Here’s Why Close Brothers Shares Fell On Monday

Close Brothers Group (LSE: CBG) shares tumbled more than 8% on Monday after RBC Capital Markets downgraded the specialist lender, citing fresh legal uncertainty in the UK’s long-running motor finance commission scandal.

RBC cut its rating on Close Brothers to “sector perform” from “outperform” and slashed its price target to 470p from 625p — a roughly 25% reduction. Analyst Benjamin Toms said the shares could “drift lower from here” following back-to-back adverse court developments.

The Upper Tribunal last week agreed to hear judicial review challenges to the Financial Conduct Authority’s £9.1 billion industry-wide redress scheme, a decision Close Brothers itself said it was “surprised” by. Separately, the Court of Appeal ruled to allow mass “omnibus” claims over motor finance commissions to proceed — another blow to lenders exposed to the issue.

RBC estimates the legal challenge pushes back the resolution timetable by at least three months, with a hearing now expected in December 2026 or, more likely, February 2027. The bank now expects Close Brothers to skip its dividend entirely for the 2026 financial year.

Close Brothers currently holds a £320 million provision against the existing scheme, but RBC warned that if the FCA’s plan were scrapped altogether, the lender could face an additional £200 million in administrative costs.

The stock, trading at just 0.48 times forward tangible book value, is now forecast by RBC to deliver the weakest returns of 50 European lenders over the next three years.