REG - Close Bros Grp PLC - Update in relation to motor finance commissions

Close BrothersAnnouncement

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RNS Number : 5407Z  Close Brothers Group PLC  08 April 2026

 

 Close Brothers Group plc and Close Brothers Finance plc

 This announcement contains inside information

 Update in relation to motor finance commissions
 8 April 2026

Close Brothers group plc ("Close Brothers" or "the group") has undertaken a
review of the FCA's Policy Statement PS26/3: Motor finance consumer redress
scheme ("the policy statement") and its impact on the group.

As set out below, the estimated cost of the scheme as published is c.£320
million, broadly similar to the group's existing provision, and can be
comfortably absorbed by existing capital resources, leaving the group well
positioned to continue delivering its strategy.

At this stage, no provision changes have been recognised. The group's existing
IAS 37 provision remains under review.

The group will continue to closely monitor any further legal, regulatory and
industry developments and is considering its next steps.

Financial impact

Close Brothers estimates that the scheme as published, if recognised in
isolation, would result in a provision of c.£320 million on a pro forma basis
as at 31 January 2026. This compares to the group's IAS 37 provision of £294
million(1) as at 31 January 2026.

This would reduce the group's CET 1 capital ratio by c.25 basis points to
14.0%, on a pro forma basis as at 31 January 2026. This remains comfortably
ahead of the group's medium-term target of 12-13%.

The group's £294 million provision is based on a number of probability
weighted scenarios, one of which is the implementation of a redress scheme in
line with the FCA's original consultation paper published on 7 October 2025.
The c.£320 million estimate reflects one scenario only, being the FCA's
policy statement, as well as a number of changes to the scheme itself relative
to the FCA's original consultation paper.

This c.£320 million estimate is based on the methodology and approach
outlined in the policy statement, with the following key data points and
assumptions:

·    c.720k UK regulated motor finance loans written between 6 April 2007
and 1 November 2024 qualifying for redress under the scheme. This includes
c.640k loans written under Discretionary Commission Arrangements ("DCAs") and
a further c.80k non-DCA loans which are likely to meet the "tied" arrangements
and/or "high commission" criteria as defined by the FCA

·    An average redress payment of c.£500 per customer, including
compensatory interest. This is lower than the industry average of £829 quoted
in the policy statement, reflecting the relatively smaller loan sizes and
lower commission levels of Close Brothers' motor finance loan book

·    An estimated claim rate under the scheme of 75%, in line with the
FCA's assumption. A 5% absolute increase or decrease in the assumed claim rate
would result in a c.£18 million increase or decrease in the estimate
(including delivery cost impact)

·    An estimated delivery cost of c.£66 million. This excludes c.£14
million of costs already incurred against the existing provision

·    A roll-out period running from summer 2026 to the end of calendar
year 2027, resulting in a time value discount of c.£16 million

 

The group's IAS 37 provision remains under review, and the outcome will be
dependent upon any potential further legal, regulatory or industry
developments (including any legal challenge of the scheme by various parties,
or court claims and complaints from consumers), sensitivities to the
assumptions above and further analysis and interpretation of the scheme rules,
amongst other relevant factors.

The group is well positioned and remains confident in its ability to deliver
against its strategy, as outlined at the Half Year Results and business update
on 17 March 2026, underpinned by a resilient business model, a strong capital
position and a clear focus on execution to deliver long-term value for
shareholders.

 

Footnote

 1  £294 million balance sheet provision as at 31 January 2026 reflects the
£300 million provision charged to the income statement, together with a
partial unwind of the discount related to time value of money (+£8 million),
partly offset by costs incurred to date (-£14 million).

Inside information

This announcement contains information which is deemed by the Company to
constitute inside information within the meaning of the UK version of the
European Union's Market Abuse Regulation ((EU) No. 596/2014). Upon the
publication of this announcement via the Regulatory Information Service, the
inside information is now considered to be in the public domain. The person
responsible for arranging the release of this information on behalf of the
Company is Sarah Peazer-Davies, Group General Counsel and Company Secretary.

 

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 and is a constituent of the FTSE 250.

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".
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
(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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