Shares in Lloyds Bank and Close Brothers Extend Losses Amid FCA Motor Finance Review

The financial sector is facing some turbulent times ahead as shares in Lloyds Bank and Close Brothers continue to plummet following a City watchdog review into motor finance. The unexpected rise in inflation has only added to the uncertainty, leaving investors on edge about the future of these two firms.

Lloyds Bank and Close Brothers have seen significant drops in their stock prices, with Lloyds falling nearly two per cent and Close Brothers plummeting 4.5 per cent. The Financial Conduct Authority (FCA) recently announced a review into historic claims of unfair costs on discretionary car finance commissions, potentially leading to billions in compensation for consumers.

Analysts are estimating that UK banks could be on the hook for more than £1bn in compensation, with Lloyds and Close Brothers potentially facing losses of up to £1bn and £120m respectively. The uncertainty surrounding the outcome of the FCA review has left many in the industry on edge, with some comparing it to the scale of the PPI scandal that cost UK banks billions in compensation.

Despite the potential for significant losses, analysts have noted that the sector may not be as exposed in the case of motor finance as it was with PPI. Refunds are likely to be limited to ‘excess’ interest payments, capping redress across the industry at around £10bn.

The FCA is set to provide further updates on the review in the third quarter of this year, leaving investors and industry insiders eagerly awaiting the next steps. The future of Lloyds Bank, Close Brothers, and the wider financial sector remains uncertain, but one thing is clear – the impact of the FCA review will be felt for years to come.