Close Brothers Group Attracts Buy Upgrade from Shore Capital Amid Motor Finance Uncertainty

Shore Capital has revised its rating on Close Brothers Group PLC to buy from hold, suggesting that the specialist lender and asset manager now presents an attractive risk-reward profile for investors. The brokerage has raised its price target to 495p from 490p, representing potential upside of approximately 21% from the current share price of 408p.

Analyst Gary Greenwood noted that the stock has declined towards the 400p level in recent weeks, underperforming the broader market despite the absence of any material deterioration in the underlying investment thesis. Close Brothers shares have retreated 7.9% over the past month, trailing the FTSE All Share index by nine percentage points.

The principal headwind affecting sentiment remains the uncertainty surrounding motor finance complaints. The Court of Appeal has confirmed that omnibus claims, which permit the aggregation of similar complaints, may be pursued in relation to motor finance grievances. The Financial Conduct Authority has partially suspended its proposed redress scheme, with legal proceedings now scheduled for December 2026 and February 2027.

Greenwood contended that these developments, whilst prolonging the period of uncertainty, provide no substantive new insight into the eventual magnitude of compensation costs facing the industry. The market remains no closer to establishing a definitive liability estimate than it was several months previously, in his assessment.

The lender has maintained its £320 million provision unchanged since increasing it by £30 million in May. Shore Capital estimates that Close Brothers retains approximately £374 million of core capital headroom above its minimum regulatory requirement, affording considerable capacity to absorb any additional provisions that may be required.

The shares currently trade at just 0.5 times forecast tangible net asset value for the current financial year. Management has set a target of achieving a double-digit return on tangible equity by the 2028 financial year. Greenwood indicated that his own projections sit marginally below that objective, suggesting scope for further upside should management achieve its stated aims. A sustainable 10% return on tangible equity would support a valuation of approximately 655p, he observed.