Half-year Report for six months to 31 January 2025

Half Year Results for the Six Months to 31 January 2025

18 March 2025

FOCUSING ON RESILIENCE AND LONG-TERM GROWTH

Mike Morgan, Chief Executive, said:

"The group's performance reflects the strength and resilience of our business model, with robust underlying profit in the Banking business. We have made significant progress on our capital actions, achieving a pro-forma CET1 capital ratio of 13.4% at 31 January 2025, following the sale of Close Brothers Asset Management ("CBAM") and despite the impact of a £165 million provision relating to motor finance commissions."

"At our core, we have been here to serve our customers, deliver excellent service, provide specialist expertise and build strong, lasting relationships over the years. Today we are a trusted partner to UK SMEs, millions of customers, and our dedicated colleagues. Our banking model is more relevant than ever, and aligned with the UK government's growth agenda. We will build on our strong foundations while making the right strategic choices for long-term success. My priorities include focusing on greater simplification, improving operational efficiency, and driving sustainable growth. Our goal is to ensure that, once the motor finance commissions uncertainty has been resolved, the group is well positioned to generate strong, sustainable returns. Alongside a stronger capital position, delivering on these priorities will create a more efficient and resilient business, one that delivers greater value for shareholders and continues to support customers, as we have through many cycles."

Key Financials1

Key Financials (Excluding Novitas)

Strategic Highlights: Delivering on our Capital Actions and Strengthening our Underlying Business

Financial Performance

Guidance

In Banking, we are encouraged by the robust underlying profit performance delivered in the first half

While short-term trading conditions remain challenging, we are confident that Winterflood remains well positioned to benefit when market conditions return.

We expect Group (central functions) net expenses to be between £55 million and £60 million in the 2025 financial year, reflecting elevated professional fees and expenses as well as a decline in interest income

With respect to items recognised as adjusting

In the near-term, we expect to maintain our CET1 capital ratio around the top end of our medium-term target range of 12% to 13%, balancing growth and resilience.

The reinstatement of dividends will be reviewed once there is further clarity on the financial impact of the FCA review of motor finance commission arrangements and the Supreme Court appeals.

Enquiries

A virtual presentation to analysts and investors will be held today at 9.30 am followed by a Q&A session. A webcast and dial-in facility will be available by registering at https://webcasts.closebrothers.com/results/HalfYearResults2025.

Financial Calendar (Provisional)

The enclosed provisional financial calendar below is updated on a regular basis throughout the year. Please refer to our website www.closebrothers.com for up-to-date details.

About Close Brothers

Close Brothers is a leading UK merchant banking group providing lending, deposit taking and securities trading. We employ approximately 3,000 people, principally in the United Kingdom and Ireland. Close Brothers Group plc is listed on the London Stock Exchange.

Chief Executive's Statement

I was honoured to assume the position of Group chief executive in January, and I step into this role with a clear focus and determination to address both the challenges and opportunities that lie ahead. We have taken decisive actions to navigate today's volatile environment, and I firmly believe in the strength of our core business and the attributes that have defined this group.

We have made significant progress in strengthening our capital position, achieving a pro-forma CET1 capital ratio of 13.4% at 31 January 2025, following the sale of CBAM and despite the impact of a £165 million provision relating to motor finance commissions. This reflects our commitment to resilience and ensuring we can navigate the current environment with confidence. I want to thank our customers, colleagues, and shareholders for their continued support.

Despite the short-term impact of the motor finance commissions uncertainty on our financial performance, our core banking model remains resilient. We continue to deliver a robust underlying profit in our Banking business.

At our core, we have been here to serve our customers, deliver excellent service, provide specialist expertise and build strong, lasting relationships since 1878. Today we are a trusted partner to UK SMEs, millions of customers, and our dedicated colleagues. Our banking model is more relevant than ever, and aligned with the UK government's growth agenda, which places a strong emphasis on supporting SMEs. Through every economic cycle, we have stood by our customers, and that will not change.

That said, I recognise that the returns we generate today are not where they need to be, and this must change. That is why I am committed to challenging ourselves and our businesses to drive meaningful improvements. We must build on our strong foundations while making the right strategic choices for long-term success. My priorities include focusing on greater simplification, improving operational efficiency, and driving sustainable growth to ensure we resume the delivery of higher levels of returns.

The sale of CBAM has simplified the group and allows us to sharpen our focus on our ongoing business. We are actively evaluating our lending mix and portfolios to ensure they maximise returns. While we have made progress on cost savings, our efficiency metrics must improve and there is more to be done. I have initiated a review to drive a step-change in operational efficiency and cost reduction. These will focus on simplification and modernisation of technology platforms, leveraging of offshore capabilities and cost transformation of centrally provided services. A more efficient, focused group will allow us to reinvest in areas with the greatest growth potential.

Looking ahead, we see many opportunities across our markets, and are actively evaluating ways to drive growth within our Banking businesses. We remain committed to markets that offer attractive and sustainable risk adjusted returns.

Alongside a stronger capital position, these steps will create a more efficient and resilient business, one that delivers greater value for shareholders and continues to support customers, as we have through many cycles.

Our goal is to ensure that, once the motor finance commissions uncertainty has been resolved, the group is well positioned to generate strong, sustainable returns.

With an experienced leadership team and our relentless commitment to supporting our customers, I am confident in our ability to navigate the road ahead. I look forward to sharing further updates in the months to come.

Financial Performance

We reported a statutory operating loss before tax of £103.8 million (H1 2024: statutory operating profit of £87.0 million), primarily driven by the £165 million provision in relation to motor finance commissions. On an adjusted basis, excluding the impact from certain items which do not reflect the underlying performance of our business, the group's operating profit decreased 15% to £74.9 million (H1 2024: £88.1 million) driven by an increase in impairment charges, as well as a marginal decline in income and slightly higher costs.

In Banking, adjusted operating profit reduced to £104.1 million (H1 2024: £111.7 million), as a reduction in costs was more than offset by an increase in impairment charges and a marginal decline in income, primarily driven by the impact of the temporary pause in UK motor lending. The net interest margin remained strong at 7.3% and credit performance was resilient, with the bad debt ratio 20 basis points below the long-term average at 1.0%. Winterflood delivered an operating loss of £0.8 million (H1 2024: operating loss of £2.6 million), with trading income down as the business continues to navigate a challenging market environment. WBS continued to see good momentum, with income rising 22% to £9.5 million and AuA up 27% to £17.5 billion.

The group maintained a strong capital, funding and liquidity position. Our CET1 capital ratio was 12.2% at 31 January 2025 (31 July 2024: 12.8%). On a pro-forma basis, reflecting the sale of CBAM, our CET1 capital ratio was 13.4%. Our funding base reduced modestly to £12.7 billion (31 July 2024: £13.0 billion) at 31 January 2025, and we continued to have strong access to funding markets, with retail deposits increasing by 12% in the first six months of the financial year. We adhere to a conservative funding strategy, borrowing long and lending short. Additionally, we have consciously maintained a higher level of liquidity, with a 12-month average liquidity coverage ratio ("LCR") of 953%, substantially above regulatory requirements, as at 31 January 2025.

Delivering on our Capital Actions

In March 2024, we announced a number of management actions aimed at strengthening the group's available CET1 capital by approximately £400 million by the end of the 2025 financial year. These actions have largely been implemented and, as a result, approximately £360 million of CET1 capital has been generated or preserved as of 31 January 2025 (relative to the capital trajectory projected at the time).

In March 2024 we took the difficult decision to cancel payment of the 2024 dividend, allowing us to retain c.£100 million of CET1 capital in the 2024 financial year. We have since generated an additional c.£50 million of CET1 capital in the first half of the 2025 financial year, prior to the provision in relation to motor finance commissions. Given the continued significant uncertainty regarding the outcome of the FCA's review of motor finance commission arrangements and the Supreme Court appeals, the group will not pay an interim dividend in respect of the first half of the 2025 financial year.

We have been lending more selectively to optimise RWAs. Since March 2024, we estimate that a significant volume of additional loans, meeting our credit and pricing requirements, could have been underwritten. This approach is reflected in the year-on-year decline of 1% in our loan book as at 31 January 2025. Relative to our projections at the time, we have mitigated RWA growth by c.£710 million, equivalent to c.£90 million of CET1 capital preservation.

While we are disappointed not to have been able to pursue these opportunities, we remain confident in our ability to continue to support our customers and selectively grow the loan book in the second half of the financial year, subject to demand.

We have implemented cost management initiatives to partially offset the financial pressure from capital actions. These initiatives, focusing on Technology, Suppliers and Property, and People, are now expected to deliver total annualised savings of c.£25 million by the end of the current financial year. We remain committed to executing further cost savings as we recognise there is more we can achieve in enhancing our future operational efficiency.

We successfully completed the sale of CBAM on 28 February 2025. This transaction is expected to increase the group's CET1 capital by c.£120 million or c.120 basis points on a pro-forma basis as at 31 January 2025.

The estimated CET1 capital ratio benefit excludes any immediate reduction in operational risk RWAs associated with the CBAM business. The group expects a further capital benefit over the next three years of up to c.25 basis points to our CET1 capital ratio on a pro-forma basis as at 31 January 2025, due to a reduction in operational risk RWAs.

Overall, the implemented management actions have significantly strengthened the group's capital, resulting in a pro-forma CET1 capital ratio of 13.4% at 31 January 2025, significantly above our applicable regulatory requirement of 9.7%.

