Half-year Report for six months to 31 January 2026

Half Year Results for the six months to 31 January 2026

17 March 2026

Mike Morgan, Chief Executive, said:

"Close Brothers has been part of the backbone of the UK business community for nearly 150 years. Last year alone we lent £7 billion into the economy, continuing to make a real difference to the businesses and consumers we serve.

In the first half of the 2026 financial year, the group delivered a resilient trading performance reflecting cost discipline, solid credit performance and a robust net interest margin. We have repositioned the business to focus on markets where we see strong and sustainable opportunities. As a result, and given current market conditions, the loan book has marginally reduced in the first half, while a number of our core businesses continued to grow. We are well positioned for future growth as a specialist banking group.

Our CET1 capital ratio remains strong at 14.3% and we are confident that this leaves us well placed to absorb a range of potential outcomes from the FCA's proposed motor finance commission redress scheme.

We remain focused on delivering our strategic priorities: simplify, optimise, and grow. With the simplification of our business largely complete, we are firmly in the optimisation stage, and have accelerated our cost savings plans. We now expect to deliver c.£25 million of annualised savings in the current financial year and a total of c.£60 million of annualised savings by the end of 2027 rather than 2028. This positions us well to reach double-digit returns by the 2028 financial year, rising thereafter."

Key Financials1

Unless otherwise stated, all metrics refer to continuing operations only

Highlights

New guidance

We have accelerated our cost savings targets, reflecting strong progress in our transformation activities. The other components of outlook and guidance remain unchanged, as we continue to progress towards double-digit RoTE by the 2028 financial year, rising thereafter:

Existing guidance

Presentation

A virtual presentation to analysts and investors will be held today at 9.30am GMT followed by a Q&A session and a business update where we will provide further information on the business, strategy and market opportunity for each of our three lending divisions, as well as additional detail on our current cost initiatives.

A webcast will be available by registering at: https://webcasts.closebrothers.com/results/HalfYearResults2026

Enquiries

About Close Brothers

Close Brothers is a UK specialist banking group providing lending and deposit taking. We employ approximately 2,600 people, principally in the United Kingdom and Ireland. Close Brothers Group plc is listed on the London Stock Exchange.

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 any exceptional and adjusting items which do not reflect underlying trading performance. Current adjusting items include customer remediation provisions, operational or legal costs incurred in relation to an event that is deemed to be adjusting, Close Brewery Rentals Limited ("CBRL") which was sold in the period, Close Brothers Vehicle Hire ("CBVH") which is in wind-down, restructuring costs and amortisation of intangible assets on acquisition. There are no exceptional items presented in these financial results.

Discontinued operations relate to Close Brothers Asset Management ("CBAM") and Winterflood Securities ("Winterflood"), which were classified as discontinued operations in the group's income statement in the 2024 and 2025 full year results respectively. The group's income statement for the 2025 half year has been restated to classify Winterflood as a discontinued operation. Winterflood's assets and liabilities were classified as held for sale on the group balance sheet at 31 July 2025. The sale of CBAM completed on 28 February 2025, and the sale of Winterflood completed on 1 December 2025; therefore no assets or liabilities in respect of these businesses remain on the balance sheet at 31 January 2026. The sale of CBRL completed on 31 August 2025. The assets and liabilities of this business were classified as held for sale on the group balance sheet at 31 July 2025. No assets or liabilities in respect of this business remain on the balance sheet at 31 January 2026.

Chief Executive's Statement

It has now been a year since I took on the role as Group Chief Executive. While this year has not been easy, I look back on it with immense pride in the progress made by the organisation. We have delivered our capital actions and substantially strengthened our capital position. Through the Supreme Court, we successfully overturned the Court of Appeal's judgment in respect of the Hopcraft case. We have addressed legacy issues, simplified the group and repositioned the business for growth. We delivered an initial £25 million of annualised cost savings in 2025, launched our transformation programme and are now accelerating our cost targets for the next two years.

Although 2026 performance has been impacted by both market conditions and the actions we have taken to reposition the business, those actions have strengthened the business and laid the foundations for a recovery in growth and returns going forward.

Close Brothers has been part of the backbone of the UK business community for nearly 150 years. Last year alone we lent £7 billion into the economy, continuing to make a real difference to the businesses and consumers we serve. Our business rests on strong foundations, with an excellent customer reputation and clear differentiation.

At the same time I have been clear that despite these strong foundations, our returns are not where they need to be. A combination of external factors, internal challenges and a rising cost base have intensified the need for fundamental change.

A year ago, I set out a clear set of strategic priorities: simplify, optimise, and grow.

The simplify leg of our strategy is largely complete. By selling Close Brothers Asset Management, Winterflood and Brewery Rentals, exiting Vehicle Hire and concentrating on our higher value commercial brokers in Premium, we have simplified the group and refocused on our core markets where we can deliver strong returns and grow.

Today we are a simpler group, focused exclusively on specialist lending through our three divisions: Commercial, Retail, and Property. Our performance in the first half continues to demonstrate the resilience and strong foundations of these core businesses.

We are now firmly into the optimise stage. In the summer we launched our transformation programme, focused on significant cost reduction and streamlining of our historically federated organisational model. We now expect to deliver c.£25 million (previously c.£20 million) of annualised cost savings in the 2026 financial year, and a total of c.£60 million of annualised savings by the end of 2027 (previously 2028), in addition to the £25 million annualised savings delivered in 2025, setting us firmly on the path to double-digit returns by 2028, and rising thereafter.

These savings will be delivered through a combination of centralisation and rationalisation of shared services, increased use of outsourcing and offshoring, and further reductions in our third party spend and property footprint.

In parallel, we are progressing the deployment of automation and artificial intelligence at pace, providing further opportunity both to reduce costs and enhance customer experience.

I look forward to providing further details on these cost initiatives in our business update to the market, which we are hosting this morning.

These changes will result in a reduction of c.600 FTE by the end of 2027. While the impact on affected colleagues is regrettable, these actions are necessary to structurally lower our cost base, while increasing our agility and ability to serve our customers with the speed, flexibility and reliability that they have come to expect.

These actions represent an important step in the evolution of our operating model to support future scalability, improving our ability to deliver operating leverage and achieve further savings in years to come.

We are equally committed to building on our long track record of growth through the cycle. In the first half we were pleased to see expansion in both Asset Finance and Motor Finance, with a strong contribution from our Irish businesses. While the repositioning of our business and current market conditions have impacted overall growth in the period, I am confident we are in the right markets, with the right proposition, and that our businesses have capacity for meaningful growth through a combination of core business expansion and new initiatives.

