Close Brothers sells wealth unit amid car finance scrutiny

Close Brothers, one of the largest merchant banks in Britain, has decided to sell its wealth management division to Oaktree, a private equity firm based in the United States, for a total of up to £200 million. The bank will receive an immediate cash payment of £172 million, which it plans to use to strengthen its core capital buffers. This move comes in response to increasing scrutiny from the Financial Conduct Authority (FCA) regarding the motor finance sector, where the bank has significant exposure. The FCA initiated a comprehensive review in January, focusing on potentially unfair practices within the motor loans industry. This regulatory examination has raised concerns about the future profitability of Close Brothers' motor finance operations, prompting the bank's leadership to take proactive measures to safeguard its financial stability. By divesting its asset management arm, Close Brothers aims to bolster its balance sheet and prepare for any potential financial impacts stemming from the FCA's findings. The anticipated increase in core capital buffers by approximately 100 basis points is a strategic step to enhance the bank's resilience in a challenging regulatory environment. This sale reflects a broader trend in the financial services industry, where institutions are reassessing their business models in light of regulatory pressures. Close Brothers' decision underscores the importance of maintaining a strong financial foundation while navigating the complexities of evolving market conditions.