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Close Brothers swung to a loss in the first half as the UK bank set aside £165mn to cover the potential redress costs of a probe and related court ruling into the mis-selling of car finance loans.
The bank reported a statutory £104mn operating loss before tax in the six months to the end of January, down from a £87mn profit in the same period last year.
The provision comes after the FTSE 250 bank last year suspended its dividend and launched a £400mn capitalisation plan after the Financial Conduct Authority said it was investigating historic car finance commissions for potential mis-selling.
The stakes of the possible fallout for banks increased when the Court of Appeal ruled in October that it was illegal for banks to pay any type of commission to car dealers without the customer’s informed consent.
Close Brothers said it will still not pay an interim dividend in the first half of the 2025 financial year. It spent £8.4mn in operational and legal costs to handle a sharp rise in car finance complaints in the six months to the end of January. These costs were set to rise to £22mn in the full year, up from a previously anticipated £10mn-£15mn, the bank said.
