21st Nov 2024 10:07
(Alliance News) - Close Brothers Group PLC on Thursday said it is maintaining its guidance for 2025 for now, despite some additional costs likely to result from the recent UK court ruling on disclosure of commission payments in motor finance.
The London-based bank, broker and asset manager said it restarted "a significant portion" of its motor finance lending business at the start of this month, having paused it near the end of October in the wake of the ruling by the Court of Appeal against Close Brothers and other lenders in the sector.
Close Brothers said it has updated its documentation and processes to ensure disclosure of commission amounts on finance agreements and obtain full customer consents for these. As a result, it expects "full resumption" of the business "in the very near future".
Also on Thursday, the UK Financial Conduct Authority said it is consulting on a proposal to extend the time that the firms have to respond to motor finance complaints where a non-discretionary commission arrangement was involved. The FCA already has extended the time firms have to respond to motor finance complaints involving a discretionary commission arrangement.
The updates by Close Brothers and the FCA follow the Court of Appeal judgment in October in the Hopcraft versus Close Brothers Ltd, Johnson versus FirstRand Bank Ltd, and Wrench versus FirstRand Bank Ltd cases. The court decided it is unlawful for car dealers to receive a commission from lenders providing motor finance without first telling the customer about the commission and getting their informed consent to the payment.
Close Brothers on Thursday said it continues to disagree with the judgment, and it is seeking permission to appeal to the UK Supreme Court, saying the Hopcraft decision raises "important issues of law and general public importance".
Commenting on its new consultation, FCA Chief Executive Nikhil Rathi said: 'The Court of Appeal's ruling means many customers who bought a car using finance through a dealer could be owed compensation. We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it."
Providing a trading update on Thursday, Close Brothers said its financial 2025 guidance still may be affected by costs arising from the court case, including more professional and legal fees and other operating costs.
Otherwise, it said, the financial first quarter, which ended October 31, saw a "robust performance".
In the Banking division, the loan book increased by 0.6% to GBP10.2 billion from GBP10.1 billion on July 31. Annualised year-to-date net interest margin was 7.3%, sustaining the 7.2% achieved in the second half of financial 2024.
Asset Management saw annualised net inflows of 4% in the first quarter, down from 8% a year before. Managed assets edged up to GBP19.5 billion on October 31 from GBP19.3 billion on July 31. Total assets rose to GBP20.6 billion from GBP20.4 billion.
At broker Winterflood, "unfavourable market conditions" meant an operating loss in the first quarter of GBP700,000, though this was narrowed from GBP2.5 million a year before. Looking ahead, Winterflood "remains well positioned to benefit when investor appetite returns".
Close Brothers said Chief Executive Officer Adrian Sainsbury remains on medical leave. Finance Director Mike Morgan will continue to lead the business in the interim, supported by Chair Mike Biggs and senior managers.
Close Brothers shares were down 2.1% to 210.60 pence early Thursday in London.
By Tom Waite, Alliance News editor
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