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I have not really followed this stock, but invested in some of the peers. The sharp drop intrigued me today, and spent this morning, going through last several years of results etc and any commentary etc. My question to the more learned and experience members on this forum - what is your view regarding the provisions of motor finance by STB? Seems fairly low to me from outside, and I can't find management commentary to give a strong assurance that they do not have much exposure like S&U have done... They are about 1/4th the size of CBG in terms of their motor finance balance sheet, and if I extrapolate 1/4th of CBG's provisions that comes to about 40m vs approx 7m provisioned? May be I have got something wrong, but would genuinely appreciate any feedback / more insights, particularly if you can point to any specific past management commentary etc? Will look to buy if I can get some assurance regarding this aspect. Clearly, the final outcome on FCA redressal is anybody's guess and is highly speculative at this stage, but trying to make some sound reasoning here for the investment case with this overhang...

Think it’s going to be ugly today (least in the morning), given Lloyd’s RNS. !!!

Thanks Knot. Besides the legal arguments (which is still beyond me), if common sense were to prevail, I strongly believe that this will go to the courts whether CBG or any particular lender likes it or not. This is good and bad, but here is how I see it play out, unless FCA caves in for its final scheme...

Few lenders (like FirstRand) will go to court as the redressal will be an existential threat for them, so they will want to go to court.

Separately, there is no reason for private lenders (captive auto units) to oblige with FCA - whilst listed banks may want to comprise and move on with a clean state in public markets to get their depressed share prices legs up, there is no incentive for private banks/lenders to just move on. I really can't think of any, unless they think FCA is being fair or they see higher payouts via courts.

Thinking from CMC perspective (just for argument sake) - they must be making a loss with FCA redressal, no? I mean avg payout for them will be 30% of 700, so 200. Their marketing costs to capture clients + admin costs etc, must mean some of these may be making losses or very modest profits at best. So, if I were them, I would take some of the best cases (in their view) and incentivise these individuals secretly to take lenders to courts and use this as a marketing gimmick to get others also on board (given press coverage) and try to disrupt the whole FCA process.

These are just arguments that may pan out very differently. But if there is any further delays from legal cases, markets will clearly not like it either. So the question remains, even if CBG ultimately find, which they definitely will, before next trading update in November, that their provisions are suffice, and that they are happy to just end this once and for all, but others go to courts, can they still move ahead !! Probably not...

Agreed but partially. Key UK banks are less likely to go on offensive against FCA as much as foreign lenders / autos like FirstRand will most likely do. As per Bloomberg, they have a 10% market share of UK auto financing, and have only provisioned $330m so far. UK is 10% of the SA parent company and their ceo has already said last month in an interview that it will be an existential issue for them depending on FCA. Based on my preliminary analysis, I think their UK business (novo..) will go bankrupt if they end up coughing 10% of £11bn redressal cost. And pursuing legal course will be a no-brainer for them.

FirstRand Warns UK’s Car Loan Redress Goes Beyond Expectations

https://www.bloomberg.com/news/articles/2025-10-08/firstrand-warns-uk-s-car-loan-redress-goes-beyond-expectations?sref=qEygEvZK

FirstRand Ltd. said a new proposal by the UK for compensating consumers who were missold card loans that could end up costing lenders £11 billion ($14.7 billion) goes beyond what it previously expected would be a reasonable outcome.

What the Financial Conduct Authority determined was unfair treatment doesn’t align with a recent Supreme Court ruling on the matter, FirstRand argued in a statement. Africa’s biggest lender by value plans to consult with the agency as soon as possible.

“Whilst more time is required to fully review the statement, the group’s initial view is that the scheme appears to have moved beyond the group’s expectations of what can be considered proportionate or reasonable,” FirstRand said.

In hindsight, there is always someone claiming victory and claiming to be the smartest of the lot, but there comes a time, when professor market teaches a good lesson to humble even the strongest being.

Anyhow one Bloomberg author, very aptly titled the FCA redressal scheme as the new “QE of the people compensation scheme”

I think you do. PPI had an average payout of £2-3k and then had an 85% take-up.. Motor finance has an average payout of £700 and goes back far out. I think payout will likely be far lower in may view, but I may be wrong.

