Member Info for SG2025

1. Lenders’ Likely Legal & Strategic Arguments

1 A. Legal Arguments (Judicial Review Grounds)

i) Ultra Vires (Beyond Power of FCA)

Argue FCA is exceeding its statutory power under FSMA s.404 by imposing a scheme that effectively rewrites the law after the Supreme Court narrowed liability under CCA.

Point: If the courts say most DCA cases aren’t unfair, FCA cannot “invent” new liability by regulation.

ii) Irrationality / Disproportionality

Claim scheme is irrational because consumer harm is overstated.

FCA’s estimate (avg. payout

In summary:

Lenders can take the FCA to court via judicial review, but their chances of success are limited. The FCA has clear statutory powers under FSMA s.404 to impose an industry-wide redress scheme. The Supreme Court ruling narrows court-based claims, but it does not prevent the FCA from using its regulatory powers to mandate redress.

Knot, thanks - quite helpful as always. I researched the topic further on AI, and here is some useful snippets....

1. Can lenders challenge the FCA’s redress scheme legally?

Yes — lenders can challenge the FCA in court, but only through judicial review (JR).

Judicial review is the legal mechanism to test whether a regulator (like the FCA) has acted within its statutory powers and in a way that is rational, lawful, and procedurally fair.

It does not re-hear the merits of consumer complaints or substitute the FCA’s judgment for the court’s. Instead, it looks at whether the FCA had the power to impose such a scheme and whether it exercised it properly.

2. FCA’s Legal Authority to Impose a Redress Scheme

The FCA has statutory powers under s.404 of FSMA 2000 (Financial Services and Markets Act) to set up consumer redress schemes.

A s.404 scheme can: Define a “specified kind of activity” (here, motor finance with DCAs).

Require firms to review past business and pay redress if harm is found.

The FCA must consult before making a scheme and demonstrate evidence of widespread or regular failure causing consumer detriment.

This gives the FCA a strong legal basis for imposing a scheme, provided it follows due process.

3. Grounds on which lenders might challenge the FCA

Lenders could try to judicially review the scheme on arguments such as:

Ultra vires (beyond powers) → Arguing that the FCA’s scheme goes further than Parliament intended under s.404, especially since the Supreme Court narrowed unfair relationship liability.

Irrationality / Wednesbury unreasonableness → Claiming the FCA’s decision is so unreasonable that no reasonable regulator could impose it.

Procedural unfairness → If the FCA’s consultation is inadequate or ignores critical evidence (e.g., SC judgment narrowing liability).

Retrospectivity → Challenging the fairness of applying current standards to historic agreements that complied with rules at the time.

4. Obstacles for Lenders

Courts generally give wide discretion to regulators like the FCA when acting to protect consumers. Judicial review rarely succeeds unless the regulator clearly exceeded its powers or acted irrationally.

The FCA will lean on:

s.404 FSMA powers,

its statutory consumer protection objective, and

evidence of systemic consumer harm.

Politically, lenders risk reputational damage by publicly opposing consumer redress (think PPI precedent).

5. Impact of the Supreme Court Ruling

The SC ruling narrowed legal liability under CCA but did not strip the FCA of its FSMA powers.

The FCA has already said it will still proceed with a scheme despite the SC verdict, though likely with lower average payouts (most

It’s a good thing actually. Analysts lowering expectations which will mean easier for company to outperform them. Across the street, analysts have very low expectations from the company and rbc is no different. Read any of their reports, forecasts and ratings, they are all mostly similar and do not give any credence to a possibility of management actions to accelerate growth and cost initiatives !!

I think the rating is very backward looking, ie based on historicals, which is probably how they are. This also gives me confidence that things can only start to get better from here, and how out of touch from reality the credit agencies can be!!

“ Wizz Air's CEO, Jozsef Varadi, was previously in line for a £100 million bonus if Wizz Air's share price reached £120 (12,000p) by 2028”

I say pay him 200m if he can get the share price to 120£. I mean it would be almost £12bn market cap and almost 10x from current levels… the bonus size will be quite insignificant at that market cap.

In my view, markets are already pricing in the very worst case scenario at current price, which is that the cost will encompass the full 400m that Cbg has accumulated in the last 2 years including 165m provisioned. This is better than the Armageddon scenario where Cbg could have gone bust with an adverse SC decision, which thankfully did not transpire. It can only get better from here in my view with the House of Lords involvement.. and should boost sentiment next week. More importantly in the very near term, what matters most is what the management says in their next earnings release in September, about the future outlook and how they will take the business forward in the next year. If they sat, which they should, that they have more than sufficient provision and additional capital in place to account for even the worst 18bn FCA scenario and that they are ready to move forward with growing the business whilst this mess gets resolved, I think the shares could jump past 600p easily.. imho

I like debating when it comes to investing / valuations - sometimes to test my thesis for any holes and sometimes to learn thesis on the other side (bear/bull) which I may have not realized. I am only pointing few points (take it as food for thoughts or ignore them) to the debate and you should do your own research or pick your own thesis and stick with it.. Hopefully this debate will continue to remain civil.

