Aldermore Bank has been put up for sale after its parent company, FirstRand, decided to exit the UK market in protest at the motor finance compensation scheme.
The Financial Conduct Authority (FCA) confirmed the final details of the scheme on 30 March, with measures to compensate consumers who were treated unfairly by car finance companies between 2007 and 2024.
This will include arrangements where there was a clear relationship between a lender, manufacturer, and franchised dealer. It will also cover agreements involving a discretionary commission arrangement that allowed brokers to adjust the interest rate to earn a higher commission, and cases where there was a high commission arrangement.
Firms will be expected to pay out around £7.5bn in redress.
Aldermore said the motor finance scheme would require the bank to increase its existing provision from £73.1m to £280m, resulting in a pre-tax charge of £206.9m.
FirstRand labelled the scheme as “disproportionate and unfair”, saying it would result in a financial impact on the group beyond its expectations.
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The South African lender said it would need to raise a further pre-tax accounting provision of £510m to cover costs faced by its car finance subsidiary MotoNovo.
FirstRand said this would negatively impact the group’s excess capital position, but its subsidiaries, FirstRand Limited, FirstRand Bank Limited and Aldermore Group, had enough capital to maintain their growth.
The group said while it believed Aldermore Bank was “resilient”, “sustainable” and “serving an important need in the UK”, the business case for FirstRand to own a UK consumer finance entity was not within its risk appetite.
It said to protect shareholder value and Aldermore’s success, the group would work with the Aldermore board and regulators to ensure an “orderly ownership transition”.
Aldermore added that it would remain committed to its strategy to “drive significant positive outcomes” for its shareholders.
A spokesperson for Aldermore said: “The Aldermore Group is a financially robust business that continues to deliver sustainable growth.
“We remain operating in our markets as usual, driving significant positive outcomes for our customers.”