Close Brothers shares jumped on Wednesday after reassuring investors that the FCA’s motor finance redress scheme will not derail its growth plans, estimating the total cost at around £320 million, only marginally above its existing £294 million provision.
The group said the hit would shave just 25 basis points off its CET1 capital ratio, bringing it to 14.0% on a pro forma basis. This is still well clear of its 12-13% medium-term target.
No changes to its existing provision have been recognised at this stage.
The estimate covers roughly 720,000 qualifying UK motor finance loans written between April 2007 and November 2024, including around 640,000 under discretionary commission arrangements and a further 80,000 meeting the FCA’s “tied” or “high commission” criteria.
Notably, Close Brothers’ average redress payment is around £500 per customer, significantly below the FCA-cited industry average of £829. This reflects smaller loan sizes and lower commission levels across its book.
Close Brothers shares were among the heaviest hit when the FCA launched its investigation in 2024, and despite a 17% rally to 452p on Wednesday, shares are yet to get anywhere near the 800p mark they traded at before the scandal came to light.