Lloyds and Close Brothers shares fall on motor finance ruling
By Lawrence White
LONDON, Oct 28 (Reuters) -Shares in British lender Close Brothers CBRO.L dropped 6.5% on Monday, while those of bigger rival Lloyds LLOY.L fell 3% as bank stocks with exposure to motor finance suffered further following an adverse court of appeal judgment on Friday.
A London court ruled that motor finance brokers must fully inform customers about the existence and size of commissions when taking out car loans, amid a wider review by Britain's financial regulator into historical sales practices in the industry.
Close Brothers, which analysts have said has the biggest exposure, plunged 21% on Friday to a near 20-year low following the ruling which also appeared to widen the scope of possible cases of mis-selling that could come under review.
Lloyds said on Monday the court's ruling "sets a higher bar for the disclosure of and consent to the existence, nature, and quantum of any commission paid than had been understood to be required or applied across the motor finance industry prior to the decision".
Analysts have said it is hard to estimate the ultimate total cost to the industry, but the sector's total compensation bill could reach 16 billion pounds ($21 billion), making it the costliest consumer banking scandal in Britain since the faulty sales of payment protection insurance.
Bank shares are continuing to fall as investors digest the implications of the court ruling for the total compensation bill, analysts said on Monday.
"Retroactivity could be broader than the 2007-2020 window we already knew about, and any finance commission model where the exact quantum of the commission was not disclosed to the customer could also get captured by the judgment," said Benjamin Toms, analyst at RBC Capital Markets.
Reporting By Lawrence White; Editing by Emelia Sithole-Matarise
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