In today's presentation you will hear directly from each of our three divisional CEOs about the opportunities in each of their areas, underpinning our confidence that we can continue to grow at a rate of 5-10% p.a. through the cycle.

We have also further strengthened our CET1 capital ratio to 14.3% at 31 January 2026 after taking a total motor finance provision of £300 million, and we continue to make progress towards Phase 3 of the Internal Ratings Based ("IRB") application process. While we continue to await details of the FCA's proposed redress scheme, we are confident that this leaves us well placed to absorb a range of potential outcomes without impacting our prospects for growth and investment. As clarity emerges, we will continue to optimise funding, capital and liquidity, to further enhance our long-term returns trajectory.

I am confident that the resilience of our core businesses, our strong market positions and determination to address the cost base, leave us well placed for sustainable growth, resumption of capital returns for shareholders, and the delivery of higher levels of returns.

We recognise the uncertainty in the macroeconomic outlook, both in the UK, reflecting interest rate and inflation dynamics, and globally amid heightened geopolitical tensions. We continue to monitor developments closely, maintaining a disciplined focus on execution, risk management and supporting our people. The group remains well positioned, underpinned by a resilient balance sheet and clear strategic priorities.

Mike MorganChief Executive

Historical motor finance commission arrangements

Overview of Developments in relation to Motor Finance Commissions

On 1 August 2025, the Supreme Court gave its judgment, in which Close Brothers Limited ("CBL") successfully overturned the Court of Appeal's judgment in respect of the "Hopcraft" case. The Supreme Court determined that motor dealers (acting as a credit broker) do not owe fiduciary duties to their customers. As a result, the Supreme Court dismissed the Hopcrafts' claims against CBL entirely. The Supreme Court reached the same conclusion on these issues in relation to the "Wrench" and "Johnson" cases against FirstRand Bank Limited.

Following the publication of the Financial Conduct Authority ("FCA")'s consultation paper on 7 October 2025 on a proposed industry-wide redress scheme in respect of motor finance commissions, we updated our range of probability-weighted scenarios. This resulted in an increase of £135 million in our provision, which has been recognised in the first quarter, to a total provision of c.£300 million as at 31 October 2025, which includes both redress and certain operational costs. This represents the group's current best estimate based on all available information at this stage. The ultimate cost to the group could be materially higher or lower than the provision taken and remains subject to further clarity from the FCA on the scope and design of any redress scheme and any further legal, regulatory or industry developments. This position remains unchanged as at 31 January 2026.

The group is committed to achieving a fair outcome for customers and providing redress where loss has occurred. However, it does not believe the current redress methodology proposed by the FCA appropriately reflects actual customer loss or achieves a proportionate outcome. In addition, the FCA's proposed approach to assessing unfairness does not align with the legal clarity provided by the Supreme Court judgment in respect of the "Johnson" case, which confirmed that the test for unfairness is highly fact specific and must take into account a broad range of factors.

The group responded to the FCA consultation paper prior to the deadline of 12 December 2025 and awaits the final redress scheme rules, which the FCA has stated it expects to publish in late March 2026.

Financial overview

Summary group income statement1

Reconciliation from adjusted to statutory income statement

Statutory operating profit

The group reported a statutory operating loss before tax of £65.5 million (H1 2025: £102.2 million). Underlying operating profit was more than offset by £130.7 million of adjusting items, predominantly the £135.0 million increase in provision charge in relation to motor finance commissions following publication of the FCA consultation paper.

Adjusted operating profit

Adjusted operating profit decreased 19% to £65.2 million (H1 2025: £80.5 million), driven by reduced operating income, partly offset by lower impairment charges in Retail. The operating loss in Group (central functions), which includes the central functions such as finance, legal and compliance, risk and human resources, reduced to £22.8 million (H1 2025: £28.4 million). We now expect the operating loss from Group (central functions), to be c.£45-50 million in the 2026 financial year (previous guidance: c.£50 million).

Return on opening equity reduced to 5.6% (H1 2025: 7.1%) and return on average tangible equity reduced to 6.3% (H1 2025: 8.7%) primarily reflecting the reduction in adjusted operating profit. We seek to achieve double-digit RoTE by the 2028 financial year, rising thereafter.

Adjusted operating income

Adjusted operating income decreased 6% to £326.6 million (H1 2025: £348.6 million), driven by a lower average loan book, reflecting the impact of current market conditions, in particular on our Property book; and the repositioning of our businesses including the wind-down of Novitas and the planned reduction of personal lines in Premium Finance.

NIM across the lending divisions remained robust at 7.1% (H1 2025: 7.3%), with the reduction reflecting changes in business mix, including the wind-down of Novitas, as well as lower behavioural fee income. We continue to expect NIM to be slightly lower than 7% for the 2026 financial year, reflecting loan book mix impacts.

Group (central functions) income was £(4.6) million (H1 2025: £(7.3) million), reflecting interest earned on higher cash balances.

Adjusted operating expenses

Adjusted operating expenses were broadly flat at £221.9 million (H1 2025: £221.0 million), reflecting strong cost discipline offsetting inflationary impacts and continued investment in technology and capabilities across the business.

Expenses in Group (central functions) reduced 14% reflecting lower legal and professional fees associated with the impact of the FCA's ongoing review.

Overall, the group's expense/income ratio increased to 68% (H1 2025: 63%), and the compensation ratio increased to 35% (H1 2025: 34%), both reflecting the lower income in the period.

We now expect to deliver c.£25 million (previously c.£20 million) of annualised savings in the 2026 financial year, and a total of c.£60 million annualised savings by the end of the 2027 financial year (previously 2028), in addition to the £25 million annualised savings delivered in the 2025 financial year.

We expect the group's adjusted operating expenses to be c.£450 million in the 2026 financial year, and in the £410-430 million range in the 2028 financial year.

Impairment charges and IFRS 9 provisioning

Impairment charges decreased to £39.5 million (H1 2025: £47.1 million), equivalent to a bad debt ratio of 0.8% (H1 2025: 1.0%). The reduced impairment charge reflects the implementation of an updated IFRS 9 model which recognises the evolving composition and behaviour of the Motor Finance book1. This was partially offset by an increase in individually assessed provisions in Property. The bad debt ratio remains comfortably below our long-term average of 1.2%. Overall, provision coverage was flat at 2.6% (31 July 2025: 2.6%).

Since the 2025 financial year end, we have updated the macroeconomic scenarios we source from Moody's Analytics to reflect the latest available information. The weightings assigned to the scenarios remain unchanged.