In the near-term, we expect to maintain our CET1 capital ratio around the top end of our medium-term target range of 12% to 13%. We will resume selective loan book growth, subject to demand. At the same time, we will continue to evaluate additional potential RWA optimisation opportunities to maintain resilience and flexibility, including a potential risk transfer of assets in Motor Finance and other portfolios, a continuous review of our businesses and portfolios and other tactical actions.

As previously stated, the decision to reinstate dividends will be reviewed by the board once there is further clarity on the financial impact of the FCA review of motor finance commissions and the Supreme Court appeals.

Mike Morgan

Chief Executive

Overview of Developments in relation to Motor Finance Commissions

On 11 January 2024, the Financial Conduct Authority ("FCA") announced a review into historical motor finance discretionary commission arrangements ("DCAs"). This review was prompted by high numbers of complaints from customers across the market and followed the Financial Ombudsman Service's ("FOS") publication, also on 11 January 2024, of its first two decisions upholding customer complaints relating to DCAs against two other lenders in the market.

On 25 October 2024, the Court of Appeal published its judgment in respect of Hopcraft v Close Brothers Limited ("CBL") ("Hopcraft") upholding the appeal brought against CBL. This case, initially determined in CBL's favour, was heard in early July 2024 alongside two other claims against another lender. The group disagrees with the Court of Appeal's findings and, on 11 December 2024, CBL obtained permission to appeal to the Supreme Court. The other lender has also obtained permission to appeal and all cases will be heard at a hearing scheduled for 1 to 3 April 2025 ("the Supreme Court appeals"). As has been reported, a number of interested parties applied to intervene in the Supreme Court appeals. The Supreme Court has granted permission to intervene in the appeals to the FCA and the National Franchised Dealers Association ("NFDA").

On 11 March 2025, the FCA announced that it is no longer planning a further announcement in May 2025 on next steps in its review of historical motor finance commissions, as previously announced, and instead the FCA will confirm within six weeks of the Supreme Court's decision if it will be proposing a redress scheme and, if so, how it will take this forward. The FCA also stated that, depending on the Supreme Court's decision, the FCA may also consult separately on changes to its rules.

For an overview of commission models operated by Close Brothers Motor Finance over the years, please refer to page 10 of the group's Annual Report 2024 available on the Investor Relations website.

Provisioning Assessment in relation to Motor Finance Commissions

In light of recent developments in relation to motor finance commissions, the group has reviewed its accounting assessment of these matters. As a result, the group recognised a provision in relation to motor finance commissions of £165 million in the first half. This includes estimates for certain potential operational and legal costs, as well as estimates for potential remediation for affected customers. The provision is based on probability weighted scenarios using various assumptions. These include, for example, commission models, rates and time periods in scope of any regulatory redress scheme, as well as response and uphold rates.

The provision is the outcome of a thorough assessment, representing the group's current evaluation based on available information and recent developments. There remains significant uncertainty as to the range of outcomes from the Supreme Court appeals and the FCA's ongoing review of motor finance commissions and, therefore, the ultimate cost to the group could be materially higher or lower than the provision taken.

Additional details are set out in Note 15 on page 66.

As a result of the provision taken, the group's CET1 capital ratio reduced by c.150 bps from 13.7% to 12.2% at 31 January 2025. 

Update on Temporary Pause in Motor Finance and Other Changes Implemented

As previously announced, we temporarily paused UK motor finance lending on 25 October 2024. Since 2 November 2024, we have gradually resumed new business origination, with all of our lending channels live from January 2025. We expect underwriting volumes to return to levels seen prior to the October pause by Q4 of the 2025 financial year. All new business is written with updated documentation and processes to ensure disclosure of, and customer consent to, our relationship with brokers and commission amounts on finance agreements before customers enter into credit agreements. We have also implemented measures to verify credit brokers' compliance with these new requirements. Used car finance demand remains strong and in line with pre-Hopcraft levels. We estimate the impact from the pause in UK motor finance lending and other related changes to have been a c.£100 million reduction in new business volumes, which would translate to an adverse loan book impact of c.£80 million and c.£4 million reduction in adjusted operating profit (at 31 July 2025).

While the potential future applicability of the judgment to other intermediated lending businesses remains unclear, we have reviewed documentation and processes and continue to collaborate with brokers and other intermediaries to update disclosures and procedures where appropriate.

The group operates various distribution models across our business. In Retail, most of our Motor and Premium Finance business is through intermediaries. In Commercial and Property Finance, we operate predominantly through our own direct sales teams.

Update on Claims and Complaints

The group is subject to a number of claims through the courts regarding historical motor finance commission arrangements. As noted above, the Supreme Court granted CBL permission to appeal Hopcraft in December 2024, with the hearing scheduled for three days from 1 to 3 April 2025.

As of 31 January 2025, where individual cases were adjudicated in County Court, the courts found that there was no demonstrable customer harm and hence no compensation to pay in the majority of decided cases for Close Brothers. Nevertheless, there have been only a limited number of adjudicated cases at this time and the majority of cases have been stayed pending a determination of the Supreme Court appeals.

There are also a number of complaints that have been referred to the FOS for a determination. To date, no final FOS decisions have been made upholding complaints against Close Brothers relating to motor finance commission arrangements. On 9 May 2024, the FOS announced that it would be unlikely to be able to issue final decisions on motor finance commission cases for some time due to the potential impact of an appeal regarding a judicial review proceeding started by another lender in relation to one of its January 2024 decisions and also the hearing of the Hopcraft appeal. The FCA has also extended the time firms have to respond to complaints about motor finance involving both DCAs and non-DCAs until after 4 December 2025.

Since the announcement by the FCA of its review of historical motor finance commission arrangements in January 2024, we have seen a further increase in enquiries and complaints. We have also taken steps to enhance our operational capabilities to respond to increased complaints volumes and potential changes such as the implementation of a consumer redress scheme, if required. In the first half of 2025, we have incurred £8.4 million of costs associated with complaints handling and other operational and legal costs in relation to motor finance commissions. This included increased resourcing to manage complaints and legal expenses. In the 2025 financial year, we estimate these costs will be c.£22 million, ahead of the previously provided guidance of £10-15 million as a result of additional costs associated with the Supreme Court appeals. We continue to monitor the impact on our current handling of these complaints to ensure we have the appropriate resources to respond effectively.

Temporary Impacts of Motor Finance Commissions on the Group's Financial Performance

We estimate that the group's total operating expenses for this financial year will be impacted by approximately £200 million in direct and indirect costs associated with the motor finance commissions uncertainty. This includes elevated Group (central functions) expenses related to professional and advisory fees of c.£10 million, complaints handling and other operational and legal costs amounting to c.£22 million recognised as an adjusting item, as well as a £165 million provision taken in the first half, which has also been recognised as an adjusting item. Some of these costs are temporary and are expected to diminish once the uncertainties in relation to motor finance commissions are resolved.

Financial Overview

Summary Group Income Statement1

Financial Performance

Statutory Operating Profit

The group reported a statutory operating loss before tax of £103.8 million (H1 2024: statutory operating profit of £87.0 million), primarily driven by the £165 million provision in relation to motor finance commissions. The decrease also reflected the impact of complaints handling and other operational and legal costs incurred in relation to motor finance commissions, lower profitability in the Banking division and an increase in Group (central functions) net expenses.

Adjusted Operating Profit

Adjusted operating profit decreased 15% to £74.9 million (H1 2024: £88.1 million), driven by higher impairment charges, as well as a marginal decline in income and a slight increase in costs.

Banking adjusted operating profit reduced to £104.1 million (H1 2024: £111.7 million), as an increase in impairment charges and a marginal decline in income more than offset lower costs. Excluding Novitas, Banking adjusted operating profit decreased to £101.5 million (H1 2024: £111.5 million). Winterflood delivered an operating loss of £0.8 million (H1 2024: operating loss of £2.6 million) as the business continues to navigate a challenging market environment. Group (central functions) net expenses, which include the central functions such as finance, legal and compliance, risk and human resources, increased to £28.4 million (H1 2024: £21.0 million). This was driven primarily by an increase in professional fees and expenses associated with the impact on the group of the FCA's ongoing review and the Supreme Court appeals and lower interest income received on cash balances.

As outlined at the Full Year 2024 results, we continue to expect Group (central functions) net expenses to be between £55 million and £60 million in the 2025 financial year, of which operating expenses associated with the impact on the group of motor finance commissions are estimated to be c.£10 million.

Return on opening equity reduced to 6.1% (H1 2024: 8.5%) and return on average tangible equity decreased to 7.4% (H1 2024: 9.9%)5.

Operating Income

Operating income decreased marginally to £390.0 million (H1 2024: £394.5 million), with a marginal decline in Banking and a reduction in interest income in Group (central functions) more than offsetting higher income in Winterflood.

Income in the Banking division decreased 1%, primarily driven by impact of the temporary pause in UK motor lending on business volumes, as changes were implemented by the business to ensure compliance with the current legal requirements. Income in Winterflood increased 1% as the business delivered a resilient performance in challenging market conditions and saw strong growth in Winterflood Business Services.

Income decreased in the Group (central functions) to £(7.3) million (H1 2024: £(5.0) million). This was driven by lower interest income received on cash balances.

Operating Expenses

Adjusted operating expenses rose marginally to £267.0 million (H1 2024: £264.7 million), as lower costs reflecting recent cost initiatives in both Banking and Winterflood were more than offset by higher Group (central functions) expenses.

