Close Brothers raises cost-cutting target as job cuts begin
Close Brothers has dialled up its cost-cutting plans and said it was “well into next stage of restructuring” after revealing it would slash its headcount by around 20 per cent earlier this year.
The FTSE 250 bank said on Tuesday it had delivered £36m of savings in its latest financial year, coming ahead of the initial £25m target. The bank said it had now raised its target for 2027 to exceed £60m through a combination of offshoring, restructuring and property reductions.
The lender said its transformation programme had “gained real momentum” and the group was now “well into planning for the next stage of restructuring activity”.
In March, Close Brothers confirmed it would axe 600 full-time roles by the end of 2027, which represents around 20 per cent of the firm’s total headcount.
Restructuring costs were recorded at £14.3m for the last year, up from £2.3m in 2025, primarily due to redundancies. The bank said it expects the costs to rise to between £30m and £40m in the next year.
The group is also looking to AI, where it sees “significant potential to improve efficiency, as well as develop proposition enhancements”.
Close Brothers narrows losses
Close Brothers posted a pre-tax loss of £60.3m for the 12 months to July 2026, more than halving its £122.4m loss from the year prior. The firm has continued to be weighed down by the ongoing motor finance scandal, where it hiked its provisions for a potential payout to £320m earlier this year.
The saga, which relates to secret commission deals between lenders and car dealers that left consumers in the dark, is heading back to the legal courts in the first half of 2027, as manufacturing giants look to kibosh a redress scheme introduced by the City watchdog.
Close Brothers opted to scrap a final dividend payment for the third year running, citing “continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme”.
“We are committed to reintroducing the dividend, but we do need clarity when we do it… we don’t have that clarity,” Close Brothers’ boss Mike Morgan told City AM.
Four challenges to the redress scheme are set to be heard by the Upper Tribunal by February 2027.
Elsewhere, Close Brothers faced pressure on its balance sheet as operating income tumbled six per cent to £642.9m. The bank’s net interest margin – a key indicator of its profitability from lending – also slipped to 6.9 per cent, from 7.2 per cent.
Adjusted operating profit fell 17 per cent to £120.3m, down from £144.3m due to lower income from business repositioning.
Adam Vettese, market analyst at eToro, said: “Investors are buying evidence that the bank can keep generating capital while it waits for the lawyers. They are not yet buying a return to the old Close Brothers of mid teens returns and a fat payout.”
He added that would come if the £320m provision holds and “the loan book starts growing again”.
“Until then this remains a special situation, not a recovery story.”