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Highlights:

  • Close Brothers overturns Court of Appeal ruling in Hopcraft motor finance case
  • Group CET1 ratio increases to 14.3% pro forma after Winterflood divestment
  • FCA decision on possible redress scheme expected before markets open on 4 August

Close Brothers Group plc (LSE:CBG) has successfully overturned the Court of Appeal’s earlier decision in the "Hopcraft" motor finance commissions case, following a judgment delivered by the Supreme Court of England and Wales on 1 August 2025. The ruling concludes a legal process that began with Close Brothers (CBL) receiving permission to appeal in December 2024 and culminated in hearings held from 1 to 3 April 2025.

The Supreme Court found that motor dealers acting as credit brokers do not owe fiduciary duties to customers, thereby dismissing the Hopcrafts' claims in full. The decision also applied to related cases involving FirstRand Bank Limited, namely the “Wrench” and “Johnson” cases, in which similar arguments were made. However, in the Johnson case, the Supreme Court upheld a separate finding under section 140A of the Consumer Credit Act 1974, determining that the credit relationship was unfair based on the specific facts. FirstRand was ordered to pay the commission amount and interest to Mr Johnson. The Court emphasised that the test for unfairness is fact-specific and influenced by a range of considerations.

While the Hopcraft ruling clarifies important legal principles, uncertainty remains over potential regulatory implications. The Financial Conduct Authority (FCA) has stated it will announce on 4 August 2025 whether it intends to consult on a redress scheme linked to its ongoing review of motor finance commission arrangements. Until this is confirmed and the scope defined, Close Brothers cannot determine the full financial impact, including potential adjustments to its provisioning.

The group had already recognised a GBP 165 million provision in relation to motor finance commissions, factored into its Common Equity Tier 1 (CET1) capital ratio, which stood at 14.0% as of 30 April 2025. The recently disclosed sale of Winterflood Securities is expected to increase the CET1 ratio by approximately 30 basis points, bringing the pro forma level to around 14.3%, with additional CET1 improvement of up to 25 basis points anticipated from a reduction in operational risk-weighted assets. Close Brothers reported adjusted operating profit of GBP 75 million in the first half of its financial year and noted a steady performance in the third quarter, as outlined in its 21 May 2025 trading update. The company continues to assess its operations and portfolios in line with the strategic priorities detailed during its half-year results in March 2025.

CBG is trading 20.86% higher at  GBX 480.80 per share as of 4 August 2025.