Relative valuation or peer comparison is not always straight forward. Its as good as someone arguing that apple and strawberries are both fruits, so they should have same priced, but do you get them for same prices? When it comes to stocks, for an apple to apple comparison, you should compare size category, growth, returns, margins before comparing valuation multiples. Market will clearly give more multiple to a higher growth or returns.

Also, STB is £200m market cap and Arbuthnot £166m. The argument that Lloyds is too big for CBG, doesn't a similar argument goes that CBG is in an entirely different size segment (mid-cap vs small-caps). Very few bank analysts follow these small caps, which in turn significantly reduces institutional following (also because of investable size). This is one of the reasons you will see majority of small cap companies in these market cap ranges, trade at significantly depressed multiples vs larger sized peers. Few are outliers, but for very different reasons. So, I really don't treat them as comparable for peer valuations. I have read various bank analyst reports and none of them list these direct comparable for valuation purposes.

For information, as per Reuters, CBG is covered by 10 bank analysts including RBC, Berenberg, UBS, Deutsche Bank, Shore Cap, Panmure etc. STB is covered by 3 small-cap analysts !!

A more appropriate peers from sizing perspective would be Investec, Lion Finance, TBC and perhaps Metro, that all fit into mid-cap category. But each have different end markets, growth, return, margin profiles and hence trade at different multiples, so its not easy to compare either.

Another point of view, if you want to still compare CBG with STB etc, why can one not argue that the whole pack (which was effected by motor financing) is undervalued or still discounted vs fair value given still looming uncertainties from FCA redressal? Also, reading through analyst reports (and I have read many), I think they still do not give any benefit of potential loan book growth, or reduced costs from management action and no more admin/advisor costs when the whole episode is resolved!!

And one more thing, none of the analysts compare CBG with these small-cap stocks!! I

I am long CBG and have done my homework (with clearly long bias clearly).

Thanks Whatidsaytothat.

Given FCA's posturing and uncertainty created by it, and how conservative the management is, I don't think they will do a buyback anytime very soon, until they are certain about the redressal amount and have enough provision for it along with the costs. They were literally panicking for survival less than 12 months back.

In the upcoming results, they should sound really positive about the future along the lines of:

1) they have more than enough provisions for any redressal amounts post SC verdict from the £400m they have accumulated (on the conservative side of things)

2) they will focus on loan book growth and sustainability of NIMs

3) focus on costs reductions - further streamlining / cost reductions including reduced additional expenses on advisors / admin relating to motor financing

4) resume normal dividends from next cycle with additional capital being returned via buybacks once the car financing bit is wrapped up or they have absolute certainty about it.

I can bet, that just these messages will see the shares rocket up from current levels. Thereafter, it should only be positive from any incremental reduction in redressal costs.

Also, bear in mind, as Knot alluded in his previous posts, banks may again need to go to the courts, this time vs FCA, so quite likely this drags on for another 1-2 years, so key for the management to start normalizing operations and shareholder returns. That in itself will mean significant re-rating....

@Knot, I have much appreciated your posts and views on legal side of things and gained much. So in the spirit of contribution, some good for thought on the topic that I can add from professional experience :

Banks or lending firms are predominantly valued by street / analysts on P/TNAV or P/B valuations and the multiple usually varry between companies with a straight correlation on their RoEs or other return metrics along with some soft aspects like credit quality, volatility of earnings etc. for example investment banking earnings usually are more cycical and thus volatile than pure lending and tends to have lower multiples. P/E or yields are secondary valuation metrics for sense checks but more primary metrics are still p/tnav or p/b

In the specific context of CBG, tnav should increase further with accrued earnings in H2 + expected winter flood disposal - so it should be something around £9 unless they make any more credit provisons, hopefully not.

Also, their ROEs have been severally depresssed since last year on account of increased costs (£40-50) for admin and advisors for motor financing etc - all stated in thur h1 presentation. Hopefully this should disappear next year when this thing is all settled.

Additionally, they are expected to reduce their costs by £25 annually from new financial year. All this should mean the RoEs should jump significantly. The streamlining of the bussiness (CBAM and winter flood sale) should also enhance returns as they were lower margin businesses.

I can write a lot on this topic, but in summary, once the company normalises their operations and start to focus on growing its loan book, the RoEs will look far better than the other banks mentioned by others. And you can look historically, where did CBG traded on tnav multiples (1-5-2.0x). I have done my calculations and feel strongly that it is quite achievable but over a period of 1-2 years and hence invested significantly over the last several months. Hopefully this is useful.

