Close Brothers announced that it will allocate up to 165 million pounds in its accounts in the first half to cover the potential costs of the law and compensation related to the scandals of the growing car financing committee.
The FTSE 250 Looring revealed the ruling on an unprecedented update, warning that the final costs may be “higher or less” depending on the legal results of the appeal and a review by the FCA.
The scandal focuses on hidden commissions in car financing deals, with effects at the level of industry. LLOYDS Banking Group, which offers loans to cars through its Black Horse brand, has allocated 450 million pounds for potential compensation, while Santander UK has achieved a 295 million pounds. Analysts estimate the total Lloyds 1.3 billion pounds when he modernizes investors next week.
The closing price of the brothers decreased by 6.4 % to 341 inches after the announcement, while Lloyd’s shares increased by 1.75 % to nearly 64 points, and analysts suggested that the ruling could provide some reassurance to other lenders.
This controversy stems from the court of the Court of Appeal in October, which was found to be illegal car dealers to obtain a commission from lenders without the approval of the enlightened customer. This decision opened the door to a wave of compensation claims from consumers whose auto financing agreements may be abused.
However, the industry received a possible postponement after the Treasury submitted evidence of the Supreme Court, which would review the ruling in April. Both the brothers, who are competing for the ruling, have increased its financial position in anticipation of a potential compensation bill, including selling wealth management arm for 200 million pounds last September.
Despite this ruling, the close brothers stated that it is still higher than the requirements of organizational capital and that it is “in a good position to absorb the effect.” The bank also evaluates more measures to improve the weighted assets and reduce exposure.
Former analysts estimated the auto financing item worth 155 million pounds this year, followed by 188 million pounds in 2025 and 145 million pounds in 2027. Some of them, such as Shor Capital, issued higher expectations, with a higher drop of 450 pounds million in Total judgments.
In its latest commercial update for the six months until the end of January, Close Brothers expect that modified operating profits will decrease to 75 million pounds, a decrease from 94.4 million pounds a year ago.
The Supreme Court ruling in April will be pivotal in determining the volume of financial exposure to the industry, with the possibility of billions to occur at stake.