Close Brothers Suspends Dividend Over FCA’s Motor Finance Investigation

By Michael Susin

Close Brothers said it will suspend its dividend payout for fiscal 2024 as it assesses the impact of the U.K. financial regulator’s investigations into past commission arrangements made by several motor finance companies.

The financial-services company said Thursday that the reinstatement of dividends in fiscal 2025 and beyond will be reviewed once the Financial Conduct Authority has concluded its process and financial consequences have been assessed.
“There is significant uncertainty about the outcome of the FCA’s review, and the timing, scope and quantum of any potential financial impact on the group cannot be reliably estimated at present,” it said.
The company said it isn’t making any provision in the first half of fiscal 2024, but that it needs to plan for a range of possible outcomes.
“The board is implementing a range of actions to further accrete capital including optimizing risk-weighted assets and continued delivery of our cost management initiatives,” Close Brothers said.
On Jan. 11, the FCA said it was investigating historic commission arrangements following a high number of customer complaints.
The regulator said there was an increase in complaints to motor-finance companies about discretionary commission arrangements made before 2021, when they were banned by the FCA to remove the incentive for brokers to hike the interest-rate customers pay for their motor finance.
Meanwhile, the group said it continues to perform well, with the banking division delivering growth at strong margins, generating 112 million pounds ($140.7 million) of adjusted operating profit–the company’s preferred metric, which strips out exceptional and other one-off items– for the six months ended Jan. 31.
Overall, the group expects to deliver an adjusted operating profit of around GBP94 million after net expenses.
Write to Michael Susin at [email protected]