In the Banking division, costs reduced 1% as we realised c.£6 million of savings on BAU staff costs, as well as reduced investment spend compared to the elevated level incurred in the prior year. This was partly offset by wage inflation and costs incurred on technology and expanding capabilities across the business, including in Motor Finance Ireland. Winterflood's costs decreased 4%, reflecting disciplined cost management, lower operational expenses following a cost review and the absence of dual-running property costs incurred in the prior year. Expenses in the Group (central functions) rose to £21.1 million (H1 2024: £16.0 million), primarily driven by an increase in professional fees and expenses associated with the impact on the group of the FCA's ongoing review and the Supreme Court appeals.

Overall, the group's expense/income ratio was broadly stable at 68% (H1 2024: 67%), whilst the compensation ratio remained at 36% (H1 2024: 36%).

Impairment Charges and IFRS 9 Provisioning

Impairment charges increased to £48.1 million (H1 2024: £41.7 million), corresponding to a bad debt ratio of 1.0% (H1 2024: 0.9%). Excluding Novitas, impairment charges rose to £47.2 million (H1 2024: £39.6 million), equivalent to a bad debt ratio of 1.0% (H1 2024: 0.8%). The rise in impairment charges was mainly driven by the ongoing review of provisions and coverage across our loan portfolios, including single name provisions in Property, and impacts of macroeconomic forecast updates in our Motor Finance business. This compares to a relatively low charge in the comparative period (H1 2024) which included specific model refinements. Credit quality remains resilient and bad debt ratio remains comfortably below our long-term average of 1.2%. Overall, provision coverage increased to 4.7% (31 July 2024: 4.3%), with provision coverage increasing to 2.4% (31 July 2024: 2.3%) excluding Novitas.

Since the 2024 financial year end, we have updated the macroeconomic scenarios to reflect the latest available information regarding the macroeconomic environment and improved overall outlook, although the weightings assigned to them remain unchanged. At 31 January 2025, there was a 30% weighting to the strong upside, 32.5% weighting to the baseline, 20% weighting to the mild downside, 10.5% weighting to the moderate downside and 7% weighting to the protracted downside.

Whilst we have not seen a significant impact on credit performance, we continue to monitor closely the evolving impacts of inflation and cost of living on our customers. We remain confident in the quality of our loan book, which is predominantly secured or structurally protected, prudently underwritten, diverse, and supported by the deep expertise of our people. Looking forward, we expect the bad debt ratio for the 2025 financial year to remain below our long-term average of 1.2%.

Adjusting Items

We recognised £177.9 million of adjusting items in the first half of 2025 (H1 2024: £nil), consisting of a £165.0 million provision relating to motor finance commissions, £8.4 million reflecting complaints handling and other operational and legal costs incurred in relation to motor finance commissions, £4.0 million of impairment of intangible assets, £0.4 million of restructuring costs and £0.1 million of amortisation of intangible assets on acquisition.

As outlined above, in light of recent developments in relation to motor finance commissions, the group has reviewed its accounting assessment of these matters. As a result, we have recognised a provision of £165.0 million in relation to motor finance commissions, which includes estimates for certain potential operational and legal costs, as well as estimates for potential remediation for affected customers. This provision is based on probability weighted scenarios using various assumptions, including, for example, commission models, rates and time periods in scope of any regulatory redress scheme, as well as response and uphold rates.

We incurred £8.4 million of complaints handling expenses and other operational and legal costs in relation to motor finance commissions, including increased resourcing to manage complaints and legal expenses. We estimate these costs will be c.£22 million for the full 2025 financial year, ahead of the previously provided guidance of £10-15 million as a result of additional costs associated with the Supreme Court appeals.

We also recognised £4.0 million of impairment of intangible assets relating to the carrying value of goodwill and software in the Vehicle Hire and Brewery Rentals businesses.

In addition, we incurred £0.4 million of restructuring costs, primarily relating to redundancy and associated costs. We have continued to make good progress on streamlining the workforce through the consolidation of roles across our businesses and functions, as well as through the management of vacancies. We expect to incur £2-3 million of restructuring costs in the 2025 financial year, lower than the previously provided guidance of £5-10 million as we continue to implement cost management actions to improve future efficiency, whilst postponing some restructuring activities in the immediate term as we focus on protecting the organisation.

Tax Expense

The tax expense was £9.1 million (H1 2024: £23.2 million). The effective tax rate for the period is (8.8%) (six months ended 31 January 2024: 26.3%), representing the best estimate of the annual effective tax rate expected for the full year and including the £165.0 million provision in relation to motor finance commissions recognised in the period (£159.6 million net of tax). Excluding the provision, the effective tax rate would have been approximately 24%.

The standard UK corporation tax rate for the financial year is 25.0% (six months ended 31 January 2024: 25.0%; year ended 31 July 2024: 25.0%). The effective tax rate, excluding the provision in relation to motor finance commissions, is below the UK corporation tax rate primarily due to tax relief on coupons on other equity instruments.

Profit from Discontinued Operations

Following the announcement on 19 September 2024 and the receipt of the required regulatory approvals, the group completed the sale of CBAM to funds managed by Oaktree Capital Management, L.P., on 28 February 2025. Additional details are set out on page 26. The group anticipates an estimated gain on disposal of approximately £59 million in the 2025 financial year.

In the first half of the 2025 financial year, profit from discontinued operations net of tax was £0.3 million (H1 2024: £3.9 million).

Earnings Per Share

Adjusted basic earnings per share ("AEPS") for continuing operations decreased to 30.9p (H1 2024: 43.4p) and basic earnings per share ("EPS") for continuing operations decreased to (82.8p) (H1 2024: 42.6p).

Basic earnings per share ("EPS") for continuing and discontinued operations reduced to (82.1p) (H1 2024: 46.0p).

Both the adjusted and basic EPS calculation include the payment of the coupon related to the Fixed Rate Resetting Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities ("AT1"), at an annual rate of 11.125%, on 29 November 2024. The associated coupon is due on 29 May and 29 November of each year, with any AT1 coupons paid deducted from retained earnings, reducing the profit attributable to ordinary shareholders.

Dividend

Given the continued significant uncertainty regarding the outcome of the FCA's review of motor finance commission arrangements and the Supreme Court appeals and any potential financial impact as a result, the group will not pay an interim dividend in respect of the first half of the 2025 financial year.

As previously stated, the decision to reinstate dividends will be reviewed by the board once there is further clarity on the financial impact of the FCA review of motor finance commissions and the ongoing Supreme Court appeals.

Summary Group Balance Sheet

The group maintained a strong balance sheet and continues to take a prudent approach to managing its financial resources. The fundamental structure of the balance sheet remains unchanged, with most of the assets and liabilities relating to our Banking activities. Loans and advances make up the majority of assets. Other items on the balance sheet include treasury assets held for liquidity purposes, and settlement balances in Winterflood. Intangibles, property, plant and equipment, and prepayments are included as other assets. Liabilities are predominantly made up of customer deposits and both secured and unsecured borrowings to fund the loan book.

Total assets increased 3% to £14.4 billion (31 July 2024: £14.1 billion), mainly reflecting higher market-making and Treasury assets, partly offset by the loan book reduction. Total liabilities were 4% higher at £12.7 billion (31 July 2024: £12.2 billion), driven primarily by higher market-making liabilities. Both market-making assets and liabilities, which related to trading activity at Winterflood, were higher due to higher counterparty positions at the end of the period. Assets and liabilities classified as held for sale have been recognised in respect of the discontinued operations, which relate to CBAM.

Total equity reduced 7% to £1.7 billion (31 July 2024: £1.8 billion), primarily reflecting the impact of the £165 million provision in relation to motor finance commissions on the retained earnings. The group's return on assets decreased to 0.6% (H1 2024: 0.9% excluding discontinued operations).

Group Capital

Movements in Capital and Other Regulatory Metrics

The CET1 capital ratio reduced from 12.8% to 12.2%, driven primarily by the £159.6 million provision (net of tax) in relation to motor finance commissions (-c.155bps) offset by profits in the period excluding the provision (c.50bps). There was also an AT1 coupon payment (-c.10bps) and a decrease in IFRS 9 transitional arrangements (-c.5bps). This was partly offset by a reduction in RWAs (c.45bps) and a decrease in intangible assets deducted from capital (c.10bps).

CET1 capital decreased 9% to £1,257.3 million (31 July 2024: £1,374.8 million), driven by the statutory loss in the first half (£111.8 million), which was primarily driven by the £159.6 million provision (net of tax) in relation to motor finance commissions offset by profits in the period of £47.8 million. There was also an AT1 coupon payment of £11.1 million and a decrease in the transitional IFRS 9 add-back to capital of £5.8 million. This was partly offset by a reduction in intangible assets deducted from capital of £11.5 million.

Tier 1 capital and Total capital both decreased 7% to £1,457.3 million and £1,657.3 million respectively (31 July 2024: £1,574.8 million and £1,774.8 million respectively), largely reflecting the provision taken in relation to motor finance commissions.

RWAs decreased 3% to £10.3 billion (31 July 2024: £10.7 billion), primarily driven by a reduction in loan book RWAs (£241.6 million), and a reduction in securitisation RWAs following a change to implement Securitisation Standardised Approach for Motor Finance Ireland (£55.1 million).

As a result, CET1, tier 1 and total capital ratios were 12.2% (31 July 2024: 12.8%), 14.1% (31 July 2024: 14.7%) and 16.0% (31 July 2024: 16.6%), respectively. On a pro-forma basis, reflecting the estimated benefit from the CBAM disposal, at 31 January 2025, the CET1, tier 1 and total capital ratios would have been 13.4%, 15.3% and 17.2%, respectively.

