Close Brothers Group plc (LSE: CBG) closed Thursday at 466.80p, up 1.08%, as sentiment toward the specialist bank showed signs of stabilisation following months of volatility driven by motor finance regulatory concerns.
The company’s third-quarter 2026 trading update confirmed that profitability across its lending operations remained resilient, with a year-to-date net interest margin of 7.0% and its loan book growing 1% to £9.3 billion.
Close Brothers increased its provision relating to the FCA’s motor finance consumer redress scheme to £320 million during the quarter, a figure broadly in line with estimates and within the group’s capital capacity without requiring additional capital issuance.
The CET1 capital ratio stood at a healthy 14.3%, providing a buffer above the group’s medium-term target range of 12% to 13% and well above minimum regulatory requirements.
The merchant bank also announced that annualised cost savings from its transformation programme are now expected to exceed £25 million, with adjusted operating expenses forecast to come in below previous guidance.
The FCA’s motor finance redress scheme, which covers agreements dating back to 2007 and could affect up to 14 million consumers, represents a significant overhang for the sector, but Close Brothers declined to challenge the scheme in a statement provided to regulators in late April.
Broker Panmure Liberum noted that the £320 million provision figure was only modestly higher than the carrying value already held, describing it as something that could be “easily absorbed into existing capital resources” and allowing the company to begin moving forward.
An earlier short-seller report from Viceroy Research in March had predicted a more severe scenario including potential equity dilution, but the FCA’s final framework has since narrowed the uncertainty range significantly.
Asset quality remained stable through the third quarter, with a bad debt ratio of 0.8%, supporting confidence in the credit book’s underlying health.
Thursday’s 1.08% gain continued a pattern of measured recovery as investors digested the more defined regulatory position and reassessed the stock’s long-term earnings potential.
