Close Brothers Group plc

Close Brothers reported adjusted operating profit of GBP 144 million in FY25, down 14% year over year, and return on average tangible equity of 7.1%. The group reported an operating loss before tax of GBP 122 million, driven mainly by GBP 267 million of adjusting items, including a GBP 165 million motor finance commissions provision, GBP 33 million for proactive customer remediation in Motor Finance, and GBP 30 million of impairment on the exiting Vehicle Hire business. Banking adjusted operating profit was GBP 198 million, the loan book declined 4% to GBP 9.5 billion, net interest margin was 7.2%, the bad debt ratio was 1%, and CET1 was 13.8% or 14.3% pro forma after Winterflood. Management did not give specific profit guidance for FY26, but said FY26 will include a drag from the runoff of the Premium personal lines book and Novitas, while cost savings and growth initiatives continue; they expect net interest margin to be slightly lower than 7%, bad debt ratio to stay below the long-term average of 1.2%, and group adjusted expenses to be within GBP 440 million to GBP 460 million in FY26, moving to GBP 410 million to GBP 430 million by FY28.

Mike Morgan framed FY25 as a year of decisive change, saying the group has strengthened capital, simplified the portfolio, and addressed legacy issues. He emphasized that Close Brothers has moved from a diversified merchant bank toward a more focused specialist lender, with growth plans centered on SME markets in the U.K. and Ireland. His tone was cautiously upbeat: he said the business is now better positioned for efficiency, growth, and a path back to double-digit RoTE by FY28 and rising thereafter.

Fiona McCarthy focused on the financial impact of the cleanup actions and the underlying resilience of the banking franchise. She cited adjusted operating profit of GBP 144 million, statutory operating loss before tax of GBP 122 million, CET1 of 13.8% (14.3% pro forma), Banking adjusted operating profit of GBP 198 million, NIM of 7.2%, and a 4% decline in the loan book to GBP 9.5 billion. She also said the GBP 165 million motor finance provision remains unchanged, FY25 complaints and legal costs were GBP 18.7 million versus prior guidance of GBP 22 million, and FY26 complaints-related costs should fall to the single-digit millions; the group also expects FY26 restructuring costs of GBP 5 million to GBP 10 million and net interest margin slightly below 7%.

Analysts focused on the GBP 33 million proactive remediation provision, asking whether the issue was contained, whether other product lines were checked, and whether a regulatory fine could arise. Mike said the issue related to overpayments on early settlement in Motor Finance, had been fixed, and was contained within that business; he said it dated back a long period and predated the current management team. Questions also probed FY26 earnings, cost phasing, and reputation; Fiona declined to give specific profit guidance, but pointed to runoff from Premium personal lines and Novitas as drags, while management said demand is returning and that the business has sufficient capital and a clearer, more focused franchise.