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 2026 financial year to remain below our long-term average of 1.2%.

Adjusting items

We recognised £130.7 million of adjusting items in first half of 2026 (H1 2025: £182.7 million), including the £135.0 million update to our provision charge relating to motor finance commissions, with H1 2025 including the initial £165.0 million provision charge. We also recognised £5.7 million of operating profit from the group's rentals businesses, CBRL (now sold), and CBVH (in wind-down), primarily reflecting the gain on disposal of CBRL.

We also incurred £1.6 million (H1 2025: £0.4 million) of restructuring costs, primarily relating to redundancy and associated costs. We now expect to incur c.£10-15 million of restructuring costs in the 2026 financial year and c.£30-40 million in the 2027 financial year, reflecting the acceleration of our cost reduction activities.

We expect complaints handling expenses and other operational and legal costs in relation to motor finance commissions to be in the single-digit millions in the 2026 financial year, including unwinding of the time value discount in relation to the motor finance commissions provision.

Tax

The tax credit in H1 2026 was £0.3 million (H1 2025: tax expense of £9.2 million), driven by an increase in tax deductible remediation provisions, giving rise to a tax credit more than offsetting other tax expense incurred in the period. The effective tax rate for the period was 0.5% (H1 2025: (9.0%)), including the £135.0 million provision charge (£120.8 million net of tax) in relation to motor finance commissions. Excluding the provision, the effective tax rate would have been approximately 20%.

The effective tax rate, excluding the provision in relation to motor finance commissions, was below the 25% UK corporation tax rate for the six months ended 31 January 2026 primarily due to tax relief on coupons on other equity instruments and the gain on sale of CBRL being tax exempt. The effective tax rate for the six months ended 31 January 2025, excluding the provision in relation to motor finance commissions, was also below the 25% UK corporation tax rate at approximately 23%, primarily due to tax relief on coupons on other equity instruments. Please refer to Note 3 "Taxation" for further details on the group's taxation.

Discontinued operations

Performance of these businesses has been presented as discontinued operations. Following completion of the disposal of Winterflood, there are no assets or liabilities classified as held for sale on the balance sheet at 31 January 2026, and minimal impact through the income statement. 

Winterflood delivered total profit after tax of £0.7 million (H1 2025: loss after tax of £0.7 million).

For further information on the discontinued operations, refer to Note 20 "Discontinued operations and assets and liabilities classified as held for sale".

Earnings per share

Adjusted basic earnings per share ("AEPS") for continuing operations decreased to 27.1p (H1 2025: 33.8p) and basic earnings per share ("EPS") for continuing operations increased to (51.0)p (H1 2025: (81.8)p).

Basic earnings per share ("EPS") for continuing and discontinued operations increased to (50.5)p (H1 2025: (82.1)p).

Both the adjusted and basic EPS calculations 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%, in December 2025, amounting to £11.1 million. The associated coupon is due semi-annually, with any AT1 coupons paid deducted from retained earnings, reducing the profit attributable to ordinary shareholders.

Dividend

Given the continued uncertainty regarding the outcome of the FCA's review of motor finance commission arrangements and any potential financial impact, the group will not pay an interim dividend on its ordinary shares in respect of the first half of the 2026 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 commission arrangements.

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 lending divisions. Loans and advances to customers and operating lease assets make up the majority of assets. Other items on the group's balance sheet include treasury assets, with intangibles, property, plant and equipment, and prepayments 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 reduced to £12.3 billion (31 July 2025: £14.1 billion), primarily due to the completion of the sales of Winterflood and CBRL which no longer feature on the group balance sheet, and a 20% reduction in treasury assets reflecting a planned reduction in excess liquidity.

Total liabilities reduced to £10.6 billion (31 July 2025: £12.3 billion), due to 11% lower customer deposits reflecting our lower funding requirement in the first half of the 2026 financial year, and the completion of the sales of Winterflood and CBRL which no longer feature on the group balance sheet.

Total equity was broadly flat at £1.7 billion as at 31 January 2026 (31 July 2025: £1.7 billion).

The group's return on assets excluding discontinued operations reduced to 0.6% (31 July 2025: 0.8%).

Group Capital

Movements in capital and other regulatory metrics

The Common Equity Tier 1 ("CET1") capital ratio increased from 13.8% to 14.3%, as the additional £135.0 million provision in relation to motor finance commissions (c.-125bps net of tax) was more than offset by a reduction in loan book Risk Weighted Assets ("RWAs") (c.70bps), the recognition of other profits attributable to shareholders (c.60bps), and the sale of Winterflood (c.55bps).

CET1 capital decreased 6% to £1,266.3 million (31 July 2025: £1,348.1 million), primarily driven by the motor finance commissions provision increase (£120.8 million net of tax), partly offset by other profits attributable to shareholders in the period of £56.4 million. Tier 1 capital and total capital both decreased 5% to £1,466.3 million and £1,666.3 million respectively (31 July 2025: £1,548.1 million and £1,748.1 million respectively), reflecting the same movements underpinning CET1 capital.

RWAs decreased 9% to £8.9 billion (31 July 2025: £9.8 billion). This was primarily driven by a £639.5 million reduction in credit risk RWAs reflecting lower loan book balances, the benefit of the ENABLE Build Guarantee Scheme in Property, and the disposals of Winterflood and CBRL. Operational risk RWAs also reduced £159.8 million and market risk RWAs reduced £114.0 million, both primarily reflecting the disposal of Winterflood.

As a result, CET1, tier 1 and total capital ratios were 14.3% (31 July 2025: 13.8%), 16.5% (31 July 2025: 15.8%) and 18.8% (31 July 2025: 17.8%), respectively.

The applicable CET1, tier 1 and total capital ratio requirements, including Capital Requirements Directive ("CRD") buffers but excluding any applicable PRA buffer, were 9.7%, 11.4% and 13.7%, respectively, at 31 January 2026. Accordingly, we continue to have headroom significantly above the applicable CET1 requirement of c.460bps.

Until 31 July 2025, the group applied IFRS 9 regulatory transitional arrangements which allowed banks to add back to their capital base a proportion of the IFRS 9 impairment charges during the transitional period. The transitional period ended on 31 July 2025.

The leverage ratio, which is a transparent measure of capital strength not affected by risk weightings, increased to 13.5% (31 July 2025: 12.9%).

We currently estimate that following the disposal of Winterflood, the implementation of Basel 3.1 from 1 January 2027 will result in an increase in the group's RWAs of less than 10%. Given the group expects to receive a full offset in Pillar 2a requirements at total capital level for the removal of the Pillar 1 RWA SME support factor, the implementation is not expected to have a significant impact on the group's overall capital headroom position.

