Close Brothers to axe 600 jobs after car finance ‘wipeout’ warning

Close Brothers has warned it will cull as much as a fifth of its headcount as the bank continued its aggressive cost-cutting strategy following mounting losses linked to the motor finance scandal.

The FTSE 250 bank said it would axe a whopping 600 full-time roles by the end of the 2027 financial, which represents around 20 per cent of the firm’s total staff.

It follows the bank recording a loss of £65.5m in the first half of the year after it was forced to hike its provisions for the motor finance scandal. The figure did mark an improvement from a loss of £102.2m in the same period the year prior.

Losses were driven by the whopping £135m set aside in October following the UK’s financial watchdog outlining proposals for its industry-wide redress scheme for the car mis-selling saga. The extra funds dragged the bank’s total provisions to £300m.

Close Brothers faces bombshell report

But the fresh update on Tuesday followed a bombshell report from short-seller Viceroy, which warned the bank would have to “at least” double its existing provisions following “examination” of the watchdog’s redress scheme.

The note accused Close Brothers of “systematically misrepresenting” its exposure to the motor finance scandal and warned in a blue-sky scenario the bank could face regulatory intervention and leave shareholders “substantially wiped out”.

The bank stuck to previous guidance on its dividend that the reinstatement will not come until there is further clarity on the financial watchdog’s forthcoming motor finance redress scheme.

Operating income tumbled to £333.8m, down from £355.4m in the same period last year, impacted by a lower average loan book and the strategic wind-down of certain business lines.

Meanwhile expenses fell to £359.8m, down from £409.5m, as chief executive Mike Morgan continued to plough forward with his cost-cutting overhaul.

“We remain focused on delivering our strategic priorities: simplify, optimise, and grow. With the simplification of our business largely complete, we are firmly in the optimisation stage, and have accelerated our cost savings plans,” Morgan said on Tuesday.