0.7 (1.0) - 0.4 - 0.1
Purchases, issues, originations and transfers in - - - 0.3 - 1.2 1.5
Sales, settlements and transfers out - - - - 2.2 - 2.2
At 31 January 2024 (unaudited) - 11.8 (12.2) 0.5 1.8 1.2 3.1
Total gains/(losses) recognised in the consolidated income statement - (5.7) 5.8 - - - 0.1
Purchases, issues, originations and transfers in 11.8 - - (0.3) (0.5) (0.4) 10.6
Sales, settlements and transfers out - - - (0.1) (3.1) - (3.2)
At 31 July 2024 11.8 6.1 (6.4) 0.1 (1.8) 0.8 10.6
Total gains/(losses) recognised in the consolidated income statement - (1.7) 1.8 - (0.2) - (0.1)
Purchases, issues, originations and transfers in 4.9 - - - - 0.6 5.5
Sales, settlements and transfers out - - - - - - -
Reclassification to liabilities held for sale - - - - 2.0 - 2.0
At 31 January 2025 16.7 4.4 (4.6) 0.1 - 1.4 18.0
The gains recognised in the consolidated income statement relating to Level 3
instruments held at 31 January 2025 amounted to £1.3 million (31 January
2024: £0.3 million loss, 31 July 2024: £0.2 million gain).
19. Additional Support for Customers
Forbearance
Forbearance occurs when a customer is experiencing difficulty in meeting their
financial commitments and a concession is granted, by changing the terms of
the financial arrangement, which would not otherwise be considered. This
arrangement can be temporary or permanent, depending on the customer's
circumstances.
The Banking division reports on forborne exposures as either performing or
non-performing in line with regulatory requirements. A forbearance policy is
maintained to ensure the necessary processes are in place to enable
consistently fair treatment of all customers and that each is managed based on
their individual circumstances. The arrangements agreed with customers will
aim to create a sustainable and affordable financial position, thereby
reducing the likelihood of suffering a credit loss. The forbearance policy is
periodically reviewed to ensure it remains effective.
The Banking division offers a range of concessions to support customers which
vary depending on the product and the customer's status. Such concessions
include an extension outside terms (for example, a higher Loan to value
("LTV") or overpayments) and refinancing, which may incorporate an extension
of the loan tenor and capitalisation of arrears. Furthermore, other forms of
forbearance such as moratorium, covenant waivers and rate concessions are also
offered.
Loans are classified as forborne at the time a customer in financial
difficulty is granted a concession and the loan will remain treated and
recorded as forborne until the following exit conditions are met:
• the loan is considered as performing and there is no past-due amount according
to the amended contractual terms;
• a minimum two-year probation period has passed from the date the forborne
exposure was considered as performing, during which time regular and timely
payments have been made; and
• none of the customer's exposures with Close Brothers are more than 30 days
past due at the end of the probation period.
At 31 January 2025, the gross carrying amount of exposures with forbearance
measures was £372.5 million (31 July 2024: £363.8 million). The key driver
of this increase has been higher forbearance in our Asset Finance and Leasing,
and Motor Finance businesses reflecting continued macroeconomic challenges and
enduring cost of living pressures on customers.
An analysis of forborne loans is shown in the table below:
31 January 2025 31 July 2024
Gross loans and advances to customers (£ million) 10,044.6 10,276.6
Forborne loans (£ million) 372.5 363.8
Forborne loans as a percentage of gross loans and advances to customers (%) 3.7 % 3.5 %
Provision on forborne loans (£ million) 98.7 89.4
Number of customers supported 16,956 13,166
The following is a breakdown of forborne loans by segment:
31 January 2025 31 July 2024
£ million £ million
Commercial business 122.9 118.5
Retail business 52.3 42.8
Property business 197.3 202.5
Total 372.5 363.8
The following is a breakdown of the number of customers supported by segment:
31 January 2025 31 July 2024
Number of customers supported Number of customers supported
Commercial business 912 839
Retail business 15,994 12,275
Property business 50 52
Total 16,956 13,166
The following is a breakdown of forborne loans by concession type:
31 January 2025 31 July 2024
£ million £ million
Extension outside terms 102.3 101.7
Refinancing 26.6 28.0
Moratorium 158.9 147.0
Deferring collections/recoveries activities 82.4 85.1
Other modifications 2.3 2.0
Total 372.5 363.8
Government lending schemes
Over the pandemic period, following accreditation, customers were offered
facilities under the UK government-introduced Coronavirus Business
Interruption Loan Scheme ("CBILS"), the Coronavirus Large Business
Interruption Loan Scheme ("CLBILS") and the Bounce Back Loan Scheme ("BBLS"),
thereby enabling the Banking division to maximise its support to small
businesses. At 31 January 2025, there are 2,350 (31 July 2024: 2,887)
remaining facilities, with a residual balance of £131.5 million (31 July
2024: £202.3 million) following further repayments across the Commercial
businesses.