As reported in our Full Year 2025 results, engagement with the regulator continues following our application in December 2020 to transition to the IRB approach. We continue to make progress towards Phase 3 of the application process.

After the period end, we issued £250 million of 6.125% Subordinated Tier 2 Notes due 2036, accompanied by a related tender of our outstanding £200 million 2.00% Fixed Rate Subordinated Notes due 2031.

Capital outlook

In the near-term, we expect to maintain our CET1 capital ratio above the top end of our medium-term target range of 12% to 13%, based on our current assessment of the provision in respect of motor finance commissions.

Group funding1

The Treasury function is focused on managing funding and liquidity to support the lending divisions, as well as managing interest rate risk. 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.

We have maintained a prudent maturity profile, with the average maturity of funding allocated to the loan book at 18 months (31 July 2025: 18 months), ahead of the average loan book maturity at 15 months (31 July 2025: 15 months).

Total funding decreased 8% to £11.7 billion (31 July 2025: £12.7 billion), which accounted for 124% (31 July 2025: 132%) of the loan book at the balance sheet date, as we sought to optimise funding and liquidity from elevated levels held during the recent period of uncertainty. The average cost of funding1 across our lending divisions reduced to 4.9% for the six months ended 31 January 2026 (12 months ended 31 July 2025: 5.4%) primarily reflecting the lower base rate in the period.

The ongoing investment in our Savings capability, franchise and product offering has allowed us to significantly grow and diversify our retail deposit base in recent years. As a proportion of total funding, our retail deposits have grown from 27% at the end of the 2022 financial year to account for 54% in the first half of the 2026 financial year (31 July 2025: 54%). Continued growth and diversification of our offering creates opportunity to further optimise funding cost and maturity in future years.

In the first half, customer deposits decreased 11% to £7.9 billion (31 July 2025: £8.8 billion) as we sought to optimise the pricing and level of deposit funding following strong growth in recent years. Retail customer deposits decreased 8% to £6.3 billion (31 July 2025: £6.8 billion), with non-retail deposits reducing 19% to £1.6 billion (31 July 2025: £2.0 billion), in line with our funding plan. In accordance with our prudent and conservative approach to funding, only 19% of total deposits are available on demand and 47% have at least three months to maturity. At 31 January 2026 approximately 91% of retail deposits were protected by the Financial Services Compensation Scheme.

Secured funding decreased 4% to £1.0 billion (31 July 2025: £1.1 billion) reflecting scheduled repayments under our public securitisations.

Unsecured funding, which includes senior unsecured and subordinated bonds, was unchanged at £1.1 billion (31 July 2025: £1.1 billion).

Moody's ratings for the group and CBL (Bank deposit rating) are Baa2/P2 and A3/P2 respectively (at 17 October 2025), with a negative outlook. This follows a one notch downgrade for both the group and CBL long term ratings, and the short-term deposit rating of CBL, primarily owing to the impact of the £135.0 million additional motor finance provision on our capital position. This action has concluded the review for downgrade that was initiated on 1 November 2024. Fitch Ratings ("Fitch") for both the group and CBL are BBB/F3, affirmed on 15 December 2025, with a negative outlook. Our credit ratings remain robust, and we retain strong access to funding markets.

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.

During the recent uncertainty regarding the outcome of the FCA's review of historical motor finance commission arrangements, we have consciously maintained an elevated level of liquidity, which has now begun to normalise. Accordingly, treasury assets reduced 20% to £2.2 billion (31 July 2025: £2.8 billion) in the first half. The majority of our treasury assets continue to be held on deposit with the Bank of England.

We regularly assess and stress test the group's liquidity requirements and continue to materially exceed the liquidity coverage ratio ("LCR") regulatory requirements, with a 12-month average LCR to 31 January 2026 of 1,141% (31 July 2025: 1,012%). 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 2026 was 148.6% (31 July 2025: 145.9%). 

Business Review

Commercial

Commercial lends to more than 28,000 small and medium-sized enterprises through our in-house teams, where loans are originated via our direct sales force or introduced by third-party distribution channels. Asset Finance provides commercial asset financing, hire purchase and leasing solutions for a diverse range of assets and sectors. Invoice Finance provides debt factoring, invoice discounting and asset based lending to SMEs and corporates.

Adjusted operating profit for Commercial decreased to £40.7 million (H1 2025: £50.0 million), primarily reflecting lower utilisation in Invoice Finance, the impact of the wind-down of Novitas, and lower behavioural income in Asset Finance.

On a statutory basis, operating profit increased to £45.8 million (H1 2025: £41.1 million), benefitting from the gain on sale of CBRL.

Adjusted operating income decreased to £151.2 million (H1 2025: £158.4 million) reflecting reductions in loan balances in Invoice Finance and through the wind-down of the Novitas book, and lower behavioural income in Asset Finance. NIM remained broadly stable at 6.5% (H1 2025: 6.6%).

Adjusted operating expenses were broadly flat at £94.0 million (H1 2025: £93.3 million), as continued investment in technology and annual staff cost increases were partially offset by the benefits of cost actions in Asset Finance, and non-recurrence of Novitas expenses. The Commercial expense/income ratio increased to 62% (H1 2025: 59%).

Adjusted impairment charges increased to £16.5 million (H1 2025: £15.1 million) driven by the non-recurrence of a prior year reduction in Stage 3 loans in Invoice Finance, partially offset by lower impairment charges following the wind-down of Novitas, with a stable credit performance in Asset Finance. This corresponded to a bad debt ratio of 0.7% (H1 2025: 0.6%) and a broadly stable provision coverage ratio of 1.6% (31 July 2025: 1.5%).

Retail

Retail provides finance to individuals and businesses through a network of intermediaries. Motor Finance provides several products at point of sale in a dealership, or online via a broker, which allow consumers to buy vehicles from over 3,400 retailers in the UK and 450 retailers in Ireland. Premium Finance works with c.1,200 insurance brokers in the UK and Ireland and helps make insurance payments more manageable for individuals and businesses, by allowing them to spread the cost over fixed instalments. The division includes our Savings business, which provides simple and straightforward savings products to businesses and individuals. In 2025, we announced a strategic repositioning to focus the growth of our Premium Finance business towards commercial lines insurance premium finance where we see strongest risk-adjusted returns and long-term growth potential, and to reduce our emphasis on personal lines insurance premium finance.

We welcome the recently published FCA Premium Finance Market Study and its conclusions, which align with our existing approach.

