Close Brothers, the London-listed merchant bank, has unveiled a significant cost-cutting initiative that has driven investor optimism about its potential recovery following a costly motor finance misselling scandal. The company reported finding approximately £36 million in annualized savings in the year ending July 31, surpassing its initial target of around £25 million.
The savings come as part of an overhaul announced by Chief Executive Mike Morgan in March, which he described as gaining “real momentum.” Close Brothers aims to reach £60 million in annualized savings by the next financial year, with the current progress placing the bank on track to exceed this goal.
As part of the restructuring, Close Brothers is reducing its workforce by about 600 jobs by July, trimming headcount from 3,000 to 2,500 over the past year. The job cuts and other cost-saving measures, including the closure of one of its two London offices and renegotiation of third-party contracts, are intended to strengthen the bank’s financial position amid ongoing challenges related to the motor finance scandal.
Close Brothers has been deeply affected by the fallout from the industry-wide car loans controversy, which has forced the group to increase its provisions for customer compensation by about £165 million during the last financial year, bringing the total set aside to £320 million. The impact of these charges contributed to a pre-tax loss of £65.4 million for the year, following a £127.1 million loss in 2025.
Vehicle finance remains a significant part of Close Brothers’ business, accounting for roughly £2 billion of its £9.5 billion loan book, even though the bank is not one of the largest vehicle finance providers in the market. In response to the scandal, the lender has taken further steps to bolster its balance sheet, including halting dividend payments and divesting its Winterflood market-making unit and asset management division.
Morgan emphasized that the accelerated cost-cutting measures would not exceed the previously announced figure of 600 job reductions. The firm’s ongoing restructuring marks a significant shift from its origins dating back to 1878, when Close Brothers was founded to provide farm mortgages in Iowa. With these actions, the bank aims to restore financial stability and navigate the aftermath of the motor finance misselling crisis.