Close Brothers Group (LON: CBG), the UK specialist lender, saw its shares rise about 9% in early trading today despite results showing lower profit and no dividend. Adjusted operating profit, which excludes one-off and adjusting items, fell 17% to £120.3m for the year to the 31st of July.
The shares stood at 422p at 8.31am, up 9.3% from yesterday’s close of 386p, after opening at 393p and touching 420p. The range since late June runs from 378p to 455.4p, so the stock is still below its June high.
The bank published the figures at 7am, an hour before the market opened. Adjusted profit compares with £144.3m a year earlier, and adjusted operating income fell 6% to £642.9m. On the statutory basis, the bank made a pre-tax operating loss of £60.3m from continuing operations, against a loss of £122.4m a year earlier.
The ordinary dividend is nil again, as in the previous year. Close Brothers cites uncertainty over legal challenges to the motor finance compensation scheme run by the Financial Conduct Authority (FCA) and says it will reassess as clarity emerges.
The move may reflect the detail more than the headline, though the company has not said what drove it. Adjusted costs of £430.9m beat guidance of about £450m, and annualised savings of about £36m were well ahead of the £25m target. The loan book of £9.5bn was flat over the year, though underlying growth was 4% in the second half and every division grew in the final quarter.
The motor finance provision, which compensates customers over historic car finance commissions, is unchanged at about £320m since the April trading update. The £164.7m charged this year accounts for most of the £180.6m of adjusting items behind the statutory loss.
For the year ahead, the bank guides to underlying loan growth of 5-10%, costs of about £430m and a modest rise in return on tangible equity, its profit relative to shareholders’ tangible capital, from 5.5%. It keeps a double-digit target for FY 2028.
Chief Executive Mike Morgan addressed the unresolved scheme, which the Upper Tribunal has suspended in part while four legal challenges proceed:
As we await further clarity on the outcome, our focus remains on the execution of our strategy.
Mike Morgan, Chief Executive, Close Brothers