Close Brothers suspends dividend over FCA auto financing investigation

Written by Michael Sussin

Close Brothers has announced that it will suspend dividend payments for 2024 as it assesses the impact of the UK financial regulator's investigation into past fee arrangements made by several car finance companies.

The financial services company announced on Thursday that reinstatement of the dividend will be considered from 2025 onwards after the Financial Conduct Authority completes the process and assesses the financial impact.
“There are significant uncertainties surrounding the outcome of the FCA's review and the timing, extent and amount of the potential financial impact on the group cannot be estimated with certainty at this time.”
The company said it would not make any provisions for the first half of fiscal 2024, but needed to plan for a range of possible outcomes.
“The board is implementing a range of actions to further increase capital, including optimizing risk-weighted assets and continuing to implement cost management initiatives,” Close Brothers said in a statement.
The FCA announced on January 11 that it was investigating historic fee arrangements following numerous customer complaints.
The regulator said it was seeing an increase in complaints to car finance companies about discretionary fee arrangements made before 2021, which were banned by the FCA to remove incentives for brokers to raise the interest rates customers pay on car finance. .
Meanwhile, the group said its banking division continued to perform well, with high-margin growth and adjusted operating profit of 112 million pounds ($140.7 million). This is the company's preferred metric, excluding exceptional and other one-time items.  –For the six months ended January 31st.
Overall, the group expects adjusted operating profit before net costs to be approximately £94m.
Email Michael Susin at michael.susin@wsj.com.