Shares in Close Brothers Group (LSE: CBG) plummeted 17% on Thursday after the merchant bank warned over its dividend due to a Financial Conduct Authority (FCA) investigation into historical motor finance arrangements.
The FTSE 250 stock plunged to 328.00p in early deals, making it the worst mid-cap performer. Close Brothers cautioned on a “potential financial impact” from the regulator’s probe and said it will pay no dividends for the year ending July 31.
The FCA is examining whether compensation is owed to people who may have been overcharged for car loans. It has heard from over 10,000 people and said more could come forward.
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While the outcome remains uncertain, Close Brothers said building capital strength is a priority amid the regulatory scrutiny. It will review reinstating payouts once the FCA concludes its investigation.
The update came as Close Brothers revealed its banking division continues to perform well, generating £112m in adjusted operating profit in the first half, up sharply from £15.0m last year. Its asset management arm also reported strong annualised net inflows of 9%.
