Close Brothers Share Discussion Threads

[blueclyde] 26/2/2024 08:27

It is clear to see this is nothing like PPI. PPI were sold a product they did not need. In this instance everyone bought a car with the loan they were sold..

[velocytongo] 26/2/2024 07:49

Lloyds bank made an initial PPI provision of £2-3bn and paid out over £20bn.

[blueclyde] 25/2/2024 22:57

I do not think it will come to that. Everything I am reading suggests it is highly likely in the vast majority of cases there is nothing to answer for. Lloyds results are confirmation of that view. All we can do now is await Close Brothers assessment of the situation. That article even mentions the part in scope for any ambiguity was the commission on the loan which is a small percentage of the total loan anyway and even then it seems to have been fair. I think this share has just collapsed as it is a FTSE 250 share in a wider weak market.

[cyberbub] 25/2/2024 22:20

Yes a good summary. However as hinted in the article, the FCA seems to be being driven by perceptions of protecting customers, rather than concepts of reasonableness. It may need legal action against the FCA by the lenders and/or car dealers to change that situation.

[blueclyde] 25/2/2024 21:51

Another article posted on the LSE board worth reading:https://www.am-online.com/opinion/2024/02/23/executive-view-the-fca-and-martin-lewis-where-s-the-harm-anyway

[blueclyde] 25/2/2024 10:13

More and more data points confirming that this will to quote the article turn out to be a storm in a tea cup and if anything Lewis and the 750,000 claims should be charged with fraud.

[velocytongo] 25/2/2024 08:37

Good article but nearly fell out of bed laughing when I read this!

But car finance industry voices have argued that while, on paper, the ability for dealerships to set interest rates themselves looks bad, in practice it enabled better, more flexible deals for consumers in the vast majority of cases.

[blueclyde] 24/2/2024 22:24

It's a good article as it confirms my thinking that every agreement was bespoke depending on each individual's circumstances and different parties involved in negotiating the contracts. As such each of the 750,000 cases will need independently looked at which will probably take the next 30 odd years to work through or the FCA will maybe at worst issue token fines with no liability acknowledged by those involved and close their case.

[cyberbub] 24/2/2024 21:53

You would expect the dealerships to fight their corner, but what their reps say makes sense to an extent IMO. Of course it's what the FCA say that will actually be implemented...

[popit] 24/2/2024 21:12

Woozle

It is difficult to see how you could describe talk of possible receivership and liquidation for CBG as a Panglossian view

It is exactly the opposite

[cyberbub] 24/2/2024 18:12

Woozle, the *very very* worst case scenario I would say!!!

IMO while it's possible that they might have to do a rights issue, I don't think it's likely given how much cash is still being generated by the company. Far more likely that they could get some additional debt package if they really needed to, plus maybe restructuring some of their existing debts. With the cancelled divi for 2024 and (if they really need to) cancelling it for 2025 as well, they should have £250M in hard cash to support substantial additional borrowing.

Not that I think the above is particularly likely, as I don't think that the damage will be more than £200M maximum.

In the worst case and the company was forced into a rights issue, then because of their significant profitability and the very high discount of market cap to NTAV, I don't think that there would be a need for a heavy discount, your suggested £2 would just be crazy IMO. CBG aren't a potless loss-making jam-tomorrow AIM minnow, forced into ever-more desperately discounted placings every 6 months just to keep the lights on.... they're a highly profitable main-market company!

All IMO, no advice intended

[woozle1] 24/2/2024 17:08

I think Popit you are a one eyed bull and not happy with anything that contradicts your panglossian view. All I am saying is that there is a range of outcomes from a few hundred million to £700-800 million. It is easy to make the case for both (and I have).

There is also the issue of the shape of redress with consumer led (which would take years and good for the company) or company led (i.e the company would have to send out cheques to anyone of the database who'd been subject to DCA). The latter is unlikely but still a possibility

The company could issue £500m of new shares at £2 and still have a NTA of around £5, assuming no other problems in the business. On that basis, the shares are a buy as that it probably the worst case scenario.

[karv1] 24/2/2024 14:06

Thanks for response. I might do some more research on Novatis. Time to do some more research.

