Close Brothers Group PLC
F:CS3
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Close Brothers Group PLC
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Close Brothers Group PLC
Close Brothers Group is a UK merchant banking company that makes money mainly by lending to small and medium-sized businesses and to individual customers. It offers specialist loans for things like cars, equipment, property, and working capital, and it also provides deposit accounts that fund part of its lending book. In plain terms, it acts as a specialist lender that fills gaps that big mainstream banks often leave open. The company also has a wealth management business that looks after investments for private clients, charities, and institutions, and a securities arm that helps clients trade shares and other investments. These businesses earn fees for advice, administration, and dealing services, while the lending side earns interest on loans. That mix gives Close Brothers two main income streams: interest income from credit and fee income from financial services. What makes its business model different is its focus on niche lending and specialist financial services rather than mass-market banking. It targets customers and situations where local knowledge, quick decisions, and tailored credit are important. That makes the group a useful middleman in the financial system, connecting savers, borrowers, and investors through a set of specialist banking services.
Close Brothers Group is a UK merchant banking company that makes money mainly by lending to small and medium-sized businesses and to individual customers. It offers specialist loans for things like cars, equipment, property, and working capital, and it also provides deposit accounts that fund part of its lending book. In plain terms, it acts as a specialist lender that fills gaps that big mainstream banks often leave open.
The company also has a wealth management business that looks after investments for private clients, charities, and institutions, and a securities arm that helps clients trade shares and other investments. These businesses earn fees for advice, administration, and dealing services, while the lending side earns interest on loans. That mix gives Close Brothers two main income streams: interest income from credit and fee income from financial services.
What makes its business model different is its focus on niche lending and specialist financial services rather than mass-market banking. It targets customers and situations where local knowledge, quick decisions, and tailored credit are important. That makes the group a useful middleman in the financial system, connecting savers, borrowers, and investors through a set of specialist banking services.
Provision: Management took an additional GBP 135 million charge for motor finance commissions (bringing the total to GBP 300 million) and says the provision is based on probability-weighted scenarios — the final FCA scheme could be materially higher or lower.
Profitability: Adjusted operating profit was GBP 65.2 million in H1, return on average tangible equity 6.3%, and the group reported a statutory loss after tax of GBP 64.4 million driven by the motor-commission provision.
Capital: CET1 strengthened to 14.3% (50 bps increase) after the additional provision and Winterflood sale; management expects to remain above the 12%–13% medium-term target range and says Basel 3.1 will raise RWAs by less than 10%.
Costs / transformation: The group accelerated its cost program — delivered GBP 25 million annualised in 2025, now expects ~GBP 25 million in 2026 and GBP 60 million of annualised savings by end-2027 (one year earlier than prior guidance) with ~600 FTE reduction targeted.
Loan book & NIM: Loan book reduced 2% (1% underlying excluding runoffs); group NIM 7.1% in H1 but management now expects NIM slightly below 7% for FY2026 due to mix effects.
Divisional performance: Commercial and retail remained resilient (commercial profit GBP 40.7 million; retail GBP 17.5 million; property GBP 29.8 million) with motor and asset finance growing while some premium finance and Novitas positions were wound down.
Liquidity & funding: Treasury assets were reduced 20% to GBP 2.2 billion as elevated liquidity normalised; deposits now 54% of funding (retail deposits GBP 6.3 billion), cost of funding fell to 4.9% and average funding maturity is ~18 months.