Chumba, Senator1 - great posts and v useful read, which is hard to find on this platform honestly. My two cents...

1) Why just £100m buyback and not more? They should remove special divis and increase buybacks at this price or go more aggressive with buybacks once redomicile is completed. It may have been a good idea to have messaged this in the CEO pre-recorded message...

2) Why not reduce capex by cutting down new UK stores and instead focus on investments in price (and thereby LFLs) and buybacks. The RoE from these two measures will certainly be higher than opening new stores, particularly in the UK. Not as an ongoing strategy, but they should become flexible/dynamic about market opportunity and a balanced focus on top line vs EPS growth. Afterall, new stores may also cannibalize existing store sales to some extent. I know this could confuse market on store count and top line growth, and so may require a pivot to a new strategy and market messaging, which should be easier with the new CEO.

3) Interest cost seem pretty high compared to gross debt, seems like 11-12% interest rate, which certainly seems quite steep. Can see substantial saving by refinancing, perhaps next year..

Thanks for the info. Are the shorts increasing only for Wizz or the pattern similar across the sector, including particularly IAG as well? Needless to say, the short term risk for Wizz and to varying degree across the sector is the Israel/Iran war intensifying or prolonging and causing further spikes in oil prices. Israel will likely continue to go on until the regime falls (similar to Gaza), and this will likely mean a prolonged war unless US joins and speeds up the process or Iran's counterstrikes cause a lot of damage to change public sentiment. My view is they don't want US to join Israel and if they cause oil disruption, Trump will take it as an excuse to join Israel actively. He may still decide to do so, which if so, will mean Iran will use all pressure points including choking oil supply.

"No client wants to get into a 3 year project contract when he is unsure if the contractor has the financial heft to complete it. Just imagine where ADNOC will be if Wood goes insolvent in the middle of the project. What a message it would be?"

@raghusn, by your assertion - why would Petrofac win a billion+ dollar from Adnoc when their market cap is what 20m !! ??? Just playing devil's advocate to find gap in your argument. Happy to get a more sound counter argument.

@Kando, I agree with you. A lot of posters on this forum keep forgetting (short term memory) that we do NOT know the rot in finances discovered by Deloitte and which was mentioned in a very watered down language. Only the Board knows this and their desperation or rather willingness to do a deal at this price, must be revealing of the rot itself. Remember they rejected takeover bids much above 200p only last year and the year before. Something must have gone wrong which has changed their attitude. I am glad with Sky's leak, which have tended to be accurate historically of at least the deal on the table. Another counter bid thereafter or a better outcome will be cherry on the cake though, but I am grounded in my expectations.

Former Wood Group director slams ‘screw up’ of perfectly good business

https://www.pressandjournal.co.uk/fp/business/local/6736000/former-wood-director-slams-screw-up-of-perfectly-good-business/

Read More: https://www.kaohooninternational.com/markets/558172

What do you mean impending fine in June? Is it the one in Australia? Didnt know it was due to come out next month.

Couple of questions - welcome sound responses. I am long on the stock, but have some concerns around FX movements and management still keeping a bit vague on tariff impact.

1) Guess GBP strengthening have -ve impact on MEL cashflows or no? The update today states "All growth rates are stated at constant currency and on a like-for-like basis.". So they are not accounting for FX movement. The notes also state that the guidance is based on GBP = USD1.25, and that movement in USD or EUR will have substantial movement in operating profit and gross debt (and hence cash flows I guess).

2) My read from today's update (from the language) is that the guidance still excludes tariff impact. Is that how you read?

These may be the reason why SP is down since April and markets are discounting the impact of tariffs and FX, which may reverse as tariffs are pulled back and USD hopefully starts to strengthen..

@Falcon-Flyer-03, something in my posts must have hurt a little part of your tiny brain that got you so fired up to go on personal insults!!

"@SG2025 I do not intend to critisize - everyone invests for their own reasons. Do you share IceCool's thoughts that the institutional investors will throw the board out and that a new board will re-structure Wood?"

I think this is a fantasy. Its not that simple to simply replace the Board of a public company, especially when you don't have a person (majority holder)/institution (activist) to pivot around, and even then its a lot of struggle to bring such a change. Absence of these, there is not a single example in UK or whole of Europe (least in my knowledge in the last 2 decades) where standard institutional investors have brought such a drastic change?? These institutions are not structured to behave like an activist and force a change of BoD. Maximum the Board will unite to replace the Chair and CEO (and possible some directors may step away voluntarily over time), but that will not happen until the Sidara bid falls away and lending is secured.