S&U shake off motor finance woes as verdict looms
Specialist lender S&U said it remains confident in the group’s turnaround from motor finance woes after a strong start to the financial year.
The bank said in a trading update on Wednesday that optimism in their annual report was “clearly being justified” by the firm’s performance since April.
S&U’s profit for the financial year ending January 31 2025 fell to £24m, compared to £33.6m in the previous period.
This came as Advantage – the group’s motor finance arm – suffered an over £12m blow to profit, reducing it to £28.8m. S&U’s impairment charges rose to £35.6m, reflecting a near £10m increase in motor finance arrears.
But the company said it is now “trending to be ahead of 2024 at half-year and accelerating from there”. S&U attributed the improvements to improved sale numbers, stronger collections at Advantage and the “tapering” of additional professional and regulatory costs.
Net receivables at advantage for the first-quarter were £273m, which was down from £337m the previous year. S&U said this trended “above budget”.
S&U’s judgment day looms
But the lender, as with many of its peers, remains on edge for the upcoming Supreme Court judgment on the historic motor finance case.
The highest court in the land is expected to give its verdict whether it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent in the summer.
S&U said a “clear and pragmatic decision” would provide “much-needed clarity” to the sector and support the government’s objective of improve access to credit across the UK.
The Financial Conduct Authority (FCA) has said it will confirm within six weeks of the verdict whether it is proposing to introduce a redress scheme.
The London-listed firm has been at odds with the FCA due to the car misselling saga.
The firm blamed the watchdog’s regulatory pressure for its “uninspiring performance” in motor finance in the first six months of 2024.
It added the watchdog’s focus on the division had “significantly constrained Advantage’s ability to interact with and manage its traditional customers, with whom it has happily worked for the past 25 years.”
The boss of banking giant Lloyds – which has set aside £1.2bn for the scandal – told the Treasury Committee last month there was “no evidence of harm” in the firm’s motor finance operations.
The City regulator said in a statement earlier this month any redress scheme it deploys must keep the market afloat and not drive any companies out of the market.
“This could reduce competition and could make it more expensive for consumers to borrow money to buy a car in the future,” the watchdog said.
Anthony Coombs, S&U chairman, said: “Throughout our history, S&U’s people have skilfully adapted to new market conditions and opportunities. This is evident now at both Advantage and Aspen and has happily continued in May.
“Assuming a stable and supportive environment from policymakers, regulators, and the Courts, we believe these efforts will translate into improved profitability this year and in the future.”