The applicable CET1, tier 1 and total capital ratio requirements, including Capital Requirements Directive ("CRD") buffers but excluding any applicable Prudential Regulation Authority ("PRA") buffer, were 9.7%, 11.4% and 13.7%, respectively, at 31 January 2025. Accordingly, we continue to have headroom significantly above the applicable requirements of c.250bps in the CET1 capital ratio, c.270bps in the tier 1 capital ratio and c.230bps in the total capital ratio.

The leverage ratio, which is a transparent measure of capital strength not affected by risk weightings, decreased to 11.7% (31 July 2024: 12.7%) largely reflecting the provision taken in relation to motor finance commissions.

The group applies IFRS 9 regulatory transitional arrangements which allow banks to add back to their capital base a proportion of the IFRS 9 impairment charges during the transitional period. Our capital ratios are presented on a transitional basis after the application of these arrangements. On a fully loaded basis, without their application, the CET1, tier 1 and total capital ratios would be 12.1%, 14.0% and 16.0%, respectively and the leverage ratio would be 11.7%.

The PRA Policy Statement PS 9/24 Implementation of the Basel 3.1 standards near-final part 2 was published on 12 September 2024, with the majority of rules applicable to the group remaining unchanged, including the proposed removal of the small and medium-sized enterprises ("SME") supporting factor, new conversion factor for cancellable facilities and new market risk rules. Following a PRA announcement in January 2025, the implementation of the final regulations has been further postponed to 1 January 2027. We continue to expect implementation to result in an increase of up to c.10% in the group's RWAs calculated under the standardised approach. However, the PRA has proposed to apply an SME lending adjustment as part of Pillar 2a, to ensure that the removal of the SME support factor does not result in an increase in overall capital requirements for SME lending. Whilst this adjustment is subject to PRA confirmation and a resulting restatement of the group's total capital requirements, we would reasonably expect the UK implementation of Basel 3.1 to have a less significant impact on the group's capital headroom position than initially anticipated.

As outlined previously, following the submission of our initial application (in December 2020) to transition to the Internal Ratings Based ("IRB") approach, the application successfully moved to Phase 2 of the process in March 2022 and engagement with the regulator continues. Our Motor Finance, Property Finance and Energy portfolios, where the use of models is most mature, were submitted with our initial application, with work on the subsequent portfolios in progress.

Capital Outlook

The sale of CBAM completed on 28 February 2025, and is estimated to generate a profit on disposal of approximately £59 million and increase the group's CET1 ratio by c.120 bps on a pro-forma basis as at 31 January 2025 from 12.2% to 13.4%.

In the near-term, we expect to maintain our CET1 capital ratio around the top end of our medium-term target range of 12% to 13%. We will resume selective loan book growth, subject to demand. At the same time, we will continue to evaluate additional potential RWA optimisation opportunities to maintain resilience and flexibility, including a potential risk transfer of assets in Motor Finance and other portfolios, should it be needed, a continuous review of our businesses and portfolios and other tactical actions.

As previously stated, the decision to reinstate dividends will be reviewed by the board once there is further clarity on the financial impact of the FCA review of motor finance commissions and the ongoing Supreme Court appeals.

Group Funding1

Our Treasury function is focused on managing funding and liquidity to support the Banking businesses, as well as interest rate risk. Our Savings business, which was integrated into the Retail business in the 2024 financial year, provides simple and straightforward savings products to both individuals and businesses, whilst being committed to providing the highest level of customer service.

Our conservative approach to funding is based on the principle of "borrow long, lend short", with a spread of maturities over the medium and longer term, ahead of a shorter average loan book maturity. We have maintained a prudent maturity profile, with the average maturity of funding allocated to the loan book at 18 months (31 July 2024: 20 months), ahead of the average loan book maturity at 15 months (31 July 2024: 16 months).

Our funding draws on a wide range of wholesale and deposit markets including several public debt securities at both group and operating company level, as well as public and private secured funding programmes and a diverse mix of customer deposits. This broad funding base reduces concentration risk and ensures we can adapt our position through the cycle.

Total funding reduced in the first half to £12.7 billion (31 July 2024: £13.0 billion), which accounted for 130% (31 July 2024: 128%) of the loan book at the balance sheet date, as scheduled repayments on secured funding and a reduction in unsecured funding was offset in part by higher customer deposits as we actively continue to grow our retail customer deposit base. The average cost of funding in Banking was maintained at 5.5% (2024: 5.5%), as interest rates remained broadly stable at a higher level. We are well positioned to continue benefiting from our diverse funding base and the strength of our Savings franchise.

While customer deposits were stable at £8.7 billion (31 July 2024: £8.7 billion), we saw a change in the mix as we have actively sought to grow our retail deposit base. Retail customer deposits increased 12% to £6.4 billion (31 July 2024: £5.7 billion), with non-retail deposits reducing 22% to £2.3 billion (31 July 2024: 3.0 billion). In line with our prudent and conservative approach to funding, our funding is predominantly term, with only 13% of total deposits available on demand and 60% having at least three months to maturity. At 31 January 2025, approximately 86% of retail deposits were protected by the Financial Services Compensation Scheme (including third party platform).

Secured funding decreased 8% to £1.1 billion (31 July 2024: £1.2 billion) as a result of scheduled repayments for our Motor Finance securitisations. Our remaining drawings under the Term Funding Scheme for Small and Medium-sized Enterprises ("TFSME") amount to £110 million, which will mature in October 2025 and which we expect to replace in line with our diverse funding profile, dependent on market conditions and demand.

Unsecured funding, which includes senior unsecured and subordinated bonds and undrawn committed revolving facilities, remained broadly stable at £1.2 billion (31 July 2024: £1.2 billion).

We continue to leverage the benefits from the previous investment in our customer deposit platform, which has provided us with scalability and enabled us to diversify our product offering. Deposits held through this platform now stand at over £6.6 billion. The introduction of Easy Access has provided us access to a large potential deposit pool, with balances of over £800 million (at 31 January 2025) less than two years after launch. We remain focused on growing our retail funding base from a variety of segments, further optimising our cost of funding and maturity profile.

Our credit ratings continue to reflect the group's inherent financial strength, including its funding and liquidity profile, diversified business model and consistent risk appetite, notwithstanding the current uncertainty. Moody's Investors Services ("Moody's") ratings for CBG and CBL are A3/P2 and A1/P1 respectively (at 15 November 2024) with ratings placed on "Review for downgrade" in light of the potential risks in relation to motor finance commissions. Moody's ratings for Close Brothers Group's senior unsecured and subordinated debt are A3 (at 15 November 2024). Fitch Ratings ("Fitch") Issuer Default Ratings ("IDRs") for CBG and CBL are BBB+/F2 with a "rating watch negative" (at 19 February 2025).

Group Liquidity

The group continues to adopt a conservative stance on liquidity, ensuring it is comfortably ahead of both internal risk appetite and regulatory requirements.

In light of the significant uncertainty regarding the outcome of the FCA's review of historical motor finance commission arrangements, we have consciously maintained a higher level of liquidity, with the majority of our large, high quality liquid asset portfolio held in cash and government bonds. During the first half, treasury assets increased 6% to £2.4 billion (31 July 2024: £2.3 billion) and were predominantly held on deposit with the Bank of England.

We regularly assess and stress test the group's liquidity requirements and continue to exceed the liquidity coverage ratio ("LCR") regulatory requirements, with a 12-month average LCR to 31 January 2025 of 953% (31 July 2024: 1,034%). In addition to internal measures, we monitor funding risk based on the CRR rules for the net stable funding ratio ("NSFR"). The four-quarter average NSFR to 31 January 2025 was 140.1% (31 July 2024: 134.4%) driven by increased retail deposits.

Business Review

Banking

Key Financials

Key Financials (Excluding Novitas)

Robust Profit Performance Reflecting our Focus on Costs and Resilient Credit Quality

The Banking division has faced an uncertain market backdrop in the first half, with the resilience of SMEs further tested by upcoming changes from the UK Budget, and consumer affordability continuing to be challenged. Whilst the regulatory environment has also introduced significant uncertainty, the resilience of our businesses and our people have driven a robust performance overall and we are confident in the opportunities for our businesses going forward.

Banking adjusted operating profit reduced to £104.1 million (H1 2024: £111.7 million), as an increase in impairment charges and a marginal decline in income more than offset lower costs.

On a statutory basis, we delivered an operating loss of £(73.8) million (H1 2024: operating profit of £111.7 million), mainly reflecting the provision of £165.0 million in relation to motor finance commissions, which includes estimates for certain potential operational and legal costs, as well as estimates for potential remediation for affected customers. We also recognised £12.9 million of other adjusting items, which included £8.4 million of complaints handling expenses and other operational and legal costs incurred in relation to motor finance commissions, reflecting increased resourcing to manage complaints and legal expenses, £4.0 million of impairment of intangible assets and £0.1 million of amortisation of intangible assets on acquisition. In addition, we incurred £0.4 million of restructuring costs, primarily relating to redundancy and associated costs, as we continued to make progress on streamlining our workforce.

The loan book reduced 3% in the first half to £9.8 billion (31 July 2024: £10.1 billion), driven by seasonality and the selective lending previously highlighted, as we sought to optimise risk weighted assets and further strengthened our capital position. This led to a lower loan book across all Banking businesses. Excluding the businesses in run-off, Novitas and the legacy Republic of Ireland Motor Finance business, the loan book was stable year-on-year but declined 2% in the first half to £9.7 billion (31 January 2024: £9.7 billion, 31 July 2024: £9.9 billion).

