Close Brothers Group is embarking on a significant restructuring, eliminating approximately 600 roles—nearly a quarter of its workforce—over the next 18 months. The 148-year-old merchant bank announced the cuts alongside a strategy to rapidly expand its use of automation and artificial intelligence. This move follows another period of losses, driven by a growing provision for the UK's motor finance mis-selling scandal.

The bank aims to reduce costs by £25 million this financial year and a further £60 million the following year, a target brought forward by twelve months. Savings will come from outsourcing, offshoring, reducing office space, and the accelerated AI rollout. CEO Mike Morgan stated the measures, while regrettable for staff, are needed to create a leaner, more agile organization.

For the half-year ending March 31, Close Brothers reported a pre-tax operating loss of £65.5 million. This figure includes an additional £135 million set aside for the car finance redress scheme, bringing its total provision to roughly £300 million. The final cost hinges on the Financial Conduct Authority's impending decision on compensation calculations, a point of contention between the regulator and several lenders.

Market confidence has been shaken. Shares fell sharply this week after short-seller Viceroy Research alleged the bank has severely underestimated its exposure. Close Brothers has rejected the claim. The firm had already begun streamlining its operations, selling its Winterflood and asset management divisions, prior to this latest restructuring push.

Source: The Guardian