The Banking division also received accreditation to offer products under the
various Recovery Loan Schemes ("RLS"), the Growth Guarantee Scheme ("GGS")
and schemes in the Republic of Ireland. At 31 January 2025, there are 1,430
(31 July 2024: 1,321) live facilities, with balances of £353.8 million
(31 July 2024: £340.7 million).
The Banking division maintains a regular reporting cycle of these facilities
to monitor performance. To date, a number of claims have been made and
payments received under the government guarantee.
20. Interest Rate Risk
The group recognises three main sources of interest rate risk in the banking
book ("IRRBB") which could adversely impact future income or the value of the
balance sheet:
• repricing risk - the risk presented by assets and liabilities that reprice at
different times;
• embedded optionality risk - the risk presented by contractual terms embedded
into certain assets and liabilities; and
• basis risk - the risk presented by a mismatch in the reference interest rate
for assets and liabilities.
IRRBB is assessed and measured on a behavioural basis by applying key
behavioural and modelling assumptions including, but not limited to, those
related to fixed rate loans subject to prepayment risk, the behaviour of
non-maturity assets and liabilities, the treatment of own equity, and the
expectation of embedded interest rate options. This assessment is performed
across a range of regulatory prescribed and internal interest rate shock
scenarios approved by the bank's Asset and Liability Committee.
Two measures are used for measuring IRRBB, namely Earnings at Risk ("EaR") and
Economic Value ("EV"):
• EaR measures short-term impacts to earnings, highlighting any earnings
sensitivity, should interest rates change unexpectedly.
• EV measures longer-term earnings sensitivity due to interest rate changes,
highlighting the potential future sensitivity of earnings, and any risk to
capital.
No material exposure exists in the other parts of the group, and accordingly
the analysis below relates to the Banking division and company.
EaR impact
The table below sets out the assessed impact on group net interest income over
a 12-month period from interest rate changes. The results shown are for
an instantaneous and parallel change in interest rates at 31 January 2025:
31 January 2025 31 July 2024
£ million £ million
0.5% increase 0.9 0.1
2.5% increase 4.2 0.5
0.5% decrease (0.9) (0.1)
2.5% decrease (4.5) (0.8)
The group also monitors any potential earning exposure from basis mismatches
between its lending and funding activities on a monthly cadence. To provide a
clearer assessment of the group's exposure to interest rate changes, basis
risk is excluded from the EaR numbers.
The group's EaR at 31 January 2025 reflects its policy to ensure exposure to
interest rate shocks is managed within the group's risk appetites. The EaR
measure is a combination of the group's repricing profile and the embedded
optionality risk, which is negligible in the current interest rate
environment.
The EaR reflects the bank's strategy to manage and minimise interest rate
risk, to that required to operate efficiently.
EV impact
The table below sets out the assessed impact on group EV, which measures the
potential change in the balance sheet value following an instantaneous and
parallel change in interest rates at 31 January 2025:
31 January 2025 31 July 2024
£ million £ million
0.5% increase 2.1 3.5
2.5% increase 10.1 17.2
0.5% decrease (2.0) (3.5)
2.5% decrease (6.5) (14.4)
The group's EV at 31 January 2025 reflects its policy to ensure exposure to
interest rate shocks is managed within the group's risk appetites. The EV
measure is a combination of our repricing profile and the embedded optionality
to cover interest rate floors within the bank's lending and borrowing
activities.
21. Related Party Transactions
Related party transactions, including salary and benefits provided to
directors and key management, did not have a material effect on the financial
position or performance of the group during the period. There were no changes
to the type and nature of the related party transactions disclosed in the 2024
Annual Report that could have a material effect on the financial position and
performance of the group in the six months to 31 January 2025.
22. Discontinued operations and assets and liabilities classified as
held for sale
On 19 September 2024, the group announced that it had entered into an
agreement to sell its wealth management business, Close Brothers Asset
Management ("CBAM"), one of the group's operating segments, to funds managed
by Oaktree Capital Management, L.P. ("Oaktree").
CBAM relates to the group's 100% shareholding in Close Asset Management
Holdings Limited ("CAMHL") and its subsidiaries. The business is a well
regarded UK wealth management franchise and the transaction will strengthen
the group's capital base and enhance its position to navigate the current
uncertain environment.
