Close Brothers has sold market maker Winterflood as part of a simplification drive ahead of an imminent ruling on compensation related to the motor finance commissions scandal.
London-based financial services group Marex will buy Winterflood for just under £104million in a deal set to complete early next year.
Close Brothers said the sale, which follows the agreed disposal of Close Brothers Brewery Rental last week, will help ‘simplify’ the business, and ‘enhance operational efficiency and drive sustainable growth’.
Winterflood is a leading equity market maker in the UK, offering a range of trading services to institutional investors, retail brokers and other financial institutions.
Close Brothers, which sold its asset management business in February, told shareholders on Friday now ‘is the right time to sell Winterflood and focus on the group’s core lending activities’ as it continues ‘actively evaluating its portfolios to ensure that returns are maximised’.
Boss Mike Morgan said the Winterflood sale ‘marks another important step in simplifying the group to focus on our core specialist lending business’.
Winterflood is a leading equity market maker in the UK, offering a range of trading services to institutional investors, retail brokers and other financial institutions
It comes amid a looming decision on potential compensation payments related to the motor finance commissions scandal from the Supreme Court.
Close Brothers shares have been back in favour this year amid growing expectations that total redress payments will not be as large as initially feared.
The shares added more than 9 per cent on Friday morning to 450.6p, taking 2025 gains to around 93 per cent.
However, the shares remain around 13 per cent lower over the last year and more than 70 per cent below their April 2021 peak, reflecting continued concerns about the lender’s exposure to potential compensation payments.
Gary Greenwood, equity research analyst at Shore Capital, said Close Brothers had obtained a ‘decent price’ for Winterflood, which ‘in recent times has been operating around a break-even level due to a combination of cyclical and structural factors’.
He added: ‘This means the group should have plenty of headroom in its capital ratios prior to the conclusion of the Supreme Court’s judgement on motor finance commissions and subsequent FCA interpretation.
‘To the extent that any excess capital is available after this, we would expect this to either be reinvested in faster and higher returning parts of the business or returned to shareholders. We will update our forecasts in due course.
‘We currently have a HOLD recommendation on Close Brothers’ shares with a fair value of 370p, being below the current share price albeit on a conservatively struck basis.’
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