When searching for cheap UK stocks, some of the best deals can often be found at the bottom of the performance tables. In fact, only six FTSE 250 index Stocks performed worse than… Close the group of brothers (LSE:CBG) over the past five years. Since March 2021, its shares have collapsed 78%.

But recovery will only be possible if investors are convinced that the problems of the past have been solved. Otherwise, there could be more bad news for shareholders. With that in mind, let’s see why this UK merchant banking group has fallen out of favor and examine whether its incredibly low earnings multiple means its shares could bounce back soon.

Under the spotlight

The group’s problems are all linked to the Financial Conduct Authority’s (FCA) industry-wide investigation into alleged car loan fraud. When there is important news (good or bad) to report on this issue, the group’s share price reacts accordingly.

For example, on 10 January 2024, the Financial Conduct Authority (FCA) publicly announced its review. Over the next five weeks, the group’s shares collapsed by 61%.

On August 1, 2025, the Supreme Court upheld the group’s appeal to overturn previous rulings issued in three cases brought by borrowers. In the company’s words: “[this] It decided that car dealers (acting as credit intermediaries) did not owe fiduciary duties to their customersOver the next seven days, its stock price rose by 30%.

Currently, the FCA is consulting on an industry-wide compensation scheme. However, Close Brothers says “It is not believed that the current proposed compensation methodology… adequately reflects the client’s actual loss or achieves a proportionate outcome“.

Deja vu

On Monday (March 16), the group’s shares fell 13.9%.

This followed the publication of a report by the Viceroy, “An independent investigative research group“, suggesting that Close Brothers is underestimating the true cost of compensation. It claims that the group “exhaustedIn its efforts to preserve its capital base, it is selling its subsidiaries and suspending its dividend, which gives it little financial leverage if the outcome is worse than expected.

The Viceroy says the group will have to “at least“Double its current allocation of £300m. Its research suggests a likely range of outcomes is £572m – £1.232bn. In extreme circumstances, this could result in a breach of regulatory reserve requirements. Its base case (£999m)”It indicates that shareholders will be significantly eliminated in the restructuring process“.

This is serious stuff. But it’s only one opinion. The company responded by saying:He disagrees“He explained that”Provisioning approach” – any “Follows a strong governance process“- in accordance with international accounting standards.

Latest results

Yesterday (March 17), the group released its results for the six months ending January 31.

Based on adjusted earnings over the last year, the stock trades at a multiple of just 6.5. It is noteworthy that the group’s market value is approximately one billion pounds less than its book (accounting) value. At the end of January, its net tangible asset value per share was 870p, compared to the share price at the time of 505p.

On paper at least, it sounds like a deal.

However, given all this uncertainty, it would be too risky for me to take a position. I will reconsider the investment case when things become clearer. In the meantime, I’ll take a look at some other interesting opportunities.