The business fulfilled the requirements of IFRS 5 to be classified as
discontinued operations in the consolidated income statement with comparative
information restated. In addition, the assets and liabilities of the business
have been presented as held for sale in the 31 January 2025 consolidated
balance sheet.
Results of discontinued operations
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
Operating income 81.8 75.8 156.9
Operating expense(1) (79.2) (68.9) (143.8)
Impairment on financial assets (0.1) (0.1) -
Operating profit before tax 2.5 6.8 13.1
Tax (1.4) (1.8) (3.6)
Profit after tax 1.1 5.0 9.5
1. Operating expenses include £2.4 million of directly attributable transaction
costs relating to the disposal of CBAM.
Assets and liabilities held for sale
The major classes of assets and liabilities classified as held for sale are as
follows:
31 January 2025
£ million
Balance sheet
Intangible assets 56.6
Loans and advances to banks 41.0
Other receivables 35.6
Other assets 26.8
Total assets classified as held for sale 160.0
Accruals and deferred income 20.5
Other liabilities 39.6
Total liabilities classified as held for sale 60.1
Cash flows from discontinued operations
Six months ended 31 January Year ended 31 July
2025 2024 2024
£ million £ million £ million
Net cash flow from operating activities - - -
Net cash flow from investing activities (3.0) (4.0) (9.7)
Net cash flow from financing activities (1.5) (1.3) (2.9)
23. Post Balance Sheet Event
On 28 February 2025, following the announcement on 19 September 2024 and the
subsequent receipt of required regulatory approvals, the group successfully
completed the sale of CBAM to Oaktree. The completion of this sale is a
non-adjusting event under the requirements of IAS 10 "Events After the
Reporting Period".
As set out in Note 22, CBAM fulfilled the requirements of IFRS 5 to be
classified as 'discontinued operations' in these Half-Year 2025 financial
statements. The gain on disposal, which is set out in the table below and not
taxable, will be recognised in the group's Full-Year 2025 financial
statements.
Consolidated gain on disposal
£ million
Cash consideration 146.4
Contingent deferred consideration 21.1
Total consideration 167.5
Disposal transaction costs (8.5)
159.0
Net assets of CBAM at completion date 99.7
Consolidated gain on disposal 59.3
The cash consideration of £146.4 million was received on completion. The
contingent deferred consideration is in the form of preference shares,
redeemable no later than Oaktree's exit, for an amount of up to £28.0 million
plus interest at a rate of 8 per cent per annum, stepping up to 12 per cent
after five years. The contingent deferred consideration is subject to
potential deductions, including in relation to retention of key individuals
and certain potential regulatory costs and separation cost overruns. The fair
value of the contingent deferred consideration is estimated to be £21.1
million based on a discounted expected cash flow method.
Definitions
Additional Tier 1 ("AT1") capital: Additional regulatory capital that along
with CET1 capital makes up a bank's or banking group's Tier 1 regulatory
capital. Includes the group's perpetual subordinated contingent convertible
securities classified as other equity instruments under IAS 32
Adjusted: Adjusted measures are presented on a basis consistent with prior
periods and exclude amortisation of intangible assets on acquisition, to
present the performance of the group's acquired businesses consistent with its
other businesses; and any exceptional and other adjusting items which do not
reflect underlying trading performance
Adjusted earnings per share ("AEPS"): Adjusted profit attributable to ordinary
shareholders divided by basic weighted average number of ordinary shares in
issue
Applicable requirements: Applicable capital ratio requirements consist of the
Pillar 1 requirement as defined by the CRR, the Pillar 2a requirement set by
the PRA, and the capital conservation buffer and countercyclical buffer as
defined by the PRA Rulebook. Any applicable PRA buffer is excluded
Assets under administration: Total assets for which Winterflood Business
Services provide custody and administrative services
Bad debt ratio: Impairment losses in the year as a percentage of average net
loans and advances to customers and operating lease assets
Bargains per day: Average daily number of Winterflood's trades with third
parties
Basic earnings per share ("EPS"): Total profit attributable to ordinary
shareholders and other equity owners divided by basic weighted average number
of ordinary shares in issue
Bounce Back Loan Scheme ("BBLS"): UK government business lending scheme that
