Close Brothers has unveiled a £400 million initiative aimed at fortifying its capital position in anticipation of the repercussions of a regulatory investigation into motor financing transactions, which analysts project could entail significant costs of up to £16 billion for the banking sector.
Close Brothers
The FTSE 250 bank, which recently halted its dividend payouts, stated on Tuesday that it deemed it wise to further reinforce its financial standing and implement cost-saving measures given the “considerable uncertainty surrounding the outcome” of the inquiry “at this early stage.”
While asserting that it currently bears “no legal or constructive obligation” related to the Financial Conduct Authority’s investigation and has not made any provisions as a result, the company outlined a series of actions to augment its common equity tier one ratio, a key measure of financial robustness, by £400 million by the conclusion of its fiscal year in 2025.
These measures include a “significant risk transfer of assets,” alongside other initiatives such as “cost management strategies” and the retention of £100 million in earnings if necessary.
Adrian Sainsbury, the chief executive, remarked, “The FCA’s examination of the motor finance sector is ongoing, and it would be premature to speculate on the outcome or assess the potential impact on the group. Nevertheless, the board acknowledges the critical importance of readying the group for various potential outcomes arising from this review.”
