𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

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Close Brothers has revealed plans to strip out more than another £60 million in annual costs amid plans to continue ramping up the use of artificial intelligence (AI).

The banking group said it cut annual costs by around £36 million in the year to July 31 – far more than the £25 million initial target – after announcing plans in March to cut 600 jobs and trim its office network.

In full-year results, it said it now expects to deliver more than £60 million of annual savings cumulatively by the end of next July as efforts to outsource and offshore work abroad and cut back its office network and business functions are paying off.

It added it was now “well into planning for the next stage of restructuring activity”, with a focus on bringing its support functions under one central division for the group and accelerating the rollout of AI.

Chief executive Mike Morgan did not rule out further job cuts but said he has no plans to axe further roles on top of the 600 already announced.

Around 200 of those jobs went in the year to July, with the remaining 400 set to go over the year ahead, with some of the call centre roles being offshored to South Africa.

The group reported pre-tax operating losses of £60.3 million for the year to July 31 as it was knocked by another £164.7 million in provisions for the car finance redress scheme, taking its total to about £320 million, while restructuring costs, including redundancies, also kept it in the red.

But losses halved from the £122.4 million pre-tax loss reported in 2024-25 and lending rose 2% on an underlying basis, after a 4% rise in the final six months.

The Financial Conduct Authority (FCA) paused plans earlier this year for compensation payouts for those sold car finance deals with unfair or hidden commission payments as the redress scheme faced legal challenges.

Close Brothers said it would not pay a final dividend for 2026 given the “continued uncertainty regarding the outcome of the legal challenges to the FCA’s motor finance consumer redress scheme and any potential financial impact”.

The firm has been trimming costs and boosting its capital strength due to the hefty motor finance compensation bill, agreeing sales of its Winterflood arm and asset management businesses.

Mike Morgan, chief executive of Close Brothers, told the Press Association the group would have been profitable had it not been for the motor finance provisions and, in the absence of expected further cash set aside, is set to return to profit in 2026-27.

He said the business “will be profitable and we are profitable”, pointing to underlying operating profits of £120.3 million for the year to July 31.

He said: “We have taken decisive action: exiting non-core activities and repositioning business lines; taking out costs; returning to growth, and sharpening our focus on our specialist lending markets in which we have expertise.”

He added: “We are now a simpler, more focused specialist bank, better positioned to serve customers, invest in growth and enhance returns for shareholders.

“The progress we have made this year gives me confidence in our strategy and I remain fully committed to returning the group to double-digit returns by 2027-28, rising thereafter.”

Shares in the group jumped 12% as analysts praised the group’s turnaround efforts.

Gary Greenwood, equity analyst at Shore Capital, said: “The acceleration in lending through the second half is particularly encouraging while management is delivering cost savings faster than planned.”