Close Brothers has raised its Close Brothers cost-cutting target to exceed £60m by 2027, after delivering £36m of savings in its latest financial year against an original goal of £25m. The FTSE 250 bank, still carrying heavy provisions linked to the motor finance scandal, said its transformation programme had ‘gained real momentum’ and that it was ‘well into planning for the next stage of restructuring activity’.
Close Brothers Cost-Cutting Target Raised Amid Motor Finance Cloud
The bank confirmed it hit the £36m savings figure ahead of its initial £25m target, and has now lifted the 2027 ambition to more than £60m. Cost reductions will come through a combination of offshoring, restructuring and property reductions, the bank said.
Restructuring costs came in at £14.3m for the year, up sharply from £2.3m the prior year, primarily due to redundancy payments. The bank expects those costs to rise further, to between £30m and £40m in the year ahead, as the bulk of the job-cutting programme takes effect.
In March, Close Brothers confirmed it would cut 600 full-time roles by the end of 2027, representing around 20 per cent of its total headcount. The group also said it sees ‘significant potential’ in artificial intelligence to improve efficiency and develop what it described as ‘proposition enhancements’.
Losses Narrow but Balance Sheet Feels the Strain
Close Brothers posted a pre-tax loss of £60.3m for the 12 months to July 2026, more than halving the £122.4m loss recorded the previous year. Even so, the bank’s balance sheet is under pressure: operating income fell six per cent to £642.9m, and the net interest margin, a measure of profitability from lending, slipped to 6.9 per cent from 7.2 per cent.
The bank scrapped its final dividend for the third year running. It cited ‘continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme’ as the reason for withholding the payment.
Motor Finance Saga Heads to the Upper Tribunal
The motor finance dispute centres on secret commission arrangements between lenders and car dealers that consumers were not told about, covering agreements made between Close Brothers Motor Finance and borrowers from 6 April 2007 to 1 November 2024. Close Brothers has set aside £320m in provisions for a potential payout.
The proposed compensation scheme has been valued at £9.1 billion, according to Reuters. Four commercial parties are challenging the scheme before the Upper Tribunal: CA Auto Finance UK Limited, Consumer Voice Limited, Mercedes-Benz Financial Services UK Limited, and Volkswagen Financial Services (UK) Limited, according to the Financial Conduct Authority.
The FCA has confirmed the Upper Tribunal will hear those challenges either on 14-18 December 2026 or 16-26 February 2027. The outcome will determine whether the regulator’s redress scheme survives, or whether lenders can sidestep what would be one of the largest consumer compensation exercises in UK financial history.
For Close Brothers, the timing matters acutely. The bank’s ability to restore dividend payments, rebuild its margin and complete its restructuring without further capital strain all hinge on how those hearings go. Management has made clear it will not move until the legal picture is clearer, and February 2027 now stands as the earliest credible point at which that clarity might arrive.