[cyberbub] 24/2/2024 13:16

£94M AOP for the *first half* is the prediction in the latest trading statement. This excludes tax and also some obscure accounting line, which you can see from reading the last results in September was only £1.5M. So £94M minus probably £500k, then knock off 27% for tax makes £67M after-tax profit. Assuming the same in H2 makes £134M after-tax profit for the year. So substantially down on 2023 but still very healthy for what is today a sub-£500M cap company.

The EPS in 2023 was halved compared to 2022 only because of the Novatis writedown (which is an accounting loss not a cash loss).

These profits are why they can afford to pay out £100m in divis... Albeit I think that 50p is more likely when the divi is (hopefully) restored next year.

That's my reading of the numbers but DYOR as always.

[karv1] 24/2/2024 12:46

I have a Question that is similar to other one I put in the chat....
On the update

We expect to report overall group AOP of approximately £94 million. After group (central functions) Net expenses.......
I have always thought AOP means after losses and before tax, but net expenses after everything?
................... In my head version 1 AOP £94million means a drop of 80million in write downs compared with the Adjusted operating profit, pre provision 178m 2023 maybe means they still taking a hit with Novitas.
...........................................Version 2 after net expenses means £94m x 2 =188m for year after tax beats 2023 and 2022 numbers.
In simple terms can someone with way more knowledge that me explain what they think is included or not included on the £94m figure?
and Thanks for any response.

[cyberbub] 23/2/2024 23:11

Popit, a liability of £43 bazillion would definitely lead to CBG's destruction too. You're bandying around numbers which don't seem realistic based on what we know from comparator banks. You're correct though that none of us will be 100% sure until September. Meanwhile we have a hopefully positive results statement coming up in 4 weeks which should prove that the company is still throwing off lots of cash.

[blueclyde] 23/2/2024 21:28

It is nonsense because Lloyds Bank believe the maximum liability for them is £450 million and they were by far and away the biggest lender and they state now that they do not believe they have done anything wrong.

[popit] 23/2/2024 21:03

It is not nonsense to say that a liability of £1 billion for CBG could require a rights issue or perhaps receivership and liquidation

What you have written however is real nonsense

"If it does turn out to be a storm in a teacup it will be confirmed in an RNS one morning and the price will gap up to the £9 a share NAV"

lol

How can CBG confirm their liability in a RNS ?

CBG have no clue what their liability will be

The FCA will tell CBG what their liability is some time later this year

CBG do not get to decide anything

[cyberbub] 23/2/2024 14:57

For new arrivals, here's the link to Martin Lewis's article about the car finance issue. His latest newsletter from a couple of days ago said that 740,000 claims had been registered on his online 'claim tool'.

hxxps://www.moneysavingexpert.com/reclaim/reclaim-car-finance/

[chriss911911] 23/2/2024 14:47

over 40bn was lent each year on motor finance, so the whole market loan book is around 160bn, Close is therefore tiny at just 1% of the market. Lloyd's on the other hand, is a big player with 10% of the UK car finance market.

We know how much was lent by Lloyd's and Close, what they made before and after the rules changed, we also know what has changed in accounting, and audit world to tighten governance to ensure provisions were consider better especially following the failings of PPI.

We know the FCA claimed already after the ban consumers would save £165m a year, if that's the case the hole bill will not be more than 1bn to industry, so 1% of 1bn is not a lot, but maybe they change that view now, they would need to have changed it an awful lot to matter and analyst would suggest they miss judged it 10x, maybe simply applying how PPI played out that would still land Close a modest worst case of one years dividend.

The whole point of investing, is to judge what you do know, not dwell on what you cannot know, by the time you do know it, so does everyone else, so it is no longer of value.

[blueclyde] 23/2/2024 13:42

Well that is the thing about this situation everyone needs to do their own in depth research and decide for themselves. If it does turn out to be a storm in a teacup it will be confirmed in an RNS one morning and the price will gap up to the £9 a share NAV.

[karv1] 23/2/2024 13:40

I hope it goes blue today.seems the share price has recovered some.

[woozle1] 23/2/2024 13:28

We know very little and Lloyds and CBG have said as much. When PPI kicked off Lloyds made a provision of £3bn and ended up paying out £22bn. This could be a storm in a tea cup or it could be recap rights issue for CBG. We simply don't know. The large discount to NTA indicates that some of rights issue will be required, which could be wrong.