Close Brothers Group plc

For FY25, Close Brothers reported adjusted operating profit of GBP 144 million and a return on average tangible equity of 7.1%. The group recorded an operating loss before tax of GBP 122 million, mainly due to GBP 267 million of adjusting items, including a GBP 165 million motor finance commissions provision, a GBP 33 million proactive customer remediation provision, a GBP 30 million Vehicle Hire impairment, and GBP 18.7 million of motor commissions-related complaints and legal costs. Banking adjusted operating profit was GBP 198 million, the loan book declined 4% to GBP 9.5 billion, net interest margin was 7.2%, and the bad debt ratio was 1%. CET1 capital was 13.8%, or 14.3% pro forma for Winterflood. Management did not give specific FY26 profit guidance, but said net interest margin is expected to be slightly lower than 7%, bad debt ratio should remain below the 1.2% long-term average, motor commissions-related costs should be in the single-digit millions in FY26, and group adjusted expenses are expected to be GBP 440 million to GBP 460 million in FY26, falling to GBP 410 million to GBP 430 million by FY28.

Mike Morgan framed the year as one of decisive portfolio reshaping and capital repair, saying the group has strengthened capital, simplified the portfolio, and addressed legacy issues. He emphasized that the business is now more focused on specialist lending, with the simplification agenda largely complete and the next phase centered on optimization and growth. His tone was constructive but guarded: he repeatedly acknowledged near-term pain from motor finance uncertainty and loan book moderation, while expressing confidence in returning to double-digit RoTE by FY28.

Fiona McCarthy focused on the financial impact of adjusting items and the balance between resilience and ongoing uncertainty. She said adjusted operating profit was GBP 144 million, statutory operating loss before tax was GBP 122 million, and the main adjusting items were the GBP 165 million motor finance provision, GBP 33 million remediation provision, GBP 30 million Vehicle Hire impairment, and GBP 18.7 million of motor-related costs, which were below earlier guidance of GBP 22 million thanks to automation and AI. She highlighted strong capital and liquidity, including CET1 of 13.8%, pro forma 14.3%, funding of GBP 12.7 billion, treasury assets of GBP 2.8 billion, LCR of 1,012%, and retail deposits up 20% to GBP 6.8 billion. She also said FY26 expenses should be slightly higher in Banking, group legal and professional fees should reduce, and the group expects to remain above the top end of its 12% to 13% CET1 target range in the near term.

Analysts pressed on the GBP 33 million Motor Finance remediation provision, asking whether the issue was contained, how far back it went, whether other product lines were checked, and whether a regulatory fine was possible. Management said the issue was specific to Motor Finance early settlement processes, had been fixed, and dated back a long time, but they would not speculate on fines. Questions also focused on FY26 profitability and management incentives; Fiona said no specific FY26 profit guidance would be given, but FY26 would be dragged by the Premium Finance runoff and the Novitas unwind, while Mike said remuneration is aligned to multiple metrics including the double-digit RoTE goal. Later questions probed cost phasing and residual charges, and management said the GBP 20 million annualized savings over 3 years includes the Premium repositioning plan, while restructuring costs will continue beyond FY26 even though Vehicle Hire losses are not expected to add materially beyond the impairment already taken.