Close Brothers Group plc

Adjusted operating income decreased 6% to GBP 643 million. Adjusted operating expenses decreased 3% to GBP 431 million. Adjusted impairment losses were broadly unchanged at GBP 92 million. Adjusted operating profit was GBP 120 million, down from GBP 144 million last year. Statutory loss before tax improved to GBP 60 million from GBP 122 million, and loss after tax from continuing operations was GBP 65 million. Adjusted EPS was 47.5p and return on average tangible equity was 5.5%. The loan book was broadly flat at GBP 9.5 billion, with underlying growth of 2% for the year and 4% in the second half. NIM was 6.9% versus 7.2% last year. FY27 guidance calls for underlying loan book growth within 5% to 10%, costs of about GBP 430 million, NIM slightly below FY26 due to mix, bad debt ratio below the long-term average of 1.2%, a modest increase in RoTE, and CET1 within 12% to 13% after Basel 3.1. Management also expects cost savings to exceed GBP 60 million annualized by end-FY27 and cost to move toward the lower end of GBP 410 million to GBP 430 million by FY28.

Mike Morgan said the group has been reshaped into a focused specialist bank and that the strategy is now centered on optimize and grow after simplify is largely complete. He emphasized the return to loan-book growth, stronger momentum into FY27, and the use of AI and operating-model changes to build a more efficient, scalable business. His tone was confident but measured, with repeated references to disciplined underwriting, sustainable growth, and a path to double-digit returns by FY28 and beyond.

Fiona McCarthy said adjusted operating income fell to GBP 643 million mainly because of repositioning, lower NIM and a smaller average loan book, while adjusted operating expenses fell to GBP 431 million thanks to cost discipline and transformation actions. She highlighted the Motor Finance commissions provision increasing by GBP 165 million to about GBP 320 million, restructuring costs of GBP 14.3 million, and FY27 restructuring costs expected at about GBP 30 million to GBP 40 million. She also pointed to a robust capital and liquidity position: CET1 at 14.1%, total funding of GBP 11.4 billion, liquidity resources of GBP 3 billion, and average cost of funds at 4.6%.

Analysts pressed on higher rates, the timing and implications of the Motor Finance tribunal process, competitive pressure if a rival were bought by a bank, the sustainability of Invoice Finance growth, and the Q4 impairment uptick. Management said higher rates can pressure SMEs but that rates are built into current forecasts, certainty matters more than the exact level, and the business can compete by maintaining margin and disciplined lending. On the tribunal, Mike Morgan said he could not say how long a verdict would take, though he suspected it could be months; on competition, he said Close Brothers would assess the facts of any deal but is focused on its own diversified funding and return plan. Fiona McCarthy said the Q4 impairment increase was tied to a small number of stressed Property cases, with overall coverage at 2.7% and Property coverage at 5.6% with Stage 3 at 35%; Invoice Finance’s 26% second-half growth was partly boosted by a seasonal dip in the prior half.