Close Brothers shares crash as analysts expect ‘refined’ motor finance ruling
Shares in FTSE 250 lender Close Brothers fell as much as eight per cent on Monday as the landmark motor finance hearing came to a close.
At the Supreme Court case, Close Brothers attempted to overturn the Court of Appeal’s October ruling that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent.
The highest court in the land is expected to reach a judgment on the case in the forthcoming months, leaving investors waiting for the result.
Gary Greenwood, research analyst at Shore Capital, said: “There remains significant uncertainty as to the likely outcome of the Supreme Court hearing.
“However, our general sense from the hearing is that judiciary is unlikely to completely reverse the Court of Appeal’s decision, but instead is more likely that it will seek to clarify and refine certain aspects”.
Close Brothers shares sank 6.5 per cent following the Court of Appeal’s ruling. The stock has lost nearly thirty per cent in the last six months.
Following the Treasury’s rejected intervention in the case, the lender’s shares plummeted as much as nine per cent.
The Financial Conduct Authority said it would confirm an industry-wide redress scheme within six weeks if the banks were handed an adverse judgment.
Greenwood said the predicted outcome would “reduce the risk of a redress scheme to the motor finance industry relative to a position where all commissions were deemed to have been illegal”.
“This would in turn prevent or limit significant spillover across to other markets where commission-based models operate.”
Greenwood added this result would be “relatively good news” for lenders who do not have extensive historical exposure to discretionary commissions or have operated “with better disclosure”.
Lender’s stock across the market took a hit on Friday as the global trade war ramped up.
Trump’s ‘Liberation Day’ tariff onslaught triggered a market sell-off, with banks making some of the biggest losses.