Operating income decreased 1% to £362.7 million (H1 2024: £365.3 million), mainly driven by the impact of the temporary pause in UK motor lending, as well as the run-off of the legacy Republic of Ireland Motor Finance business. The temporary pause to lending in UK Motor Finance is expected to have a c.£5 million impact on income and a c.£4m impact on adjusted operating profit in the 2025 financial year.

The net interest margin remained strong at 7.3% (H1 2024: 7.5%), as we maintained our focus on pricing discipline. On an underlying basis, excluding a year-on-year increase in Novitas income, as well as favourable movements in derivatives, the net interest margin reduced to 7.2% (H1 2024: 7.6%), driven by margin pressures on new business as a result of increased funding costs for SMEs in the higher rate environment.

We are well positioned to maintain a strong net interest margin but expect to see some pressure in the second half of the year from temporary factors and competitive new business margins. As a result, we expect the full-year net interest margin to be around 7%, slightly below the first half exit rate of 7.1%.

Adjusted operating expenses reduced 1% to £210.5 million (H1 2024: £211.8 million), as we realised c.£6 million of savings on BAU staff costs, as well as reduced investment spend compared to the elevated level incurred in the prior year. This was partly offset by wage inflation and costs incurred on technology and expanding capabilities across the business, including in Motor Finance Ireland. The expense/income ratio remained stable at 58% (H1 2024: 58%), while the compensation ratio marginally declined to 31% (H1 2024: 32%).

As outlined in March 2024, we have mobilised cost management initiatives and these are now expected to deliver an additional c.£5 million in annualised savings by the end of the current financial year. This increases the estimated total annualised savings to c.£25 million by the end of the current financial year (excluding costs to achieve), up from £20 million previously. Of the c.£25 million in annualised savings, we expect c.£17 million to be recognised in the 2025 Full Year income statement.

These cost management initiatives are well advanced, with significant progress made over the first half of this year. Our technology transformation programme, initiated in 2023, is focused on simplifying and modernising our technology estate, consolidating and increasing our use of strategic partners, whilst creating a more digitally enabled and agile IT environment that is secure, resilient and sustainable. The programme has now entered a second phase and to date, we have reduced our technology headcount by c.30% since the 2023 financial year, removed approximately 120 IT applications and decommissioned over a quarter of servers from our technology estate, and our migration to the Cloud is underway, reducing costs and increasing flexibility.

From a Suppliers and Property perspective, we have exited two of our London premises, with the removal of c.800 desks, and consolidation is underway elsewhere across the UK. By the end of the 2025 financial year, we will have reduced the property footprint of the Banking division by approximately one third. We are achieving improved commercial outcomes with our strategic partners, rationalising our supplier base and continuing to prudently use offshore services.

On the People side, we have continued to adjust our workforce as we drive increased efficiency and effectiveness. We have made good progress on streamlining the workforce through the consolidation of roles across our businesses and functions, as well as through the management of vacancies. In the first half, we incurred £0.4 million of restructuring costs, which continues to be recognised as an adjusting item, primarily relating to redundancy and associated costs. We expect to incur £2-3 million of restructuring costs in the 2025 financial year, lower than the previously provided guidance of £5-10 million as we continue to implement cost management actions to improve future efficiency, whilst postponing some restructuring activities in the immediate term as we focus on protecting the organisation.

Banking adjusted operating expenses in the 2025 financial year are expected to increase by c.1% on the prior year. Higher staff costs, wage inflation, and spend on technology and expansion of capabilities across the business are expected to be largely offset by cost savings achieved by our initiatives and reduced investment spend.

Looking forward, we are committed to executing further cost savings and have initiated a review to drive a step change in operational efficiency and cost reduction. Options under consideration include further consolidation and rationalisation of centrally provided services, additional technology simplification and rationalisation, further selected outsourcing and offshoring through strategic partners and targeted investment in new technologies to augment our business model, including automation and artificial intelligence.

Impairment charges increased to £48.1 million (H1 2024: £41.8 million), corresponding to a bad debt ratio of 1.0% (H1 2024: 0.9%). Excluding Novitas, impairment charges rose to £47.2 million (H1 2024: £39.6 million), equivalent to a bad debt ratio of 1.0% (H1 2024: 0.8%). The rise in impairment charges was mainly driven by the ongoing review of provisions and coverage across our loan portfolios, including single name provisions in Property, and impacts of macroeconomic forecast updates in our Motor Finance business. This compares to a relatively low charge in the comparative period (H1 2024) which included specific model refinements. Credit quality remains resilient and bad debt ratio remains comfortably below our long-term average of 1.2%.

Overall, provision coverage increased to 4.7% (31 July 2024: 4.3%), driven primarily by the impacts of interest accrual on Stage 3 loans in Novitas, as well as higher coverage in the Retail and Property businesses. Excluding Novitas, the coverage ratio increased slightly to 2.4% (31 July 2024: 2.3%).

Whilst we have not seen a significant impact on credit performance, we continue to monitor closely the evolving impacts of inflation and cost of living on our customers. We remain confident in the quality of our loan book, which is predominantly secured or structurally protected, prudently underwritten, diverse, and supported by the deep expertise of our people. Looking forward, we expect the bad debt ratio for the 2025 financial year to remain below our long-term average of 1.2%.

Update on Progress Relating to Novitas

The decision was made to wind down Novitas and withdraw from the legal services financing market following a strategic review in July 2021, which concluded that the overall risk profile of the business was no longer compatible with our long-term strategy and risk appetite. As announced in 2023, we have accelerated our efforts to resolve the issues surrounding this business. We continue to pursue formal legal action issued against one of the After the Event ("ATE") insurers and in September 2024 issued a claim against a second insurer.

In the first half, we recognised impairment charges of £0.9 million (H1 2024: £2.2 million) in relation to Novitas, primarily as a result of legal costs associated with the insurer disputes. While we will continue to review provisioning levels in light of future developments, including the experienced credit performance of the book and the outcome of the group's initiated legal action, we believe the provisions adequately reflect the remaining risk of credit losses for the Novitas loan book (£68.9 million net loan book at 31 January 2025), with the provisions representing 77.5% coverage of the gross loan book.

In addition, in line with IFRS 9 requirements, a proportion of the expected credit loss is expected to unwind, over the estimated time to recovery period, to interest income. The group remains focused on maximising the recovery of remaining loan balances, either through successful outcome of cases or recourse to the customers' ATE insurers, whilst complying with its regulatory obligations and always focusing on ensuring good customer outcomes.

Loan Book Analysis

Loan Book Decline as we Lend Selectively, although Optimistic about Opportunities 

Customer demand has remained robust and we have underwritten c.£3.5 billion of new business in the first half. The loan book declined 3% in the first half to £9.8 billion (31 July 2024: £10.1 billion), driven by seasonality and selective lending. Excluding the businesses in run-off, Novitas and the legacy Republic of Ireland Motor Finance business, the loan book was stable year-on-year although declined 2% in the first half to £9.7 billion (31 January 2024: £9.7 billion, 31 July 2024: £9.9 billion).

The Commercial loan book reduced 1% to £5.0 billion (31 July 2024: £5.1 billion). In Asset Finance, we delivered strong growth in our Transport and Materials Handling portfolios, although overall the loan book declined 1% reflecting our focus on selective lending to optimise risk weighted assets, alongside lower new business in some of our other portfolios. Invoice and Speciality Finance reduced 2%, driven by the usual seasonal decline seen in the first half of the year, although utilisation levels are elevated on the prior year period, reflecting continued customer activity. Excluding Novitas, the Commercial book declined 2% to £5.0 billion (31 July 2024: £5.0 billion).

The Retail loan book declined 6% to £2.9 billion (31 July 2024: £3.0 billion). Motor Finance reduced 5%, largely reflecting the temporary pause in new lending following the Court of Appeal's judgment in Hopcraft and the measures taken to selectively lend. We also saw some impact from the run-off of the legacy Republic of Ireland motor loan book, which was offset in part by good growth in Motor Finance Ireland following the acquisition of Bluestone Motor Finance last year. The Motor Finance Ireland loan book stood at £56.0 million at 31 January 2025 (31 July 2024: £38.8 million). Premium Finance declined 7%, reflecting the usual seasonal decline seen in the first half and the competitive market environment.

The legacy Republic of Ireland Motor Finance business, which is in run-off, accounted for 3% of the Motor Finance loan book (31 July 2024: 5%) and less than 1% of the Banking loan book (31 July 2024: 1%).

The Property loan book remained relatively flat in the first half of the year but increased 5% year-on-year. Our undrawn pipeline has reduced to c.£720 million (31 July 2024: c.£850 million), reflecting a reduction in customer demand and a more challenging economic environment.

We will resume selective loan book growth, subject to demand, with modest growth expected in the second half of the 2025 financial year. The loan book at 31 July 2025 is expected to remain broadly flat year-on-year.

