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When on the lookout for low-cost UK shares, among the greatest bargains can typically be discovered on the backside of the efficiency league tables. Certainly, solely six FTSE 250 shares have carried out worse than Shut Brothers Group (LSE:CBG) over the previous 5 years. Since March 2021, its shares have crashed 78%.
However a restoration is just potential if buyers will be satisfied that previous issues have been resolved. In any other case, there could possibly be extra dangerous information to come back for shareholders. With this in thoughts, let’s see why this UK service provider banking group has fallen out of favour and look at whether or not its extremely low earnings a number of means its inventory may bounce again quickly.
Beneath the highlight
All the group’s issues are linked with the industry-wide investigation by the Monetary Conduct Authority (FCA) into the alleged misselling of automobile loans. Each time there’s important information (good or dangerous) to report on the problem, the group’s share value reacts accordingly.
For instance, on 10 January 2024, the FCA publicly introduced its overview. Over the next 5 weeks, the group’s shares crashed 61%.
On 1 August 2025, the Supreme Courtroom upheld the group’s attraction overturning earlier judgements made in three instances introduced by debtors. Within the phrases of the corporate: “[this] decided that motor sellers (performing as a credit score dealer) don’t owe fiduciary duties to their clients.” Over the subsequent seven days, its share value soared 30%.
In the mean time, the FCA is consulting on an industry-wide redress scheme. Nonetheless, Shut Brothers says it “doesn’t imagine the present redress methodology proposed… appropriately displays precise buyer loss or achieves a proportionate final result”.
Déjà vu
On Monday (16 March), the group’s shares tanked 13.9%.
This adopted the publication of a report by Viceroy, an “impartial investigative analysis group”, suggesting that Shut Brothers is under-estimating the true value of compensation. It claims the group’s “exhausted” its efforts to maintain its capital base, is promoting off subsidiaries, and is suspending its dividend, giving it little monetary firepower ought to the end result be worse than anticipated.
Viceroy says the group must “not less than” double its current provision of £300m. Its analysis suggests a possible vary of outcomes of £572m-£1.232bn. In excessive circumstances, this might result in a breach of regulatory reserve necessities. Its base case (£999m) “signifies that equity-holders will probably be considerably worn out in a restructure”.
That is critical stuff. But it surely’s just one opinion. The corporate responded by saying it “disagrees” and defined that its “provisioning method” — which “follows a strong governance course of” — is in accordance with worldwide accounting requirements.
Newest outcomes
Yesterday (17 March), the group launched its outcomes for the six months ended 31 January.
Primarily based on adjusted earnings over the previous yr, the inventory’s buying and selling on a a number of of simply 6.5. Remarkably, the group’s market cap is roughly £1bn decrease than its guide (accounting) worth. On the finish of January, its tangible web asset worth per share was 870p, in comparison with a share value on the time of 505p.
On paper not less than, it appears like a discount.
Nonetheless, given all this uncertainty, it will be too dangerous for me to take a place. I shall revisit the funding case when issues turn into a bit clearer. Within the meantime, I’m going to have a look at another fascinating alternatives.
