European Blue-Chip Stocks Rise on Motor Finance Scheme Proposals

European blue-chips rose on Monday, led by Lloyds Banking and Close Brothers, as shares jumped on news of potential motor finance compensation schemes. The FTSE 100 index opened up 0.4%, while the FTSE 250 was up 0.6%. The Cboe UK 100 was up 0.4%, and the CAC 40 in Paris improved 0.9%. Lloyds Banking was up 7.5%, and Close Brothers jumped 21%. Europa Oil & Gas rose 35%, and Westmount Energy was up 21%.

European blue-chips rose on Monday, led by Lloyds Banking and Close Brothers, as shares jumped on news of potential motor finance compensation schemes. The FTSE 100 index opened up 0.4%, while the FTSE 250 was up 0.6%. The Cboe UK 100 was up 0.4%, and the CAC 40 in Paris improved 0.9%. Lloyds Banking was up 7.5%, and Close Brothers jumped 21%. Europa Oil & Gas rose 35%, and Westmount Energy was up 21%.

The surge in share prices was driven by the UK Supreme Court's ruling on Friday, which largely overturned previous rulings against the motor finance industry. The court found that in many cases, commission payments to motor dealers were legal, but some lenders acted unfairly due to the size of the commission and how it was disclosed. This ruling is expected to significantly reduce the estimated cost of the compensation scheme for motorists, which was previously estimated to be between £9bn and £18bn [1].

Lloyds Banking Group, which had set aside £1.2bn for potential compensation claims, saw its shares jump by almost 6% in early trading. Close Brothers, one of the firms that brought the appeal to the Supreme Court, saw its shares rocket by 27%. The FCA is now consulting on a compensation scheme for motorists, with individual payouts not expected to be particularly large [2].

Analysts have noted that the ruling was a win for the lenders, but there are still uncertainties regarding the final cost of the compensation scheme. The FCA estimates the cost could be between £9bn and £18bn, but there is scope for other outcomes [2]. Despite the positive market reaction, there is caution among investors, with some noting that the ruling may not be a complete victory for the industry [2].

The ruling comes as the FTSE 100 has been experiencing a modest recovery after a widespread sell-off last week due to US 'reciprocal' tariffs and the sacking of the Bureau of Labor Statistics' chief. The FTSE 100 is expected to bounce back, with the index called 39 points higher ahead of trading on Monday [3].

References:
[1] https://www.theguardian.com/business/live/2025/aug/04/city-car-finance-scandal-ruling-compensation-scheme-shares-lloyds-close-bros-stock-markets-business-live
[2] https://www.proactiveinvestors.co.uk/companies/news/1075986/ftse-100-live-shares-bounce-back-lloyds-and-close-bros-surge-after-motor-finance-ruling-1075986.html
[3] https://www.lse.co.uk/news/london-market-open-london-rises-on-motor-finance-scheme-proposals-nn1m84b8cxidu2k.html