Banking: Commercial

Commercial Key Metrics Excluding Novitas

Good Demand in Commercial, as we Continued to Support our SME Customers

The Commercial businesses provide specialist, predominantly secured lending principally to the SME market and include Asset Finance and Invoice and Speciality Finance. We finance a diverse range of sectors, with Asset Finance offering commercial asset financing, hire purchase and leasing solutions across a broad range of assets including commercial vehicles, machine tools, contractors' plant, printing equipment, company car fleets, energy project finance, and aircraft and marine vessels. Asset Finance also includes our Vehicle Hire and Brewery Rentals businesses. The Invoice and Speciality Finance business provides debt factoring, invoice discounting and asset-based lending, and also includes Novitas. As previously announced, Novitas ceased lending to new customers in July 2021.

Whilst we saw some positive sentiment in the early part of the first half, this has been a challenging period overall for SME businesses, with their resilience tested by ongoing market uncertainty and tax changes to be introduced following the UK Budget. In Asset Finance, the marketplace has remained competitive, with borrower appetite varied across sectors and overall sentiment impacted by an uncertain outlook and higher borrowing costs, driving some softening in demand and pressure on new business margins. In the Invoice Finance market, we have seen some changes in the competitive environment and our strong offering and service has enabled us to win new clients. Overall, our Commercial businesses continued to benefit from the diversity of our offering. Our growth initiatives continued to prove successful, as the Materials Handling team delivered healthy new business volumes and our lending limit was increased under the UK government's Growth Guarantee Scheme. Our restructured Broker and Professional Solutions business is receiving positive feedback from brokers in response to its newly launched proposition and recently won an industry award.

Adjusted operating profit for Commercial decreased to £45.2 million (H1 2024: £50.9 million), mainly driven by a marginal reduction in income and higher impairment charges. Before provisions for impairment losses, adjusted operating profit reduced 6% to £61.3 million (H1 2024: £65.5 million), reflecting a decline in income and higher costs.

We saw an increase in adjusted operating profit in Novitas (H1 2025: £2.6 million, H1 2024: £0.2 million), which is currently in run-off. This was primarily driven by higher income, reflecting lower funding costs and higher interest accruals driven by the partial unwind of the expected credit loss, coupled with lower impairment charges.

Excluding Novitas, adjusted operating profit decreased 16% to £42.6 million (H1 2024: £50.7 million).

On a statutory basis, operating profit decreased to £41.1 million (H1 2024: £50.9 million). This reflects the recognition of £4.0 million of impairment of intangible assets relating to the carrying value of goodwill and software in the Vehicle Hire and Brewery Rentals businesses, as well as £0.1 million of restructuring costs.

Operating income reduced 2% to £165.2 million (H1 2024: £168.5 million) driven by lower utilisation levels in the Vehicle Hire and Brewery Rentals businesses, losses on de-fleeting activities in Vehicle Hire and reduced service fee income, partially offset by an increase in Novitas income. The net interest margin declined to 6.5% (H1 2024: 6.8%), reflecting the impact of lower utilisation in Vehicle Hire and Brewery Rentals, reduced service fee income and continued pressure on new business margins. Excluding Novitas, the net interest margin decreased to 6.3% (H1 2024: 6.7%).

Adjusted operating expenses increased marginally to £103.9 million (H1 2024: £103.0 million), mainly driven by higher costs in relation to Novitas, as the prior period benefitted from a one-off credit of £1.5 million, partially offset by lower investment spend. As a result, the Commercial expense/income ratio increased to 63% (H1 2024: 61%).

We continue to benefit from the investment made in our Asset Finance transformation programme, which was completed last financial year. This has introduced a single technology platform across the business and has standardised processes, leading to a better customer and colleague experience, whilst providing a platform for scalable growth.

Impairment charges increased to £16.1 million (H1 2024: £14.6 million) driven by provisions against certain individual exposures, partly offset by a reduction in Stage 3 loans in Invoice Finance. Provision coverage increased to 6.1% (31 July 2024: 5.7%), driven primarily by the impacts of interest accrual on Stage 3 loans in Novitas.

Excluding Novitas, there was an increase in impairment charges to £15.2 million (H1 2024: £12.4 million). This corresponded to a bad debt ratio of 0.6% (H1 2024: 0.5%) and a broadly stable coverage ratio (excluding Novitas) of 1.5% (31 July 2024: 1.4%).

Banking: Retail

Remain Focused on Prioritising our Margins and Underwriting Discipline in a Challenging Environment

The Retail businesses provide intermediated finance, through motor dealers, motor finance brokers and insurance brokers. Finance is provided to both individuals and to a broad spectrum of UK businesses.

The market backdrop continued to present challenges in the first half, with significant uncertainty in relation to the FCA's motor finance work and the Court of Appeal's judgment in Hopcraft. Although the Motor Finance business was impacted by the pause in lending in October 2024, we have remained focused on providing excellent service to our customers and partners, with all of our business lending channels live from January 2025. We are seeing good growth in Motor Finance Ireland following the acquisition of Bluestone Motor Finance (Ireland) DAC in October 2023. Furthermore, as part of our ongoing investments, we continue to strengthen our existing relationships with Motor Finance partners through the integration of our Decision in Principle ("DiP") technology. The tool supports customers to establish their borrowing capacity before applying for a loan. This technology has opened up additional routes to market and will play a key role in ensuring that we continue to have a strong proposition wherever the consumer chooses finance.

The Premium Finance business operates in a mature market where we have seen some softening in demand. We have started the rollout of a Digital Commission Disclosure Consent ("CDC") solution across our partner base. We continue to monitor our delivery of good outcomes in respect of Consumer Duty and are engaging with the FCA as required as part of the premium finance Market Study.

Adjusted operating profit for Retail reduced to £16.8 million (H1 2024: £19.0 million). Before provisions for impairment losses, adjusted operating profit decreased 2% to £40.0 million (H1 2024: £41.0 million).

In light of recent developments in relation to motor finance commissions, the group has reviewed its accounting assessment of these matters, as previously stated. As a result, the group has recognised a provision in relation to motor finance commissions of £165.0 million. On a statutory basis, Retail delivered an operating loss of £156.9 million (H1 2024: £19.0 million operating profit) mainly reflecting the provision of £165.0 million in relation to motor finance commissions, which includes estimates for certain potential operational and legal costs, as well as estimates for potential remediation for affected customers, and £8.4 million of complaints handling and other operational and legal costs incurred in relation to motor finance commissions.

Operating income decreased 2% to £128.8 million (H1 2024: £131.8 million), mainly driven by the temporary pause in UK motor lending following the Court of Appeal's judgment in Hopcraft and loan book moderation measures. This was partially offset by good growth in Close Brothers Motor Finance in Ireland. The net interest margin remained stable at 8.7% (H1 2024: 8.7%) as lower fee income and lower margin loan book mix was offset by favourable costs of funds in Premium Finance.

Adjusted operating expenses reduced 2% to £88.8 million (H1 2024: £90.8 million), driven by cost management initiatives previously outlined and higher investment spend in the prior year period. The expense/income ratio remained stable at 69% (H1 2024: 69%) with neutral operating leverage.

Impairment charges increased to £23.2 million (H1 2024: £22.0 million), driven primarily by the impacts of macroeconomic forecast updates in our Motor Finance business. The bad debt ratio increased to 1.6% (H1 2024: 1.5%), with the provision coverage ratio increasing to 3.3% (31 July 2024: 3.0%), driven by higher coverage on Stage 3 loans.

Banking: Property

Healthy Drawdowns Despite a Difficult Market Backdrop

Property comprises Property Finance and Commercial Acceptances. The Property Finance business is focused on specialist residential development finance to established SME housebuilders and professional developers in the UK for ground up and refurbishment projects. Property Finance also provides limited funding for commercial assets. Commercial Acceptances provides bridging and short-term loans for auction properties, small refurbishment and residential development projects.

The first half of the year has presented a difficult market backdrop for SME developers, with interest rates remaining at elevated levels, customer affordability being challenged and limited housing delivery. Nevertheless, we delivered a solid financial performance, supported by our relationship-led proposition and excellent customer service. We are also seeing encouraging green shoots, with government rhetoric positive on housebuilding, customer demand remaining strong and a liquid mortgage market. We are making the most of a number of growth opportunities, through expanding our presence in the regions outside of London and the South East and bringing in expertise to expand our product range as we move into other residential asset classes such as Build-to-Rent and student accommodation.

Adjusted operating profit rose 1% to £42.1 million (H1 2024: £41.8 million), as income growth and a reduction in operating expenses more than offset an increase in impairments. Before provisions for impairment losses, operating profit increased 8% to £50.9 million (H1 2024: £47.0 million).

On a statutory basis, operating profit was stable at £42.0 million (H1 2024: £41.8 million).

Operating income rose 6% to £68.7 million (H1 2024: £65.0 million), driven by year-on-year loan book growth, although the net interest margin decreased to 7.1% (H1 2024: 7.3%), mainly reflecting lower interest margins due to loan book mix.

Adjusted operating expenses reduced 1% to £17.8 million (H1 2024: £18.0 million), reflecting lower staff costs. As a result, the expense/income ratio decreased to 26% (H1 2024: 28%).

Impairment charges increased to £8.8 million (H1 2024: £5.2 million), corresponding to a bad debt ratio of 0.9% (H1 2024: 0.6%). This was driven primarily by an ongoing review of individually assessed provisions. The provision coverage ratio increased to 3.4% (31 July 2024: 3.0%), driven by elevated Stage 3 provisions.

The Property loan book is conservatively underwritten. We work with experienced, professional developers, predominantly SMEs with a focus on delivering mid-priced family housing, and have minimal exposure to the prime central London market, with our regional loan book making up over 50% of the Property Finance portfolio. Our long track record, expertise and quality of service ensure the business remains resilient to competition and continues to generate high levels of repeat business.

