Close Brothers is preparing a further round of cost-cutting after reporting a pre-tax operating loss of £60.3 million for the year to July 31, with the banking group targeting more than £60 million in annual savings in the 2026-27 year ahead.
The group said it reduced annual costs by about £36 million during the latest financial year, exceeding its initial target of £25 million. The reductions followed plans announced in March to cut 600 jobs and reduce its office network.
Close Brothers said its next stage of restructuring would focus on bringing support functions into one central division, further reducing business and office costs, and accelerating the use of artificial intelligence. It said outsourcing and moving some work overseas had contributed to the savings already achieved.
The group said it was “well into planning for the next stage of restructuring activity”. It has stated that it has no current plans to cut more jobs beyond the 600 roles already announced, although its chief executive, Mike Morgan, did not rule out further job reductions. About 200 of the announced roles had gone by the end of the year, with the remaining 400 expected to be removed over the year ahead. Some call-centre roles are being moved to South Africa.
### Motor finance provisions weigh on results
Close Brothers’ latest loss was driven in large part by a further £164.7 million provision for a motor finance redress scheme. That took the group’s total provisions for the issue to about £320 million.
The Financial Conduct Authority paused plans earlier in the year for compensation payments to customers who were sold car finance agreements involving unfair or hidden commission arrangements. The proposed redress scheme has faced legal challenges, leaving the eventual cost to lenders uncertain.
Close Brothers said it would not pay a final dividend for 2026 because of the “continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme and any potential financial impact”.
Despite remaining in the red, the group’s loss was lower than the £122.4 million pre-tax loss reported for 2024-25. Restructuring costs, including redundancy expenses, also affected the latest result.
The company said underlying lending rose by 2% over the year, including a 4% increase in the final six months. Morgan told the Press Association that the group would have been profitable without the motor finance provisions and said it was expected to return to profit in 2026-27 if no further cash was set aside for the issue.
He pointed to underlying operating profit of £120.3 million for the year and said: “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.”
### A simpler business
Close Brothers has been cutting costs and strengthening its capital position as it manages the potential burden of motor finance compensation. It has agreed sales of its Winterflood arm and asset management businesses as part of efforts to simplify the group.
Morgan said the company was now “a simpler, more focused specialist bank, better positioned to serve customers, invest in growth and enhance returns for shareholders”. He added that progress during the year had given him confidence in the strategy and that he remained committed to returning the group to double-digit returns by 2027-28, rising thereafter.
The company’s shares rose 12% after the results. Gary Greenwood, an equity analyst at Shore Capital, said the acceleration in lending during the second half was encouraging and that management was delivering cost savings faster than planned.
Close Brothers is therefore attempting to balance a recovery in lending and underlying profitability against the continuing uncertainty surrounding motor finance redress. Its cost-saving programme is moving beyond the initial workforce and property reductions, with centralised support functions, outsourcing and artificial intelligence now forming part of the next phase of the restructuring.