helped small and medium-sized businesses to borrow between £2,000 and
£50,000 (up to a maximum of 25% of their turnover)
CET1 capital ratio: Measure of the group's CET1 capital as a percentage of
risk weighted assets, as required by CRR
Common equity tier 1 ("CET1") capital: Measure of capital as defined by the
CRR. CET1 capital consists of the highest quality capital including ordinary
shares, related share premium account, retained earnings and other reserves,
less goodwill and certain intangible assets and other regulatory adjustments
Compensation ratio: Total staff costs as a percentage of adjusted operating
income
Cost of funds: Interest expense incurred to support the lending activities
divided by the average net loans and advances to customers and operating lease
assets
Credit-impaired: Where one or more events that have a detrimental impact on
the estimated future cash flows of a loan have occurred. Credit-impaired
events are more severe than SICR triggers. Accounts which are credit impaired
will be allocated to Stage 3
CRR: Regulation 575/2013/EU, as it forms part of the assimilated law of the
United Kingdom
Discounting: The process of determining the present value of future payments
Dividend per share ("DPS"): Comprises the final dividend proposed for the
respective year, together with the interim dividend declared and paid in the
year
Effective interest rate ("EIR"): The interest rate at which revenue is
recognised on loans and discounted to their carrying value over the life of
the financial asset
Effective tax rate ("ETR"): Tax on operating profit/(loss) as a percentage of
operating profit/(loss) on ordinary activities before tax
Expected credit loss ("ECL"): The unbiased probability-weighted average credit
loss determined by evaluating a range of possible outcomes and future economic
conditions
Expense/income ratio: Total adjusted operating expenses divided by operating
income
Financial Conduct Authority ("FCA"): A financial regulatory body in the UK,
regulating financial firms and maintaining integrity of the UK's financial
market
Financial Ombudsman Service ("FOS"): The Financial Ombudsman Service settles
complaints between consumers and businesses that provide financial services
Forbearance: Forbearance occurs when a customer is experiencing financial
difficulty in meeting their financial commitments and a concession is granted,
by changing the terms of the financial arrangement, which would not otherwise
be considered
Funding allocated to loan book: Total available funding, excluding equity and
funding held for liquidity purposes
Gross carrying amount: Loan book before expected credit loss provision
Growth Guarantee Scheme ("GGS"): The successor scheme to the Recovery Loan
Scheme, the Growth Guarantee Scheme launched in July 2024 and is designed to
support access to finance for UK small businesses as they look to invest and
grow
High quality liquid assets ("HQLAs"): Assets which qualify for regulatory
liquidity purposes, including Bank of England deposits and sovereign and
central bank debt
Internal ratings based ("IRB") approach: A supervisor-approved method using
internal models, rather than standardised risk weightings, to calculate
regulatory capital requirements for credit risk
International Accounting Standards ("IAS"): Older set of standards issued by
the International Accounting Standards Council, setting up accounting
principles and rules for preparation of financial statements. IAS are being
superseded by IFRS
International Financial Reporting Standards ("IFRS"): Globally accepted
accounting standards issued by the IFRS Foundation and the International
Accounting Standards Board
Investment costs: Includes depreciation and other costs related to investment
in multi-year projects, new business initiatives and pilots and cyber
resilience. Excludes IFRS 16 depreciation
Leverage ratio: Tier 1 capital as a percentage of non-risk-weighted total
exposures, adjusted for certain capital deductions, including intangible
assets, and off-balance sheet exposures
Liquidity coverage ratio ("LCR"): Measure of the group's HQLAs as a percentage
of expected net cash outflows over the next 30 days in a stressed scenario
Loan to value ("LTV") ratio: For a secured or structurally protected loan, the
loan balance as a percentage of the total value of the asset
Long-term bad debt ratio: Long-term bad debt ratio is calculated using IAS 39
until the change to IFRS 9 in FY19. Bad debt ratio excluding Novitas only
disclosed from FY21 onwards. Long-term average bad debt ratio of 1.2% based on
the average bad debt ratio for FY08-H125, excluding Novitas.
