Group reported a statutory operating loss before tax of £122.4 million compared with £132.7 million profit the previous year
LONDON: British lender Close Brothers Group reported a full-year statutory loss on Tuesday, driven by a major provision for a regulatory review into motor finance commissions, prompting the company to scrap its final dividend.
For the year ended July 31, 2025, the group reported a statutory operating loss before tax of £122.4 million, a sharp reversal from a £132.7 million profit the previous year. The result was weighed down by a £165.0 million provision charge related to the ongoing Financial Conduct Authority (FCA) investigation into historical motor finance commission arrangements.
The company said it would not pay a final dividend for the 2025 financial year, citing “continued uncertainty” regarding the outcome of the FCA’s review.
On an adjusted basis, which excludes one-off items, operating profit fell 14% to £144.3 million. This was due to a 2% drop in income to £681.2 million and a 3% rise in operating expenses.
“The performance in the 2025 financial year reflects the actions we have taken to strengthen our capital position and simplify the business,” Chief Executive Mike Morgan said in a statement.
The group’s core banking unit was significantly impacted by a temporary pause in UK motor lending, which contributed to a 4% reduction in its loan book to £9.5 billion. Adjusted operating profit in the division fell to £198.3 million from £212.9 million a year earlier.
Morgan noted a “positive outcome” from a Supreme Court judgment in August 2025 that provided clarity to the industry, but said the bank now awaits the FCA’s consultation on a potential industry-wide redress scheme.
Amid the challenges, the company has been streamlining its operations. It has sold its asset management and Winterflood businesses, and on Tuesday announced it would exit its Vehicle Hire business. These moves have bolstered its capital cushion, with its Common Equity Tier 1 (CET1) ratio rising to 13.8% from 12.8%.
Looking ahead, Close Brothers expects the net interest margin in its banking division for the 2026 financial year to be slightly below 7%, reflecting changes in its loan book mix.
“Whilst some of these actions have an upfront financial impact on the group, they provide the foundation for the next stage of our journey,” Morgan said, expressing confidence in returning the business to “double-digit returns.”