Close Brothers ramps up cost cutting after posting another loss

Close Brothers has revealed plans to strip out more than another £60 million in annual costs amid plans to continue ramping up the use of artificial intelligence (AI).

The banking group said it cut annual costs by around £36 million in the year to July 31 – far more than the £25 million initial target – after announcing plans in March to cut nearly a quarter of its 2,600-strong workforce and trim its office network.

In full-year results, it said it now expects to deliver more than £60 million of annual savings in the 2026-27 year ahead as efforts to outsource and offshore work abroad and cut back its office network and business functions are paying off.

It added it was now “well into planning for the next stage of restructuring activity”, with a focus on bringing its support functions under one central division for the group and accelerating the rollout of AI.

The group stressed it has no plans to cut more jobs on top of the 600 already announced despite nearly doubling annual cost cutting.

It reported pre-tax operating losses of £60.3 million for the year to July 31 as it was knocked by another £164.7 million in provisions for the car finance redress scheme, taking its total to about £320 million, while restructuring costs, including redundancies, also kept it in the red.

But losses halved from the £122.4 million pre-tax loss reported in 2024-25.

The Financial Conduct Authority (FCA) paused plans earlier this year for compensation payouts for those sold car finance deals with unfair or hidden commission payments as the redress scheme faced legal challenges.

Close Brothers said it would not pay a final dividend for 2026 given the “continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme and any potential financial impact”.

The firm has been trimming costs and boosting its capital strength due to the hefty motor finance compensation bill, agreeing sales of its Winterflood arm and asset management businesses.

Mike Morgan, chief executive of Close Brothers, said: “We have taken decisive action: exiting non-core activities and repositioning business lines; taking out costs; returning to growth, and sharpening our focus on our specialist lending markets in which we have expertise.”

He added: “We are now a simpler, more focused specialist bank, better positioned to serve customers, invest in growth and enhance returns for shareholders.

“The progress we have made this year gives me confidence in our strategy and I remain fully committed to returning the group to double-digit returns by 2027-28, rising thereafter.”