Adjusted operating profit for Retail increased to £17.5 million (H1 2025: £16.8 million). The division experienced lower income with a reduced Premium Finance loan book partly reflecting the planned reduction in the personal lines book, as well as higher costs associated with the build out of Motor in Ireland. This was more than offset by a Motor Finance impairment provision release and improved credit performance in Premium Finance. Before provisions for impairment losses, adjusted operating profit decreased 36% to £25.7 million (H1 2025: £40.0 million).

The provision charge in respect of motor commissions stands at £300 million, having been reassessed following the FCA consultation in October 2025. The ultimate cost to the group could be materially higher or lower than the provision taken and remains subject to further clarity from the FCA on the scope and design of any redress scheme and any further legal, regulatory or industry developments. Please refer to Note 13 "Other Liabilities" for further details on the group's provisioning assessment of this matter.

On a statutory basis, Retail delivered an operating loss of £118.1 million (H1 2025: £156.9 million operating loss) reflecting the additional provision in respect of motor finance commissions. 

Operating income decreased 8% to £118.4 million (H1 2025: £128.8 million), driven by the reduction in personal lines brokers in Premium Finance, partially offset by growth in business volumes in Motor Finance, particularly in Ireland. NIM decreased to 8.3% (H1 2025: 8.7%) reflecting normalisation of the Premium Finance net interest margin, the change in business mix with Motor Finance becoming a bigger proportion of the Retail loan book, and market rate fluctuations.

Adjusted operating expenses increased 4% to £92.7 million (H1 2025: £88.8 million), driven by Motor Finance with increased costs in Ireland as we scale the business, and additional investment spend across Retail to support further cost reduction. As a result, the expense/income ratio increased to 78% (H1 2025: 69%). 

Impairment charges decreased to £8.2 million (H1 2025: £23.2 million), driven by the implementation of an updated IFRS 9 model which recognises the evolving composition and behaviour of the Motor Finance book1, and an improved credit performance in Premium Finance. The bad debt ratio reduced to 0.6% (H1 2025: 1.6%), with the provision coverage ratio decreasing to 2.9% (31 July 2025: 3.2%).

Property

Property provides residential development finance, bridging finance and commercial development loans to experienced property developers and investors across mainland UK and Northern Ireland, through its two brands, Close Brothers Property Finance and Commercial Acceptances. Property Finance lends to over 500 professional property developers with a focus on small to medium-sized residential developments, with Commercial Acceptances lending to c.400 developers, investors and traders.

Adjusted operating profit declined 29% to £29.8 million (H1 2025: £42.1 million), primarily due to a softer demand environment leading to lower loan balances, and increased impairment charges on a small number of developments. Before provisions for impairment losses, adjusted operating profit reduced 12% to £44.6 million (H1 2025: £50.9 million).

On a statutory basis, Property delivered an operating profit of £29.6 million (H1 2025: £42.0 million).

Operating income declined 10% to £61.6 million (H1 2025: £68.7 million), driven by a lower loan book as drawdowns were more than offset by repayments levels, alongside lower fees and interest yields reflective of the lower base rate environment with the net interest margin reducing to 6.8% (H1 2025: 7.1%).

Adjusted operating expenses decreased 4% to £17.0 million (H1 2025: £17.8 million), reflecting lower staff costs. The expense/income ratio increased to 28% (H1 2025: 26%).

Impairment charges increased to £14.8 million (H1 2025: £8.8 million), corresponding to a higher bad debt ratio of 1.6% (H1 2025: 0.9%). This primarily related to increased individually assessed provisions on a small number of developments, driven by build cost inflation and a subdued sales market. As a result, the provision coverage ratio increased to 4.6% (31 July 2025: 4.2%). The Property book is predominantly secured, with conservative loan to value ratios. 72% of the loan book represents repeat business and c.40% of the book is to customers we have been lending to for over 10 years.

Group (central functions)

The operating loss from Group (central functions), which includes the central functions such as finance, legal and compliance, risk and human resources, reduced to £22.8 million (H1 2025: £28.4 million). The negative income represents the net cost of group funding, which reduced in the period reflecting higher interest earned on group cash balances. The reduction in operating expenses reflects the non-recurrence of legal and professional fees associated with the impact of the FCA's ongoing review.

Loan Book Analysis

The loan book decreased 2% over the first half of the financial year to £9.2 billion (31 July 2025: £9.5 billion). While we saw good growth in Motor Finance and in Asset Finance, the loan book reduced overall reflecting amplified seasonality and lower utilisation in Invoice Finance, continued simplification of the portfolio, including the planned reduction in the personal lines book of Premium Finance and run-off of the legacy Republic of Ireland Motor Finance business, as well as a softer current demand environment for Property.

On an underlying basis, excluding the repositioning of the portfolio, the loan book decreased 1%.

Through our recent simplification actions we have repositioned the business to focus on core markets where we see a strong and sustainable market opportunity and we continue to target 5-10% p.a. growth through the cycle through a combination of core business growth and new initiatives.

The Commercial loan book decreased 2% to £4.6 billion (31 July 2025: £4.7 billion), primarily driven by contraction in Invoice Finance, down 14% due to amplified seasonality in January 2026 and lower utilisation. Asset Finance grew 2%, with increases in the Wholesale Finance, Asset Ireland, and Energy portfolios since 31 July 2025. In the Commercial division, we continue to pursue organic growth in our core markets, as well as targeting new products and sectors such as commercial mortgages.

The Retail loan book was broadly flat at £2.9 billion (31 July 2025: £2.9 billion). While the prior year was impacted by the Hopcraft judgment, the Motor Finance loan book increased 4%, with record Motor Finance Ireland new business and a return to loan book growth in the UK. Excluding the run off of the legacy Republic of Ireland Motor Finance business, the Motor Finance loan book grew 5%. The Premium Finance loan book reduced by 13%, reflecting the planned reduction of a number of personal lines broker relationships in line with our strategic repositioning of the business, lower volumes, as well as market wide insurance premium deflation. In Retail, we are increasing our presence in the premium commercial lines market, and continuing to expand distribution of Motor Finance as well as growing our business in Ireland.

The Property loan book decreased 5% to £1.8 billion (31 July 2025: £1.9 billion) with drawdowns more than offset by repayment levels, as housing delivery across the UK remains constrained due to planning delays, build cost pressures and labour shortages, limiting new supply and reinforcing underlying demand pressures in local markets. In Property, we see significant opportunities in providing development loans for the delivery of Build-to-Rent and Purpose-Built Student Accommodation, and will continue to build our market position in these sectors alongside our core Build-to-Sell market.