Winterflood

Key Financials

Challenging Market Conditions Continued to Impact Trading Income

Winterflood is a leading UK liquidity provider, delivering high-quality execution services to platforms, stockbrokers, wealth managers and institutional investors, as well as providing corporate advisory services to investment trusts and outsourced dealing and custody services via Winterflood Business Services ("WBS").

Over the first half, Winterflood continued to navigate a volatile macroeconomic environment, with investor sentiment shaped by persistent inflation, evolving interest rate expectations and geopolitical uncertainty. While inflation has begun to moderate, market confidence has yet to fully stabilise, with UK-focused equities continuing to experience net outflows. These factors have impacted Winterflood's trading income and as a result, it delivered an operating loss of £0.8 million (H1 2024: operating loss of £2.6 million).

Operating income increased 1% to £34.6 million (H1 2024: £34.2 million), with growth in WBS more than offsetting a decline in trading income.

Trading income decreased 6% to £24.0 million (H1 2024: £25.6 million) reflecting challenging market conditions. Despite this, we incurred only one loss day (H1 2024: three loss days) as we remained focused on risk management and benefited from the expertise of our traders. Whilst equity market performance was mixed, with the FTSE 100 and FTSE 250 delivering moderate gains, the AIM-listed stocks lagged due to subdued investor confidence. Average daily bargains in the period were 55k, up 6% year-on-year (H1 2024: 52k).

Income from the Investments Trusts corporate business declined to £1.1 million (H1 2024: £1.7 million), reflecting a challenging fundraising environment with low issuance.

WBS continued to see good momentum, with income rising 22% to £9.5 million (H1 2024: £7.8 million). Assets under administration ("AuA") increased 27% to £17.5 billion (H1 2024: £13.8 billion), supported by net inflows and positive market movements in the period. WBS remains focused on developing its client relationships and investing in its award-winning proprietary technology to provide highly scalable and bespoke solutions for clients. WBS is well positioned for further growth, both organically and supported by a healthy pipeline of clients, and expects to grow AuA to over £20 billion by 2026.

Operating expenses reduced 4% to £35.4 million (H1 2024: £36.9 million), reflecting lower operational expenses following a cost review undertaken last financial year and the absence of dual-running property costs incurred in the prior year. 

We continue to make strong progress in Winterflood Retail Access Platform ("WRAP") using in-house technology and expertise. This is an end-to-end retail distribution platform that enables retail investors to participate in capital markets transactions such as initial public offerings and secondary fundraisings through retail intermediaries, across both equity and fixed income instruments. Since inception, WRAP has raised over £100 million from retail investors and has been mandated on 34 transactions, working with 15 different banks and brokers.

While macroeconomic and geopolitical uncertainties persist, the robust pipeline of clients for WBS supports Winterflood's broader growth strategy. With inflation and interest rates moderating, we anticipate a gradual improvement in investor confidence and trading activity. We are confident that Winterflood remains well positioned to benefit when market conditions return.

Discontinued Operations (Asset Management)

Key Financials1

Sale Agreement with Oaktree

On 19 September 2024, we announced the sale of CBAM to funds managed by Oaktree Capital Management, L.P. ("Oaktree") for an equity value of up to £200 million. Following receipt of the required regulatory approvals, the transaction completed on 28 February 2025.

The equity value of up to £200 million included £172 million of cash paid at completion of the transaction (comprising an upfront cash consideration of approximately £146 million paid by Oaktree to Close Brothers and a dividend of approximately £26 million paid by CBAM to Close Brothers); and up to £28 million of contingent deferred consideration in the form of preference shares.

Financial Impact on the Group

The group anticipates an estimated gain on disposal of approximately £59 million. This estimate is based on the difference between the upfront cash consideration of £146 million plus the fair value of c.£21 million for the £28 million of contingent deferred consideration in the form of preference shares, and CBAM's net asset value of £100 million as at the completion date (net of a dividend of approximately £26 million paid by CBAM to Close Brothers), as well as transaction costs of c.£8 million. Any subsequent changes in the fair value of the contingent deferred consideration after the completion date will be recognised in the group's income statements going forward.

The estimated CET1 benefit of c.120 basis points is based on financials as at 31 January 2025 on a pro-forma basis. This calculation is based on a tangible net asset value of £43 million and assumes an immediate reduction in credit risk RWAs associated with the CBAM business, as well as the estimated capital benefit expected to be recognised in respect of the estimated gain on sale described above. The estimated CET1 benefit from the sale excludes any immediate reduction in operational risk RWAs associated with the CBAM business. The group expects a further capital benefit over the next three years of up to c.25 basis points to its CET1 capital ratio as at 31 January 2025 on a pro-forma basis, due to a reduction in these operational risk RWAs.

Performance in the Six Months to 31 January 2025

Total operating income rose 8% to £82.4 million (H1 2024: £76.3 million), reflecting positive market movements, with growth in AuM delivered by the bespoke investment management business resulting in higher investment management and financial planning income. This was partially offset by lower net inflows. The revenue margin reduced to 77 bps (H1 2024: 84 bps) primarily due to a change in the mix of business into lower margin passive and fixed income products and a move to larger client size with a typically lower fee margin.

Adjusted operating expenses increased 11% to £77.6 million (H1 2024: £70.0 million), reflecting inflation-related salary increases and non-staff costs. The expense/income ratio grew to 94% (H1 2024: 92%), with the compensation ratio also increasing to 64% (H1 2024: 63%).

Operating profit from discontinued operations decreased 25% to £4.7 million (H1 2024: £6.3 million) as growth in income was more than offset by higher costs. The operating margin reduced to 6% (H1 2024: 8%), corresponding to 13% (H1 2024: 15%) when excluding the costs related to the hiring of investment managers and the associated AuM in the bespoke investment management business.

Profit from discontinued operations before tax was £1.7 million (H1 2024: £5.7 million) mainly reflecting £2.4m of disposal costs.

Over the period, net inflows decreased to £160 million (H1 2024: £732 million) and delivered a net inflow rate of 2% (H1 2024: 9%). This was mainly due to higher inflows seen in H1 2024 related to the initial migration period of assets from bespoke investment managers and higher outflows seen in H1 2025 reflecting the uncertain backdrop and the CBAM sale process.

Total managed assets increased 6% to £20.6 billion (31 July 2024: £19.3 billion), driven by positive market performance. Total client assets, which includes advised and managed assets, also increased by 6% to £21.7 billion (31 July 2024: £20.4 billion).

Movement in Client Assets

Basis of Presentation

Results are presented both on a statutory and an adjusted basis to aid comparability between periods. Adjusted measures are presented on a basis consistent with prior periods and exclude the provision in relation to motor finance commissions, costs associated with complaints handling and other operational and legal costs incurred in relation to motor finance commissions, restructuring costs, amortisation of intangible assets on acquisition and profit from discontinued operations of £0.3 million, to present the performance of the group's acquired businesses consistent with its other businesses; and any exceptional and other adjusting items which do not reflect underlying trading performance. Discontinued operations relate to CBAM, which has been classified as a discontinued operation in the group's income statement for the 2024 and 2025 financial years. The related assets and liabilities are classified as held for sale on the group's balance sheet at 31 January 2025. The adjusting items are presented within administrative expenses on a statutory basis. Please refer to Note 2 "Segmental Analysis" for further details on items excluded from the adjusted performance metrics.

Principal Risks and Uncertainties

The group faces a number of risks in the normal course of business. To manage these effectively, a consistent approach is adopted based on a set of overarching principles, namely:

•  adhering to our established and proven business model;

•  implementing an integrated risk management approach based on the concept of "three lines of defence"; and

•  setting and operating within clearly defined risk appetites, monitored with defined metrics and limits.

At the core of the group's risk management framework are the group's principal risks which are the risks that have been identified as those most material in the delivery of the group's strategic objectives. A detailed description of each, including an overview of our risk management and mitigation approach, is disclosed on pages 74 to 116 of the 2024 Annual Report. The Annual Report can be accessed via the Investor Relations home page on the group's website at www.closebrothers.com.

The principal risks are listed below and are subject to ongoing review to ensure that the framework remains aligned to the prevailing risk environment. In the current macroeconomic and operating environment, we remain vigilant to developments in our principal risk profile and proactively monitor a suite of emerging risks which reflect broader market uncertainties.

A summary of the group's principal risks is detailed below:

Business and strategic risk - The group operates in an environment where it is exposed to various independent influencing factors. Its profitability can be impacted by the broader UK economic climate; front-line sales performance; changes in technology, regulation and customer behaviour; cost movements; and competition from traditional and new players. All of these can vary in both nature and extent across its divisions.

Changes in these factors may affect the Banking division's ability to advance loans or products as it seeks to maintain its desired risk and reward criteria, impact levels of trading activity at Winterflood, or result in additional investment requirements and higher costs across the group.