@SG0912, the whole market is clueless, including everyone on this forum - no one really knows the extent of damage/costs for banks from redressal, I can bet including the management teams who probably are also doing their works.. One can only make estimations based on a a number of assumptions which are all subjective and prone to change.. For example, how many will actually take up the redressal - FCA says 85%, one can argue a lower and higher number, and this can change the final numbers substantially for any specific firm..

@Liberty2, Not a specific link - gathered from a terminal and reported by Alliance News.

Davy Research said the FCA review should be "well received as it further narrows the potential outcomes to the lower end of its initial range," although it stressed "uncertainty remains."

RBC Capital Markets said its updated model suggests that some banks have "over provisioned", although it still sees "some risk" that the final redress scheme and the FCA's definition of unfair gets challenged in the courts.

RBC said the FCA statement implies total required provisioning at Lloyds of GBP849 million compared to its GBP1.15 billion existing provision, GBP79 million at Barclays compared to its GBP90 million provision and GBP167 million at Close Brothers compared to its GBP169 million provision and GBP211 million at Bank of Ireland compared to its GBP147 million provision.

This implies a provision release at Lloyds of around GBP300 million, RBC said, with adequate provisioning at Barclays and Close Brothers, and a top-up at Bank of Ireland.

Panmure Liberum analyst Rae Maile said the statement from Lloyds shows that the answers from the FCA's update are "not clear cut".

"Given that the provisions established to date were the outcome of 'various scenario analyses' suggests that the FCA scheme does not easily fit into an Excel spreadsheet," he added.

Maile said the exact application of the FCA proposals to any market participant, and therefore whether provisions established to date are adequate, "remain unclear" although "that will not stop further speculation from many commentators."

He fears the "distraction to management will continue for some further years."

Citi banking analyst Andrew Coombs said the total GBP11.0 billion figure was worse than his GBP9 billion assumption, and "we believe the market's too", albeit still at the lower end of the GBP9 billion to GBP18 billion range previously estimated by the FCA.

Coombs had expected a lower participation rate than 85%, but had factored in higher scope for expected claimants than 44%, and a higher average claim than the GBP700 priced in by the FCA.

Administration costs of GBP2.8 billion were double his GBP1.4 billion projection.

For Lloyds, the Citi analyst calculates that applying a market share to the overall GBP11 billion figure would imply a GBP1.54 billion charge versus its existing provision of GBP1.15 billion. He expects any top-up to occur with fourth quarter results after the scheme is finalised and launched.

Gary Greenwood, banking analyst at Shore Capital suggested further "significant" provisions may be required across the industry.

But he explained that, according to FCA disclosure, around 60% of motor finance loans written in the first half of 2024 related to 'OEM Captives', the financial arms of an original equipment manufacturer, and so reside "outside of the banking industry."

He noted little has been provided by these participants to date, unlike the banks which have been more proactive.

Greenwood said while the proposed redress scheme implies a GBP2.5 bil

Summarizing my views in brief for CBG investment case. Welcome additions / gaps / contrarian views. We will have disagreements, but good to sense check other views...

Downside risks:

1) FCA redressal - ongoing

2) US shutdown - broader macro risk. IMO, this will last for much much longer than markets expect and eventually at some point markets will give up sharply (profit booking across the board) over a few days to the point until one of Republicans or Democrats reluctantly compromise. I do think it will get ugly and irrational for equities at this point creating v good short term opportunity... Timing can be anybody's guess - few to serval weeks or months.

3) UK budge in November - hopefully short to medium term.

4) Shawbrook IPO - far superior growth and RoEs. Will price at a premium but institutions will move their sector allocations into it and will sell current holdings including CBG. Minor short term impact around IPO pricing.

Upside catalysts:

1) FCA redressal

2) Analyst forecast revisions - forecasts still far far away from management guidance and potential. Not including cost savings, potentially higher growth, reduced tax in FY26 due to losses in FY25, better CET in FY25.

3) Management's guidance on how to achieve double digit RoEs - early next year

4) Better operational delivery - higher RoEs, loan book growth and stabilising margins - Q1 update in Nov and H1 in Feb 2026

5) Reinstatement of dividends / buybacks - March 2026

Given CBG's strong capital position and current valuations, it should not be as volatile on the down side as others in the sector...

When I say CMCs going to courts - I mean for the cases / customers that do not qualify in the redressal or have little compensation, which will be quite a lot. This is again similar to ambulance chasing by CMCs for a potential windfall with little downside except for court case costs which will be funded by a hedge fund!! Not sure how much of this would be possible, but good to know the possibility of this, in which case the redressal would be good for nothing and possibly end up quite badly for lenders. Don't think FCA can do much regarding this, unless except the whole redressal goes to the SC and they firmly stamps the overall perimeter, which settles the dust once and for all.

