RBC analysts have warned that Close Brothers’ cost-to-income ratio remains materially higher than that of its UK mid-cap peers, increasing pressure on the bank to accelerate cost reductions as uncertainty over motor finance redress continues, City AM reports.
According to RBC Capital Markets analysis cited by City AM, Close Brothers reported a cost-to-income ratio of around 70 per cent, the highest among a group of listed UK mid-cap lenders. This compares with roughly 63 per cent at Metro Bank, while specialist lenders OSB and Paragon reported materially lower ratios of 39 per cent and 36 per cent respectively.
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RBC said the comparison underlines a structural cost issue at Close Brothers, particularly as the bank faces elevated provisions and regulatory uncertainty in its motor finance division, which accounts for about 20 per cent of its £9.5bn loan book.
At its 2025 full-year results, Close Brothers said it had delivered £25m of annual cost savings and identified a further £20m per year over the following three years. However, RBC said these measures “fell short” of what could be achieved, estimating that the bank could remove around seven per cent of its total cost base over the next 12 months, equivalent to about £32m.
The analysts highlighted the bank’s operating model, including 25 business units with separate management layers, as an area where efficiencies could be realised. Simplifying the structure could save around £5m, they said. A reduction in headcount of about five per cent could deliver a further £9m, with RBC noting Close Brothers’ “very low” loans-per-employee ratio compared with peers.
If these measures were implemented, RBC believes Close Brothers could reduce its cost-to-income ratio to around 56 per cent, below management’s current target of 59 per cent, and move closer to the levels reported by other UK specialist lenders.
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By GlobalDataMotor finance remains a key variable. In October, Close Brothers almost doubled its motor finance provisions to £300m after the Financial Conduct Authority provided further detail on its proposed redress scheme. Final guidance from the regulator is expected in early 2026.
