31st Mar 2026 09:11
(Alliance News) - Lloyds Banking Group PLC shares moved higher on Tuesday, in the wake of a UK watchdog's motor finance verdict, which the lender said it will look into.
Bank of Ireland Group PLC, meanwhile, also noted the update from the Financial Conduct Authority and added that it is "assessing the potential financial impact".
Lloyds shares rose 1.3% to 92.44 pence in London on Tuesday morning, while Bank of Ireland added 1.5% to EUR15.36.
Other firms which have had an exposure to vehicle finance also traded higher. Close Brothers Group PLC was up 3.0% at 393.00p, Moneybarn owner Vanquis Banking Group PLC added 0.7% at 110.40p and S&U PLC rose 1.3% to 1,812.74p. Secure Trust Bank PLC, which exited the motor finance space in February, was up 3.2% at 1,275.00p. Barclays PLC rose 1.0% to 388.80p.
Banco Santander SA also has an exposure. It was up 1.7% at EUR9.65 in Madrid.
Financial Conduct Authority on Monday confirmed it will proceed with an industry-wide motor finance redress scheme, aiming to compensate millions of customers who were treated unfairly by lenders.
The regulator estimated around 12.1 million agreements will be eligible for redress, down from 14.2 million proposed at the consultation stage, after tightening eligibility criteria.
The scheme is expected to see firms pay out around GBP7.5 billion in compensation, with total costs including administration estimated at GBP9.1 billion. This is lower than earlier projections of up to GBP11 billion.
Among those lenders affected, Lloyds, which owns Black Horse, had previously raised its provisions for exposure to the scheme to around GBP2.0 billion from GBP1.2 billion.
"The details of the final scheme differ from the scheme as laid out in October 2025 and require careful analysis. Accordingly, the group is assessing the implications and impact of the final rules. The group will update the market as and when appropriate," Lloyds said on Tuesday.
Bank of Ireland's provision stands at EUR429 million.
"The group is assessing the potential financial impact of the final scheme and is committed to achieving a fair outcome for customers, ensuring appropriate redress is provided where loss has occurred," it said on Tuesday.
Deutsche Bank analyst Robert Noble does not expect Lloyds to change its provision much.
Noble commented: "The FCA motor finance consumer redress scheme has been confirmed with softer conditions and a smaller industry wide impact estimate. It is difficult to tell how it will impact individual banks and we await their statements on the matter. Lloyds have said previously that if the previous FCA proposal were enacted in full it would not move their provision much. We assume therefore the softer proposals will mean Lloyds does not materially change their provision."
Close Brothers has set aside GBP300 million. Late Monday, it said it was "assessing the potential implications of the redress scheme on the group".
Noble added: "Close Brothers has been less specific- post the last consultation the company said that the cost could be materially higher or lower than their existing GBP300 million provision. And so while the proposal is softer it's not clear yet what the impact will be."
Secure Trust Bank last month sealed the sale of its vehicle finance arm to funds managed by LCM Partners.
"The group will remain responsible for administering, and retain liability for, payments due to customers under the FCA's motor finance commissions redress scheme," it explained back in December.
By Eric Cunha, Alliance News news editor
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