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:

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 68 to 112 of the 2025 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; changes in technology, regulation and customer behaviour; competition from traditional and new players; front-line sales performance; cost movements; and strategic changes. All of these can vary in both nature and extent across its divisions.

There remains elevated uncertainty while we await further details of the FCA's proposed industry-wide redress scheme for historical motor finance commissions. Nevertheless, we continue to focus on supporting our customers, and on maintaining underwriting standards and operational resilience, while we invest to support future income generation, operational efficiency and cost savings.

The business and strategic risk has stabilised following the Supreme Court ruling in August 2025 and the successful delivery of a number of management actions to strengthen our capital position, ensuring the group is well placed to navigate the current uncertainty. However, business risk may increase through FY26 and FY27 as the group continues to progress a number of key strategic and transformation initiatives, all of which come with execution risk attached.

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. The group maintains a strong capital position, strengthened by the sale of Winterflood Securities in December 2025 with PRA approval for immediate relief of operational risk RWAs.

In October 2025, the group recognised a further provision in relation to motor finance commissions of £135 million, increasing the total provision to £300 million. While this represents the current best estimate based on a range of probability-weighted scenarios, there remains uncertainty in relation to the outcome of the FCA's consultation and the ultimate cost to the group could be materially higher or lower than the estimated provision. A range of additional potential management actions to further optimise RWAs has been evaluated, including potential risk transfer of assets in Motor Finance and other portfolios, should it be needed. Any 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 commission arrangements with such decision seeking to ensure that sufficient capital is retained in the group.

Change execution risk - As the group undertakes multiple strategic initiatives and change programmes driven by an evolving regulatory landscape and cost optimisation agenda, it faces increased exposure to associated risks. Failure to deliver business and technology change effectively may hinder our ability to achieve strategic objectives and meet the expectations of customers, regulators, colleagues, and shareholders - both at the group level and within individual businesses. Depending on the nature of the change, delays or failures in implementation could also impact financial performance. In addition, there is potential for regulatory and reputational consequences. Our current outlook on change execution risk remains broadly unchanged since the last reporting period.

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 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 complete.

Credit risk - As a lender to businesses and individuals, the group is exposed to credit risk through the failure of counterparties or associated parties, with whom the group has contracted, to meet their obligations as they fall due.

The group applies consistent and prudent lending criteria to mitigate credit risk. Its lending activities are predominantly secured across a diverse range of asset classes. This ensures concentration risk is controlled in both the loan book and associated collateral. Credit risk appetites are set around unsecured and structurally protected lending to ensure portfolios remain predominantly secured.

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.

Cyber risk - The group's exposure to cyber risk is shaped by its engagement with third parties, the introduction of new digital products and services, and the need for secure, reliable data to conduct its business. These elements are integral to achieving the group's strategic goals. 

The group continues to expect increased levels of risk of data loss or service disruption resulting from technology failures or malicious activities involving external or internal threats. Wider availability of advanced tools for conducting cyber-attacks, such as ransomware-as-a-service and AI technologies, are expected to lower technical barriers to entry in launching sophisticated and opportunistic attacks, leading to an increase in their frequency and intensity. 

The group is committed to upholding high standards of cyber security in pursuit of its strategic goals, acknowledging that exposure may arise as threats and vulnerabilities evolve. To address these challenges, robust cyber controls and continuous monitoring are employed to ensure risks are managed within acceptable levels.

Funding and liquidity risk - The bank's funding position remains strong, with daily monitoring of liquidity metrics and appropriate escalation of any emerging risks. Throughout the period, the group closely assessed the impact of developments relating to motor commissions and has observed no material deterioration in its funding or liquidity position. The funding mix is predominantly comprised of retail deposits, providing a resilient funding base that supports lending activities. This is complemented by the maintenance of a robust level of liquid assets, ensuring the group is well placed to manage potential future liquidity pressure.

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.

The group is awaiting the publication of the FCA's Policy Statement on Motor Commissions, which will set out the final form of any Consumer Redress Scheme.

In February 2026, the FCA issued the Premium Finance Market Study. The study aligns with our existing approach to consumer duty, customer outcomes and regulatory engagement.

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. 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 other adverse impact. Operational risks arise 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.

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 desire to engage with third parties to deliver cost savings and enhanced services; and delivery of new products and services to support 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. Notwithstanding, 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 publication of the FCA's Policy Statement on Motor Commissions, which will set out the final form of its Consumer Redress Scheme, will increase inherent reputational risk.

Traded Market risk - On 1 December 2025 it was announced that, following regulatory approval, the sale of Winterflood Securities to Marex Group was completed. Since traded market risk only related to Winterflood activities, this risk has now been removed from our set of principal risks.

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 could emerge across the spectrum of principal risks.

Climate risk represents a continued area of focus, and the group continues to monitor government and regulatory developments closely in parallel to managing its own carbon footprint and supporting its customers to transition to a low carbon economy. Since the last reporting period the PRA has published a revised supervisory statement related to climate risk, which the group is currently reviewing in line with the proposed implementation period.

The group's current assessment remains that the short-dated tenor of the lending book and strong business model resilience capabilities mitigate current risk exposure, while the continued embedding of the climate risk framework will enable the group to review the evolution of the risk landscape on an ongoing basis. Climate disclosures are disclosed on pages 29 to 39 of the 2025 Annual Report.

Emerging and evolving risks

The group's suite of principal risks is accompanied by a portfolio of emerging risks reflecting broader market uncertainties. The established framework for monitoring these risks supports the group's organisational readiness to respond. Group-level emerging risks are monitored by the Group Risk and Compliance Committee ("GRCC") and Risk Committee on an ongoing basis, with agreed mitigating actions in place to ensure the group's preparedness should a risk crystallise. Ongoing monitoring also tracks several sub-risks to support identification of key themes and within the year the sub-risks covered has evolved accordingly in line with the perceived risk landscape.

Current group level emerging risks include economic and geopolitical uncertainty (including current heightened geopolitical tensions), climate and sustainability risks, and strategic disruption risk.

Directors' responsibility statement

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

The Directors of Close Brothers Group plc as at the date of this report are as listed on pages 120 to 122 of the company's 2025 Annual Report. A list of current Directors is maintained on the company's website www.closebrothers.com.

On behalf of the board

Michael B. Morgan Fiona McCarthy

Chief Executive Group Chief Finance Officer

17 March 2026

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 2026 (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 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.

