Barclays is setting aside £90 million to cover potential payouts related to the growing motor finance scandal. This follows an October Court of Appeal ruling that broadened the scope of the issue, prompting several banks to brace for compensation claims. While Barclays’ provision is a lot, it’s still smaller compared to Lloyds (£450 million), Santander (£295 million), and Close Brothers (£165 million). The controversy revolves around commissions paid by lenders to car dealers, which may have led to unfair consumer costs.
Despite this challenge, Barclays reported impressive financial results, with a pre-tax profit of £8.1 billion for 2024; this puts them up 24% from the previous year. Barclays’ investment banking sector played a key role in this growth, with profits rising by 18%. However, despite the good reports, investors remain cautious. Shares dropped 4.7% to 293.25p, partly due to concerns about the scandal’s long-term impact and the lack of fresh financial targets for 2026.
A crucial Supreme Court case in April could determine how much banks will ultimately have to pay, adding uncertainty to the situation. The Financial Conduct Authority (FCA) is also conducting an investigation. While Barclays left the motor finance sector in 2019 and had a relatively small market share, Finance Director Anna Cross admitted there’s still a lot of uncertainty about the final costs involved. Industry experts warn that the compensation bill could reach levels similar to the PPI scandal (£50 billion). If the Supreme Court upholds the lower court’s decision, banks may have to grant much more than they currently anticipate.
For now, Barclays remains financially strong but is facing a period of uncertainty. With the upcoming court ruling, the true cost of the scandal is still up in the air. However, the bank remains focused on its long-term strategy, planning to return £800 million in dividends and up to £1 billion through share buybacks. The market is watching closely, as the outcome could reshape motor finance rules and possibly redefine accountability for UK banks.
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