\n<\/p>\n
The UK banking group Close Brothers is to cut about 600 jobs and roll out the use of AI \u201cat pace\u201d after posting further losses amid a mounting compensation bill for the UK motor finance scandal.<\/p>\n
The specialist lender said the cuts \u2013 almost a quarter of its 2,600-strong workforce \u2013 would be made over the next 18 months across its teams in the UK and Ireland.<\/p>\n
It aims to reduce costs by \u00a325m in the year to the end of September, up from a previous target of \u00a320m, and by another \u00a360m in the next financial year, a year earlier than planned.<\/p>\n
It said it would make the cuts through outsourcing and offshoring work and reducing office space. \u201cIn parallel, we are progressing the deployment of automation and artificial intelligence at pace, providing further opportunity both to reduce costs and enhance customer experience,\u201d the lender added.<\/p>\n
The chief executive, Mike Morgan, said: \u201cWhile the impact on affected colleagues is regrettable, these actions are necessary to structurally lower our cost base while increasing our agility and ability to serve our customers.\u201d<\/p>\n
Close Brothers, founded in 1878 by William Brooks Close and his brothers Fred and James, revealed the job cuts as it reported a pre-tax operating loss of \u00a365.5m for the six months to 31 March after setting aside another \u00a3135m for the car loans mis-selling saga. This marked an improvement on the \u00a3102m loss the previous year.<\/p>\n
The extra sum set aside, which was announced last October, added to its previous \u00a3165m provision.<\/p>\n
This means it is expecting a bill of about \u00a3300m to cover costs from the scandal and comes after the Financial Conduct Authority (FCA) published details of its proposed compensation scheme for drivers who were sold car loans with hidden or unfair commission payments.<\/p>\n
The FCA will set out its final plans for the redress scheme by the end of this month and has faced pushback from lenders including Close Brothers, Santander and Lloyds Banking Group over its calculations for how much consumers lost out and should be compensated.<\/p>\n
Close Brothers\u2019 shares slumped 14% on Monday after a short seller, Viceroy Research, claimed the lender would have to at least double its provision for car finance to somewhere between \u00a3572m and \u00a31.07bn. The stock fell a further 9.7% on Tuesday.<\/p>\n
Viceroy said Close Brothers had \u201csubstantially misrepresented\u201d its exposure to the FCA\u2019s redress scheme. The bank said it \u201cstrongly disagrees with the report\u201d in a statement after market close on Monday.<\/p>\n
Dan Coatsworth, the head of markets at AJ Bell, said: \u201cIt was telling that the share price didn\u2019t recover any of [Monday\u2019s] slump after Close Brothers denied the accusations were true, suggesting the market remains highly sceptical over the business until there is clarity on any compensation sums.<\/p>\n
\u201cJob cuts and guidance for higher than previously expected annual cost savings would normally be the right ingredients to drive a share price higher, but not in Close Brothers\u2019 case. The core business doesn\u2019t look strong enough to warrant investors taking the risk of buying in the face of considerable uncertainty.\u201d<\/p>\n
Analysts at Panmure Liberum said: \u201cThe company is trying to do all the right things in redirecting its lending and attacking costs with gusto. It needs to as the loan book is modestly lower over the half year and income will remain under pressure. The elephant in the room remains motor finance, as it has been for the last two years.<\/p>\n
\u201cThe company could probably withstand a \u00a3500m cost without recourse to shareholders. That still seems fair, but we are no closer to being sure of the outcome. The share price will remain volatile.\u201d<\/p>\n
As well as reducing costs, the bank is seeking to shore up its balance sheet in the face of the mounting compensation bill, and has sold Winterflood, a broker, and its asset management businesses.<\/p>\n","protected":false},"excerpt":{"rendered":"
The UK banking group Close Brothers is to cut about 600 jobs and roll out the use of AI \u201cat pace\u201d after posting further losses amid a mounting compensation bill for the UK motor finance scandal. The specialist lender said the cuts \u2013 almost a quarter of its 2,600-strong workforce \u2013 would be made over<\/p>\n","protected":false},"author":1,"featured_media":46958,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[5369,5086,1083,304,1936,2622,10357,7416],"class_list":{"0":"post-46957","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-banking","9":"tag-brothers","10":"tag-close","11":"tag-cut","12":"tag-group","13":"tag-jobs","14":"tag-pace","15":"tag-roll"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/46957","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=46957"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/46957\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/46958"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=46957"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=46957"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=46957"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}