9th October 2025
Shore Capital on Motor Finance
Shore Capital has published a research note on UK Motor Finance. See a summary of the key points below and the full note attached.
Gary Greenwood, Equity Analyst, said: “Lloyds Banking Group has warned it may need to take material additional provisions for motor finance commission remediation following the FCA’s proposed redress scheme, on top of the £1.15bn already set aside. This marks a clear shift from management’s earlier stance that no major extra charges were expected after the Supreme Court ruling in August 2025.
The FCA has estimated total industry costs of around £11bn, compared with c.£2bn of provisions so far, implying further charges across the sector. While some exposure sits with OEM Captives, Lloyds’ position as the largest UK motor finance bank means its warning is likely to weigh on peers such as Close Brothers.
Industry pushback is mounting, notably from FirstRand Bank, and the FCA’s consultation (closing 18 November 2025) could see criteria amended or softened. Despite potential further charges, Lloyds remains highly capital generative (c.£4bn surplus per year) and can absorb the impact, though future buybacks may be affected.
We retain our HOLD rating on Lloyds with a fair value of 74p (vs 84p current), which already factors in a 5% haircut for motor finance tail risk.”
If you would like to speak to or meet with Gary Greenwood, please let us know. To sign up to receive Shore Capital’s research directly, contact Shorecapital@mhpgroup.com