@KNot, @Liberty2,

Thanks for your analysis / posts - can't say I fully gasped the contents though. Appreciate if you can also share any views on the following to the extent you can?

1) If one of the lenders takes FCA to court, does it mean the whole redressal will have to be paused or falls through ?

2) Am I right to say, CMCs can still take lenders to court after the redressal. If so, how does the uncertainty resolves with this redressal ?

I have few more, but will share once I haved gone through the FCA doc.

Thanks in advance.

@Keeeeeptrying, Several reasons, but to name a few - profit booking, still uncertainty on FCA redressal. Yesterday's news is good for sentiment and marginally positive, but don't think it still fully resolves everything - we don't know fully yet, how will lenders and CMCs will react to this. My view is that CMCs will push back strongly and may even use their MPs, like the Parliamentary committee to push back here - time will tell if they succeed. Equally, if one of the lender takes FCA to court, does it mean the whole redressal will have to be paused or falls through? If CMCs can still take lenders to court after the redressal, then how does the redressal helps? Yet to see any analyst commentary on implications on CBG, but revisited a number of analyst reports yesterday from August, which had various scenario analysis post SC outcome and initial FCA announcement - and most had their base case that existing provisions should suffice, and don't think that has changed today - except the uncertainty of it increasing has marginally reduced, IMO.

From Bloomberg:

Financial Conduct Authority said yesterday it now expects the missold car loan compensation scheme to cost £11 billion overall. That’s lower than the midpoint of a range the watchdog previously provided.

Analysts at RBC estimate that Lloyds will be able to release about £300 million of money it set aside, having over-provisioned, while Barclays’ provisions are around the level it will have to pay.

The gap between the total cost and provisions already taken will likely be largely filled by car manufacturers, not lenders, added analysts at JP Morgan.

This morning Lloyds said it’s “currently assessing the implications” of the FCA’s consultation and will provide an update in due course.

Totally agree. I had exactly the same feeling, I have followed B&M for more than a decade and it reminded me back of the days when Arora brothers ran the show, and were very good operationally, which translated into strong financial performance..

Bought more this morning on the sharp drop first thing… it wouldn’t be a quick rebound, but at these valuations, think it will be a good turnaround story in 6-12 months, with very good steady returns over this period,..

Thank you @Taverham. Really appreciate it.

Thanks @Taverham. Can you share the link of this video? Cant seem to find it!!

Fking hell. Everyone here thinks its lack of dividends the reason for fall today. For your own sake, stop hallucinating and read some news article available publicly for free that have commentary from analysts etc. There were few unexpected provisions / one time costs - £30 million impairment charge in relation to the disposal of its vehicle hire business, and has set aside £33 million for a fresh redress programme regarding the early settlement of motor finance loans. These are overshadowing the more positive bits, including ongoing cost savings and the expectation of “double digit” growth by 2028.

Its a mixed bag as per several analyst comments, but net overall, analysts will be upgrading their forecasts and therefore increase their target prices. I can bet the shares will settle between 500 -550 over this week or next, baring expected FCA announcement around redersal anytime in early October, which may move shares up or down depending on how it comes out to be.

Luckily, managed to top up this morning with what I sold yesterday for particularly this over-reaction..

On the contrary , I quite liked the results, lots of positives…

From Bloomberg:

Financial services group Close Brothers’s profit for the year beat expectations, as the company announced it’s exiting the vehicle hire business.

It said the division has been loss-making in a tough industry and recorded a £30 million impairment charge in relation to the disposal.

It’s part of the group’s effort to become simpler and more focused, after selling off its asset management, Winterflood and Brewery Rentals units.

The group hasn’t changed the £165 million it set aside to address car finance commission claims while the Financial Conduct Authority consults on a redress scheme, despite the Supreme Court’s ruling avoiding a worst-case scenario.

Separately, the company identified historical deficiencies around the early settlement of motor finance loans, so it’s set aside £33 million for a proactive redress programme.

In the statement, it said it will deliver £20 million of savings each year for the next three years and sees a “double digit” growth rate by 2028 but will provide a full update on that trajectory after the FCA’s consultation.