Loss day: Where aggregate gross trading book revenues are negative at the end
of a trading day
Managed assets or assets under management ("AuM"): Total market value of
assets which are managed by Close Brothers Asset Management in one of the
investment solutions
Modelled expected credit loss provision: ECL = PD x LGD x EAD
Net asset value ("NAV") per share: Total assets less total liabilities and
other equity instruments, divided by the number of ordinary shares in issue
excluding own shares
Net flows: Net flows as a percentage of opening managed assets calculated on
an annualised basis
Net interest margin ("NIM"): Operating income generated by lending activities,
including interest income net of interest expense, fees and commissions income
net of fees and commissions expense, and operating lease income net of
operating lease expense, less depreciation on operating lease assets, divided
by average net loans and advances to customers and operating lease assets
Net stable funding ratio ("NSFR"): Regulatory measure of the group's weighted
funding as a percentage of weighted assets
Operating margin: Adjusted operating profit divided by operating income
Probability of default ("PD"): Probability that a customer will default on
their loan
Prudential Regulation Authority ("PRA"): A financial regulatory body,
responsible for regulating and supervising banks and other financial
institutions in the UK
Recovery Loan Scheme: Launched in April 2021 as a replacement to CBILS. Under
the terms of the scheme, businesses of any size that have been adversely
impacted by the Covid-19 pandemic can apply to borrow up to £10 million, with
accredited lenders receiving a government-backed guarantee of 80% on losses
that may arise
Return on assets: Adjusted operating profit attributable to ordinary
shareholders divided by total closing assets at the balance sheet date
Return on average tangible equity ("RoTE"): Adjusted operating profit
attributable to ordinary shareholders divided by average total shareholder's
equity, excluding intangible assets and other equity instruments
Return on net loan book ("RoNLB"): Adjusted operating profit from lending
activities divided by average net loans and advances to customers and
operating lease assets
Return on opening equity ("RoE"): Adjusted operating profit attributable to
ordinary shareholders divided by opening equity, excluding non-controlling
interests and other equity instruments
Revenue margin: Income from advice, investment management and related services
divided by average total client assets. Average total client assets calculated
as a two-point average
Risk weighted assets ("RWAs"): A measure of the amount of a bank's exposures,
adjusted for risk in line with the CRR. It is used in determining the capital
requirement for a financial institution
Secured debt: Debt backed or secured by collateral
Senior debt: Represents the type of debt that takes priority over other
unsecured or more junior debt owed by the issuer. Senior debt is first to be
repaid ahead of other lenders or creditors
Significant increase in credit risk ("SICR"): An assessment of whether credit
risk has increased significantly since initial recognition of a loan using a
range of triggers. Accounts which have experienced a significant increase in
credit risk will be allocated to Stage 2
Standardised approach: Generic term for regulator-defined approaches for
calculating credit, operational and market risk capital requirements as set
out in the CRR
Subordinated debt: Represents debt that ranks below, and is repaid after
claims of, other secured or senior debt owed by the issuer
Tangible net asset value ("TNAV") per share: Total assets less total
liabilities, other equity instruments and intangible assets, divided by the
number of ordinary shares in issue excluding own shares
Term funding: Funding with a remaining maturity greater than 12 months
Term Funding Scheme for Small and Medium-sized Enterprises ("TFSME"): The Bank
of England's Term Funding Scheme with additional incentives for SMEs
Tier 2 capital: Additional regulatory capital that along with Tier 1 capital
makes up a bank's total regulatory capital. Includes qualifying subordinated
debt
Total client assets ("TCA"): Total market value of all client assets including
both managed assets and assets under advice and/or administration in the Asset
Management division
Total funding as percentage of loan book: Total funding divided by net loans
and advances to customers and operating lease assets
Watch list: Internal risk management process for heightened monitoring of
exposures that are showing increased credit risk
Cautionary Statement
Certain statements included or incorporated by reference within this
announcement may constitute "forward-looking statements" in respect of the
group's operations, performance, prospects and/or financial condition. All
statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such words as
"anticipates", "aims", "due", "could", "may", "will", "should", "expects",
"believes", "intends", "plans", "potential", "targets", "goal" or "estimates"
and other words and expressions of similar meaning. By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions and actual results or events may differ materially from those
expressed or implied by those statements. There are also a number of factors
that could cause actual future operations, performance, financial conditions,
results or developments to differ materially from the plans, goals and
expectations expressed or implied by these forward-looking statements and
forecasts. These factors include, but are not limited to, those contained in
the Group's annual report (available at:
https://www.closebrothers.com/investor-relations). Accordingly, no assurance
can be given that any particular expectation will be met and reliance should
not be placed on any forward-looking statement. Additionally, forward-looking
statements regarding past trends or activities should not be taken as a
representation that such trends or activities will continue in the future.
Except as may be required by law or regulation, no responsibility or
obligation is accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing in this
document should be construed as a profit forecast. Past performance cannot be
relied upon as a guide to future performance and persons needing advice should
consult an independent financial adviser.
This announcement does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to subscribe for or purchase any
shares or other securities in the company or any of its group members, nor
shall it or any part of it or the fact of its distribution form the basis of,
or be relied on in connection with, any contract or commitment or investment
decisions relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the company or any of its group members.
Statements in this announcement reflect the knowledge and information
available at the time of its preparation. Liability arising from anything in
this announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
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