(Sharecast News) - Shares in Close Brothers tumbled on Thursday after the financial services group scrapped its dividend amid a regulator probe into car financing.
The Financial Conduct Authority announced last month it would investigate commission on historic car financing deals. The probe will look at deals going back a decade, on concerns that lenders and dealers were incentivised to increase interest rates for customers.
Close Brothers said there was "significant uncertainty about the outcome of the FCA's review, and the timing, scope and quantum of any potential financial impact on the group cannot be reliably estimated at present".
The merchant bank therefore will not be recognising any provision in the results. But it continued: "The board recognises the need to plan for a range of possible outcomes.
"[It] considers it prudent for the group to further build capital strength, while supporting our customers and business franchise. Therefore, the group will not pay any dividends on its ordinary shares for the current financial year.
"The reinstatement of dividends in the 2025 financial year and beyond will be reviewed once the FCA has concluded its process and any financial consequences for the group have been assessed."
As at 0845 GMT, shares in the FTSE 250 stock had lost 14% at 340.6p.
The FCA banned the commission model for car finance in January 2021. But it is concerned that consumers may have been treated unfairly before the ban.
Close Brothers is due to post interim numbers on 19 March.
Close Bros (CBG)