Capital risk - The group is required to hold sufficient regulatory capital (including equity and other loss-absorbing debt instruments) to enable it to operate effectively. This includes meeting minimum regulatory requirements, operating within risk appetites set by the board and supporting its strategic goals. As explained above, the group has recognised a provision in relation to motor finance commissions of £165 million which has an impact on its capital position. There remains significant uncertainty as to the range of outcomes from the Supreme Court appeals and FCA's ongoing review of motor commissions and, therefore, the ultimate cost to the group could be materially higher or lower than the provision taken. In March 2024 the group announced a range of management actions aimed at strengthening the group's available CET1 capital by approximately £400 million by the end of the 2025 financial year. As a result of these actions, approximately £360 million of CET1 capital has been generated or preserved as of 31 January 2025 (relative to the capital trajectory projected at the time). These actions include the decision to not pay any dividend payments, RWA optimisation including loan book growth moderation, cost management initiatives and the sale of Close Brothers Asset Management which was completed on 28 February 2025. We continue to evaluate a range of additional potential management actions to further optimise RWAs, including potential risk transfer of assets in Motor Finance and other portfolios, should it be needed, together with a continuous review of our businesses and portfolios and other tactical actions. Any decision to reinstate dividends will be reviewed by the board once there is further clarity on the FCA review of motor commissions and the ongoing Supreme Court appeals, with such decision seeking to ensure that sufficient capital is retained in the group.

Conduct risk - The group is exposed to conduct risk in its provision of products and services to customers both directly and via its intermediaries, and through other business activities that enable delivery. The regulatory change agenda continues at pace and is expected in the near term to continue to enhance consumer protection. Regulatory expectations, including with respect to retail customer savings and borrowing, and trading activities, continue to evolve with impact on the group's businesses in each of these markets. Failure to evidence delivery of good customer outcomes may lead to reputational harm, legal or regulatory sanctions and/or customer redress. Where actual customer harm has been identified, the company is taking steps to address this, including through its response to the FCA's Borrowers in Financial Difficulty review for which remedial action is materially progressed.

Credit risk - As a lender to businesses and individuals, the bank is primarily exposed to credit losses if customers are unable to repay loans and outstanding interest and fees. The group also has exposure to counterparties including those with which it places deposits or trades, and a small number of derivative contracts to hedge interest rate and foreign exchange exposures.

Whilst credit performance remains resilient, we continue to monitor closely the evolving economic conditions and the impacts on our customers. We remain confident in the quality of our loan book, which is predominantly secured, prudently underwritten, diverse, and supported by the deep expertise of our people.

Funding and liquidity risk - The Banking division's access to funding remains key to support our lending activities and the liquidity requirements of the group. Funding and liquidity are measured and monitored on a daily basis with issues escalated as appropriate. During this period the bank has closely monitored how the uncertainties and developments relating to motor commissions have impacted its funding and liquidity position. The bank's 'borrow long, lend short' funding approach provides significant resilience against short- to medium-term liquidity shocks and accordingly there have been minimal impacts to the bank's liquidity position. In addition to its prudent funding model, the bank holds significant amounts of liquid assets to ensure it is well positioned to manage through any liquidity pressure should it arise in the future. 

Legal and regulatory risk - The group is subject to the laws and regulations of the various jurisdictions in which it operates. This exposure includes risks of breaching financial services regulations and laws, as well as action resulting from contractual breach and litigation (including direct customer claims based on regulatory breaches). Failure to comply with existing legal or regulatory requirements, or to adapt to changes in a timely fashion in the course of the provision of products and services, may result in legal and regulatory risk. Changes could also affect our financial performance, capital, liquidity and access to markets in which we operate.

With an increased regulatory focus on protecting customers, any failure to implement and/or adapt to these changes quickly may expose the group to reputational harm, legal or regulatory sanctions and/or customer redress requirements.

A primary development within the period includes the Court of Appeal ruling in Johnson, Wrench and Hopcraft in which the Court of Appeal set a higher bar for the disclosure of and consent to commissions than required by current FCA rules, or regulatory requirements in force at the time of the case in question. It requires the disclosure of and the customer's consent to, not only the existence and nature of the commission, but also the amount of the commission. We disagree with the Court of Appeal's judgment and are appealing it to the Supreme Court.

A further development emerging within the period is the FCA's ongoing Premium Finance Market Study. Following the FCA publishing its draft terms of reference as MS24/2.1 in October 2024, the business continues to engage with the FCA through this process. The business awaits the outcomes of the Market Study to understand any subsequent impacts which may arise.

Non-traded market risk - Changes in market prices such as interest rates, credit spreads and foreign exchange rates have the potential to impact the value of assets or liabilities outside the trading book. Our current outlook on non-traded market risk remains broadly unchanged since the last reporting period.

Operational risk - The group is exposed to various operational risks through its day-to-day operations, all of which have the potential to result in financial loss or adverse impact. Losses typically crystallise as a result of inadequate or failed internal processes, people, models and systems, or as a result of external factors, including but not limited to Cyber and Information Security. Impacts to the business, customers, third parties and the markets in which the group operates are considered within a maturing framework for resilient delivery of important business services.

Operational risk is a core component of the Enterprise Risk Management Framework and its management is embedded in day-to-day business activities. Requirements and responsibilities are set out in the Operational Risk Policy and supporting standards and procedures as part of the framework to identify, assess, mitigate, monitor and report the operational risks, events and issues that could impact the achievement of business objectives or impact core business processes.

Businesses are responsible for the day-to-day management of operational risk, with oversight from the risk and compliance function, and independent assurance activities undertaken by group internal audit. The group's exposure to operational risk is impacted through the need to engage with innovative, dynamic third parties; delivery of new products and services; and effective use of reliable data in a changing external environment, to support delivery of the group's strategic objectives.

The outlook for operational risk continues to be under upward pressure. Scenario analysis is used to assess how severe but plausible operational risks will affect the group, providing a forward-looking basis for evaluating and managing operational risk exposures. In parallel, close monitoring continues on external factors and impacts which could arise from geo-political events and the legal and regulatory environment.

Reputational risk - Protection and effective stewardship of the group's reputation are fundamental to its long-term success. Detrimental stakeholder perception could lead to impairment of the group's current business and future goals. The group remains exposed to potential reputational risk in the course of its usual activities, such as through employee, supplier or intermediary conduct, the provision of products and services, crystallisation of another risk type, or as a result of changes outside its influence.

Media coverage of the FCA review of motor commissions, the Court of Appeal judgement in Hopcraft, and the group's appeal of the judgement to the Supreme Court has increased inherent reputational risk. The outlook for reputational risk will remain heightened as the timeline for FCA review of motor commissions continues to be extended, with FCA announcing it plans to confirm its next steps in its review within six weeks of the Supreme Court's decision and not in May 2025 as previously stated.

Traded Market risk - Traded market risk in the group only arises in Winterflood, whose core business is to provide liquidity and interact with the market on a principal basis, holding positions in financial instruments as a result of its client facilitation activity. Winterflood operates as a market maker in equities, exchange-traded products, investment trusts and sovereign and corporate bonds, operating across three primary markets: the United Kingdom, North America and Europe. For hedging purposes, derivatives are also traded, although these are limited to listed futures in UK equity and fixed income markets and FX forwards. Geopolitical uncertainty is likely to be the key driver of the volatility in Winterflood's market risk exposures over the coming 12 months.

Climate risk - Running alongside the suite of principal risks is climate risk, which the group categorises as a cross-cutting risk, as the impacts arising from climate change have the ability to impact across the spectrum of principal risks. Climate risk represents a continued area of focus, and the group continues to closely monitor government and regulatory developments in parallel to managing its own carbon footprint and supporting its customers to manage their climate risk impacts. Climate risk is embedded within the group's risk management framework, ensuring effective oversight. Climate disclosures are disclosed on pages 33 to 54 of the 2024 Annual Report.

Emerging and evolving risks

In addition to day-to-day management of its principal risks, the group utilises an established framework to monitor its portfolio for emerging risks, consider broader market uncertainties, and support its organisational readiness to respond. Group-level emerging risks are monitored by the Group Risk and Compliance Committee on an ongoing basis, with key themes and patterns of deterioration monitored via several sub-risks.

Current group level emerging risks include economic and geopolitical uncertainty (including US political risk), medium to long-term transitional climate risks, legal and regulatory change, supply chain risks, change execution risk, strategic disruption.

Directors' Responsibility Statement

Each of the Directors confirms that, to the best of their knowledge:

•  the condensed consolidated interim financial statements ("interim financial statements") have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards ("IAS");

• the half year results include a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months of the financial year and their impact on the interim financial statements, and a description of principal risks and uncertainties for the remaining six months of the financial year); and

• the half year results include a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related parties transactions that have taken place during the first six months of the current financial year and that have materially affected the financial position or performance of the company, and any changes in the related parties transactions described in the last Annual Report that could do so).

The Directors of Close Brothers Group plc as at the date of this report are as listed on pages 124 to 126 of the company's 2024 Annual Report, subject to the following change: Adrian Sainsbury ceased to be a Director of the company on 6 January 2025. A list of current Directors is maintained on the company's website www.closebrothers.com.

On behalf of the board

Michael N. Biggs Michael B. Morgan

Chairman Chief Executive

18 March 2025

Independent review report to Close Brothers Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Close Brothers Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the Half Year Results of Close Brothers Group plc for the 6 month period ended 31 January 2025 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

•  the consolidated balance sheet as at 31 January 2025;

•  the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

•  the consolidated statement of cash flows for the period then ended;

•  the consolidated statement of changes in equity for the period then ended; and

•  the explanatory notes to the interim financial statements.

The interim financial statements included in the Half Year Results of Close Brothers Group plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half Year Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half Year Results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half Year Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the Half Year Results, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the Half Year Results based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

18 March 2025

Consolidated Income Statement

For the six months ended 31 January 2025

Consolidated Statement of Comprehensive Income

For the six months ended 31 January 2025

Consolidated Balance Sheet

At 31 January 2025

Consolidated Statement of Changes in Equity

For the six months ended 31 January 2025