Shares in FTSE 250 lender Close Brothers experienced volatility during early trading on Tuesday as the first day of the motor finance hearing commenced.
The bank was among the top fallers in the FTSE as markets opened, following a downgrade from City broker Peel Hunt, as reported by .
The broker expressed surprise at the "extent" of guidance downgrades announced by Close Brothers.
The lender's shares plummeted as much as five per cent after markets opened, before rallying to over four per cent up.
However, by midday, the bank had fallen back into the red.
As of 1300 BST, it was two per cent down on its market-open share price.
Peel Hunt predicted that Close Brothers' net interest margin (NIM) – a crucial metric used by banks that illustrates the difference between interest earned on loans and interest paid on deposits – would decrease to 6.7 per cent in the second half of 2025.
This would represent a loss of 60 basis points after the lender recorded a NIM of 7.3 per cent in the first half of the year.
Peel Hunt assigned a 'Hold' rating to the lender and set a target price of 327p. Close Brothers opened at 277.20p on Tuesday.
Analysts also reduced the bank's earnings per share by 15 per cent for the 2025 financial year to 50.6p. This continued into 2026 with a one per cent downgrade.
Analysts wrote: "We believe the shares appear optically cheap, but the upcoming Supreme Court ruling... is a key unknown."
Following the Court of Appeal's ruling in October 2024 that it was unlawful for banks to pay a commission to a car dealer without the customer's informed consent, lenders including Close Brothers and First Rand are escalating the fight to the Supreme Court to get the ruling overturned.
The Financial Conduct Authority (FCA) has stated that if the banks face an adverse judgement, it will confirm an industry-wide redress scheme within six weeks.
This case could have significant financial implications for the lending industry, with RBC analysts projecting total compensation claims could reach £32bn.
To date, Close Brothers has reserved £165m in provisions, but a disadvantageous ruling could see this figure balloon.