Use 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

17 March 2026

Consolidated income statement

For the six months ended 31 January 2026

Consolidated statement of comprehensive income

For the six months ended 31 January 2026

Consolidated balance sheet

At 31 January 2026

Consolidated statement of changes in equity

For the six months ended 31 January 2026

Consolidated cash flow statement

For the six months ended 31 January 2026

The Notes

1. Basis of preparation and accounting policies

The half year results have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and the condensed consolidated interim financial statements ("interim financial statements") have been prepared in accordance with UK-adopted International Accounting Standards. These include International Accounting Standard ("IAS") 34 'Interim Financial Reporting', which specifically addresses the contents of interim financial statements. The interim financial statements incorporate the individual interim financial statements of Close Brothers Group plc and the entities it controls, using the acquisition method of accounting.

The half year results are unaudited and do not constitute statutory accounts within the meaning of Section 434 of the companies Act 2006. However, the information has been reviewed by the group's auditor, PricewaterhouseCoopers LLP, and their report appears above. The half year results for the six months ended 31 January 2025 presented as comparatives are also unaudited.

The financial information for the year ended 31 July 2025 contained within this half year report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of those statutory accounts, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, has been delivered to the Registrar of Companies. PricewaterhouseCoopers LLP has reported on those accounts. The report of the auditor on those statutory accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

Items relevant to understanding financial performance are presented on the consolidated income statement under IAS 1. Adjusting items and administrative expenses before adjusting items are not presented on the consolidated income statement this year to provide more clarity in relation to the statutory figures. Prior year comparatives have been re-presented on the same basis. In addition, the comparative information for the period ended 31 January 2025 in the consolidated income statement has been restated with £0.8 million of expenses relating to Asset Management reclassified from continuing to discontinued operations.

The accounting policies used are consistent with those set out on pages 184 to 189 of the 2025 Annual Report.

Going concern

The directors acknowledge that the risk landscape is constantly evolving and as such continually review the group's principal and emerging risks. The Financial Conduct Authority ("FCA") review of historical motor finance commission arrangements including the proposed industry-wide redress scheme and the impact on the group's activities, has continued to be a key area of focus.

In accordance with the relevant accounting standards, since the FCA's announcement of its review in January 2024, the group has assessed provision requirements on an ongoing basis. Based on all available information, including market developments in relation to a proposed industry-wide redress scheme for motor commissions in October 2025, the group holds a provision of £293.6 million as at 31 January 2026. This provision is based on probability weighted scenarios using various assumptions and includes estimates for certain potential operational and legal costs, as well as estimates for potential customer redress. Refer to Note 13 for further information regarding the assumptions used and sensitivity of those assumptions.

In light of the prevailing and continued uncertainty as to the range of outcomes from the FCA's ongoing review of motor finance commissions and the consultation on the proposed industry-wide redress scheme, the group recognises the need to plan for a range of possible outcomes, and continues to prioritise maintaining a strong capital position, balance sheet, and prudent approach to managing its financial resources.

As part of the directors' consideration of the appropriateness of adopting the going concern basis, the directors have reviewed the group's operating plan to June 2027, being 15 months from the date of approval of the interim financial statements. This is in line with the assessment period (15 months) reviewed as part of the FY25 going concern assessment.

The directors have considered a range of forward-looking scenario analyses, similar to those considered in the FY25 assessment (refer to page 113 of the 2025 Annual Report). The group's 'severe but plausible' going concern scenario overlays the operating plan with an additional provision relating to motor finance commissions in March 2026, subdued loan book growth and higher than expected bad debt and operational costs. Such additional provision was derived by stressing the assumptions used to calculate the existing provision relating to motor finance commissions.

The modelling output of all scenarios considered highlights the resilient capital position, and capacity to absorb losses and increases in RWAs beyond the impacts modelled, strengthened by modelled management actions. 

The group continues to have a strong and conservative business model, lending in a variety of sectors across a diverse range of assets. The group remains well positioned in each of its businesses, is soundly funded, and has strong levels of liquidity. The group maintains strong headroom to minimum regulatory requirements to withstand the downside scenario elements. In making their going concern assessment, the directors have also considered the operational agility and resilience of the group. The directors continually expect to maintain a high level of operational and system performance. 

Under all scenarios the group continues to operate with sufficient levels of capital for the next 15 months from the reporting date, with the group's capital ratios in excess of minimum regulatory requirements.

Separately from managing the group capital position the group adopts a conservative approach to funding and liquidity risk and seeks to maintain a funding and liquidity position characterised by preserving a simple and transparent balance sheet, sustaining a diverse range of funding sources and holding a prudent level of high-quality liquidity. As such, the weighted average maturity of its funding is longer than the weighted average maturity of its lending portfolio. The board reviewed these factors when concluding upon going concern. 

As part of the liquidity management process the group also uses a suite of internally developed liquidity stress scenarios to monitor the potential liquidity exposure of its banking operations daily and determine its high-quality liquid asset requirements. This ensures that the group remains within risk appetite and identifies potential areas of vulnerability. These stresses are formally approved by the Asset and Liability Committee, Group Risk and Compliance Committee and board and cover both idiosyncratic and market wide stresses. The group uses a combined retail and wholesale stress scenario to determine the amount of liquidity it needs to hold for its banking operations. As at 31 January 2026 the group held sufficient liquidity resources to meet the applicable stress. 

In conclusion, the directors have determined that they have a reasonable expectation that the group as a whole have adequate resources to continue as a going concern for a period of at least 12 months from the date of approval of the interim financial statements. Accordingly, they continue to adopt the going concern basis in preparing the interim results. 

Critical accounting judgements and estimates

The reported results of the group are sensitive to the judgements, estimates and assumptions that underlie the application of its accounting policies and preparation of its interim financial statements. UK company law and IFRS require the directors, in preparing the group's interim financial statements, to select suitable accounting policies, apply them consistently and make judgements, estimates and assumptions that are reasonable.

The group's estimates and assumptions are based on historical experience and reasonable expectations of future events and are reviewed on an ongoing basis. Actual results in the future may differ from the amounts estimated due to the inherent uncertainty.

The group's critical accounting judgements, made in applying its accounting policies, and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment within the next financial year are set out below.

The impact of climate change on the group's judgements, estimates and assumptions has been considered in preparing these interim financial statements. While no material impact has been identified, climate risk continues to be monitored on an ongoing basis.

Critical accounting judgements

The critical accounting judgements of the group, which relate to expected credit loss provisions under IFRS 9 and motor finance commissions, are as follows:

Information on the first two accounting judgements can be found below, while further information on the third judgement can be found in Note 13.

