REG - Close Bros Grp PLC - Trading Statement

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RNS Number : 1648F  Close Brothers Group PLC  21 May 2026

           Scheduled Q3 2026 Trading Update
 21 May 2026

Close Brothers Group plc ("the group" or "Close Brothers") today issues its
scheduled trading update relating to the third quarter of its 2026 financial
year. All statements in this release relate to the period from 1 February 2026
to 30 April 2026 ("the quarter") unless otherwise stated.

Mike Morgan, Chief Executive, said:

"We have delivered a solid performance in the third quarter and continue to
execute our strategy through this important transitional year. We are
progressing well with the delivery of our strategic objectives and targets.
Our capital position remains strong after absorbing the additional provision
for motor finance commissions, enabling investment in future growth to further
support the UK economy."

Performance in the three months to 30 April 2026(1)

The lending divisions delivered resilient underlying profitability,
benefitting from a robust NIM and modest growth in the core loan book while we
continue to execute our transformation programme to reduce costs.

The loan book increased 1% in the quarter to £9.3 billion (31 January 2026:
£9.2 billion), as continued growth in Motor Finance and the reversal of
seasonality in Invoice Finance more than offset a weaker external environment
for Property and the ongoing planned reduction of Premium Finance personal
lines. On an underlying basis(2), the loan book increased by 2%.

The annualised year-to-date net interest margin was 7.0% (H1 2026: 7.1%) and
we continue to expect the net interest margin to be slightly lower than 7% for
the 2026 financial year, reflecting loan book mix impacts.

We are making good progress on our initiatives to deliver cost reduction and
optimise operational processes, including the simplification of business and
management structures, and further outsourcing and offshoring. We now expect
to exceed our target of c.£25 million of annualised savings by the end of the
2026 financial year, as a result of accelerating cost actions into the current
year. We also expect the group's adjusted operating expenses to be below our
previous guidance of c.£450 million for the 2026 financial year.

We now expect the group (central functions) operating loss at the lower end of
the c.£45-50 million guidance range in the 2026 financial year.

The annualised year-to-date bad debt ratio was 0.8% (H1 2026: 0.8%),
reflecting resilient credit performance in the quarter, notwithstanding the
modelled impact of heightened macroeconomic uncertainty. In line with our
previous guidance, we expect the bad debt ratio for the 2026 financial year to
remain below our long-term average of 1.2%.

Motor finance commissions

Following the publication of the Financial Conduct Authority ("FCA") Policy
Statement PS26/3: Motor finance consumer redress scheme ("the scheme") on 30
March 2026, the group has increased its provision to £320(3) million. This
has resulted in an additional income statement charge of £30(3) million in
the quarter.

The £320 million provision is the group's current best estimate of the cost
of the scheme as published, including an assumption of delayed implementation
due to legal challenges to the scheme brought by a number of parties.

While there are elements of the scheme that we disagree with, we continue to
believe that the existing scheme offers a quick, clear and certain route to
resolving this matter for all relevant parties.

However, the ultimate cost to the group remains subject to the outcome of the
legal challenges to the scheme and any further legal, regulatory or industry
developments including court claims and complaints from consumers.

Strong balance sheet

We maintained a strong funding, liquidity and capital position during the
quarter. Our Common Equity Tier 1 ("CET1") capital ratio and total capital
ratio stood at 14.3% and 19.5% respectively at 30 April 2026 (31 January 2026:
14.3% and 18.8%). The CET1 capital ratio reflects the additional £30 million
provision in relation to motor finance commissions, offset by other profits
attributable to shareholders in the quarter. The total capital ratio
additionally benefitted from the 6.125% Subordinated Tier 2 Notes due 2036,
issued at the start of the quarter.

Outlook

We have delivered a solid performance in the quarter and at this stage (and
subject to current macroeconomic developments) remain on track to deliver the
2026 financial year in line with guidance.

Footnotes

1 The performance in the third quarter of the 2026 financial year relates to
continuing operations unless otherwise stated. Close Brothers Vehicle Hire is
in wind-down, and related operating lease assets are therefore excluded from
the loan book totals.

2 Excluding the planned reduction in Premium Finance personal lines and
run-off of the legacy Republic of Ireland Motor Finance loan book.

3 £320 million balance sheet provision as at 30 April 2026 reflects updates
made to the 31 January 2026 provision of £294 million for cost utilisation
and unwind of the time value discount in the quarter, and an additional income
statement charge of £30 million.

Enquiries

Maritz
Carvalho
Close Brothers Group
plc                              020 3857 6063

Sam
Cartwright
H/Advisors
Maitland
07827 254561

 

About Close Brothers

Close Brothers is a UK specialist banking group providing lending and deposit
taking. We employ approximately 2,600 people, principally in the United
Kingdom and Ireland. Close Brothers Group plc is listed on the London Stock
Exchange.

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, financial condition and/or
environmental, social and governance ambitions, targets and commitments. 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
announcement 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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