Share prices rise after Supreme Court ruling

Motor finance lenders Lloyds and Close Brothers have seen a significant rise in their shares following a Supreme Court ruling.

Supreme Court ruling boosts Lloyds and Close Brothers shares

Shares of Lloyds Banking Group and Close Brothers surged after the Supreme Court ruled in favor of banks in a crucial motor finance case. Lloyds shares rose 5.5 percent to hit 80p, while Close Brothers saw a 22 percent spike. The Supreme Court overturned a previous ruling that declared it unlawful for banks to pay commissions to car dealers without customer consent. While this supports the banks, the Court found one commission payment by First Rand, a South African lender, to be unfair, raising red flags for the Consumer Credit Act. The Financial Conduct Authority announced it would consult on a significant redress scheme for affected customers, which could cost between £9 billion and £18 billion, a far cry from initial projections above £30 billion. Analysts see this outcome as a victory for banks but express caution regarding the broader implications for the motor finance sector.

The Supreme Court ruling appears to offer a lifeline for Lloyds and Close Brothers, signaling a shift in the landscape of motor finance. While banks breathe a sigh of relief, the provisions for potential customer compensation still loom large. This situation illustrates the complex interplay between regulatory oversight and the financial industry's operational strategies. As companies navigate these waters, their ability to adapt to new regulations will significantly impact market confidence and future competition. Analysts remain divided on the long-term effects of this ruling, especially regarding how banks will manage their provisions moving forward.

Highlights

This ruling could reshape the dynamics of the motor finance market going forward.