Close Brothers has outlined plans to remove more than £60 million in additional annual costs as it accelerates the use of artificial intelligence and continues restructuring the banking group.
The group said it cut annual costs by around £36 million in the year to July 31, exceeding its initial £25 million target. It had announced plans in March to cut 600 jobs and reduce its office network.
Close Brothers now expects to deliver more than £60 million in annual savings in 2026-27, as outsourcing and offshoring work, along with reductions to its office network and business functions, begin to take effect.
The group said it was “well into planning for the next stage of restructuring activity”, including bringing support functions under one central division and accelerating the rollout of artificial intelligence. It said it had no plans to cut additional jobs beyond the 600 already announced, although the chief executive did not rule out further reductions.
About 200 of the announced roles were eliminated in the year to July, with the remaining 400 expected to go over the following year. Some call centre roles are being offshored to South Africa.
Close Brothers reported a pre-tax operating loss of £60.3 million for the year to July 31, after taking a further £164.7 million provision for the car finance redress scheme. This brought total provisions for the scheme to about £320 million. Restructuring costs, including redundancy expenses, also contributed to the loss.
The loss was down from £122.4 million in 2024-25. Lending increased by 2% on an underlying basis, including a 4% rise in the final six months of the year.
The Financial Conduct Authority paused plans earlier this year for compensation payments to customers sold car finance agreements involving unfair or hidden commission payments, as the redress scheme faced legal challenges.
Close Brothers said it would not pay a final dividend for 2026 because of “continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme and any potential financial impact”.
The group has also been reducing costs and strengthening its capital position, and has agreed the sales of its Winterflood arm and asset management businesses.
Chief executive Mike Morgan said the group would have been profitable without the motor finance provisions and was set to return to profit in 2026-27 if no further cash was required to be set aside. The company reported underlying operating profit of £120.3 million for the year.
“We have taken decisive action: exiting non-core activities and repositioning business lines; taking out costs; returning to growth, and sharpening our focus on our specialist lending markets in which we have expertise,” Morgan said.
He added that Close Brothers was “a simpler, more focused specialist bank” and remained committed to returning the group to double-digit returns by 2027-28, rising thereafter.
Shares in the group rose 12% as analysts praised its turnaround efforts. Gary Greenwood, an equity analyst at Shore Capital, said the acceleration in lending during the second half and faster-than-planned cost savings were encouraging.
