Close Brothers’ motor finance book shrank 2.6% to £1.7bn over the six months to January 31, which the group attributed to risk-averse underwriting.

The portfolio was broadly flat compared to H2 2016. Close Brothers said it would continue to “consistently apply [its] model, holding margin and prioritising credit quality in a highly competitive UK motor finance market”.

The lender’s Irish motor finance portfolio continued to grow modestly, which Close Brothers said was in line with expectations.

Operating income for Close Brothers’ retail banking segment, which includes motor and premium finance, grew 8% year-on-year, to £118.6bn, with interest margins slightly up at 8.8% (2016: 8.7%).

Impairments for retail were up 21% year-on-year, to £14.4m. Nevertheless, Close Brothers said there had been “no change to the benign credit environment” for lending.

It said: “The bad debt ratio of 1.1% remains consistent with the second half of the last financial year.

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“We remain comfortable with the credit quality of the motor finance loan book, supported by our prudent underwriting, focus on used cars and low exposure to PCP.”

Adjusted operating expenses for the retail segment increased 5% year-on-year, to £61.4m. Close Brothers partly attributed this to investments aimed at improving propositions to dealers and end customers. In October, the lender launched a revamped website for its motor finance offering.

Preben Prebensen, chief executive of the Close Brothers group, said: “We are pleased with our performance and progress in the first half, delivering higher profit while staying true to our client and customer focused model, and maintaining our prudent and disciplined approach.

“All our businesses have achieved a good performance year to date, and we remain well positioned for the full year.”

“Longer term, we are confident that the consistent application of our business model, along with our strong customer relationships, the expertise of our people and the quality of our service will allow us to continue performing well in all market conditions.”