Significant increase in credit risk

Assets are transferred from Stage 1 to Stage 2 when there has been a significant increase in credit risk since initial recognition. Typically, the group assesses whether a significant increase in credit risk has occurred based on a quantitative and qualitative assessment, with a "30 days past due" backstop.

Due to the diverse nature of the group's lending businesses, the specific indicators of a significant increase in credit risk vary by business and may include some or all of the following factors:

Definition of default

The definition of default is an important building block for expected credit loss models and is considered a key judgement. A default is considered to have occurred if any unlikeliness to pay criterion is met or when a financial asset meets a "90 days past due" backstop. While some criteria are factual (e.g. administration, insolvency or bankruptcy), others require a judgemental assessment of whether the borrower has financial difficulties which are expected to have a detrimental impact on their ability to meet contractual obligations. A change in the definition of default may have a material impact on the expected credit loss provision.

As part of the ongoing review and maintenance of credit models, in November 2025 an updated IFRS 9 model was deployed for the Motor Finance business. The updated model incorporated changes to definition of default alongside amended cure criteria, recognising the evolving composition and behaviour of the portfolio, and recalibrations. The model implementation resulted in a reduction in modelled provisions and the overall impaired population (see Note 6 for further detail). Simultaneously, a post-model adjustment was applied to offset some of the provision release from the implementation based on management's expert judgement. This adjustment was applied to facilitate a phased approach that allows for regular management review to ensure provision levels remain appropriate in the context of recent unemployment trends and the wider macroeconomic environment.

Key sources of estimation uncertainty

The key sources of estimation uncertainty of the group, which relate to expected credit loss provisions, value in use calculations, and motor finance commissions, are as follows. These sources of estimation uncertainty are consistent with the prior year, albeit the estimates relating to motor finance commissions have been updated in line with the latest developments.

Forward-looking information

Determining expected credit losses under IFRS 9 requires the incorporation of forward-looking macroeconomic information that is reasonable, supportable and includes assumptions linked to economic variables that impact losses in each portfolio. The introduction of macroeconomic information introduces additional volatility to provisions.

In order to calculate forward-looking provisions, economic scenarios are sourced from Moody's Analytics. These cover a range of plausible economic paths that are used in conjunction with PD, EAD and LGD parameters for each portfolio to assess expected credit loss provisions across a range of conditions. An overview of these scenarios using key macroeconomic indicators is provided under 'Scenario forecasts and weights' later in Note 1. Ongoing benchmarking of the scenarios to other economic providers is carried out monthly to provide management with comfort on Moody's Analytics scenario paths.

Five different projected economic scenarios are currently considered to cover a range of possible outcomes. These include a baseline scenario, which reflects the best view of future economic events. In addition, one upside scenario and three downside scenario paths are defined relative to the baseline. Management assigns the scenarios a probability weighting to reflect the likelihood of specific scenarios, and therefore loss outcomes, materialising, using a combination of quantitative analysis and expert judgement.

The impact of forward-looking information varies across the group's lending businesses because of the differing sensitivity of each portfolio to specific macroeconomic variables. This is reflected through the development of bespoke macroeconomic models that recognise the specific response of each business to the macroeconomic environment.

The modelled impact of macroeconomic scenarios and their respective weightings is reviewed by business experts in relation to stage allocation and coverage ratios at the individual and portfolio level, incorporating management's experience and knowledge of customers, the sectors in which they operate, and the assets financed.

This includes assessment of the reaction of the ECL in the context of the prevailing and forecast economic conditions, for example where currently higher interest rates and inflationary conditions exist compared to recent periods.

Economic forecasts have continued to develop over the course of the financial year to date and reflect the mixed external environment observed during the period. Forecasts deployed in IFRS 9 macroeconomic models are updated on a monthly basis. At 31 January 2026, the latest baseline scenario forecasts gross domestic product ("GDP") growth of 0.9% in calendar year 2026 and an average base rate of 3.4% across the same period. Consumer Price Index ("CPI") inflation is forecast to be 2.1% in calendar year 2026 in the baseline scenario, remaining consistent at 2.1% in 2027.

At 31 January 2026, the scenario weightings were: 30% strong upside, 32.5% baseline, 20% mild downside, 10.5% moderate downside and 7% protracted downside. As economic forecasts are considered to recognise developments in the macroeconomic environment appropriately, no change has been made to the weightings ascribed to the scenarios since 31 July 2025.

Given the prevailing economic uncertainty, regular analysis is undertaken to assess the appropriateness of the five scenarios used. This included benchmarking the baseline scenario to consensus economic views, as well as consideration of an additional forecast related to stagflation, which could be considered as an alternative downside scenario.

Compared to the scenarios in use in the expected credit losses calculation, the stagflation scenario includes a longer period of higher interest rates coupled with a shallower but extended impact on GDP. Due to the relatively short tenor of the portfolios, the stagflation scenario is considered to be of less relevance than those deployed. Additionally, due to the higher severity of recessionary factors in the existing scenarios, utilising the stagflation scenario would result in lower expected credit losses.

The final scenarios deployed reflect a broadly comparable UK economic outlook relative to 31 July 2025. Under the baseline scenario, UK headline CPI inflation is expected to moderate from current levels and meet the Bank of England's 2% target during the second half of 2026. Following the downward trend in inflation from its 2022 peak, the Bank of England base rate is forecast to continue to reduce in all scenarios, albeit at a slower pace than previously expected. House price outlook has been broadly stable, reflecting a degree of resilience through challenging market conditions in recent months. Unemployment rate forecasts have deteriorated compared to 31 July 2025, recognising recent reported increases above 5%.

The forecasts represent an economic view at 31 January 2026, after which there have been further economic developments, including the decision to maintain the UK base rate at 3.75% at the February Monetary Policy Committee meeting. These developments, and their impact on scenarios and weightings, are subject to ongoing monitoring by management.

These periods have been included as they demonstrate the short, medium and long-term outlooks for the key macroeconomic indicators which form the basis of the scenario forecasts. The portfolio has an average residual maturity of 15 months, with 99% of loan value having a maturity of five years or less.

The tables below show economic assumptions within each scenario, and the weighting applied to each at 31 January 2026. The metrics shown are key UK economic indicators, chosen to describe the economic scenarios. These are the main metrics used to set scenario paths, which then influence a wide range of additional metrics that are used in expected credit loss models. The first tables show the forecasts of the key metrics for the scenarios utilised for calendar years 2026 and 2027. The subsequent tables show averages and peak-to-trough ranges for the same key metrics over the five-year period from 2026 to 2030.

Scenario forecasts and weights