Challenger bank Shawbrook put out an upbeat third quarter trading statement on Thursday.
Here are the highlights:
- Underlying profit before taxation up 68% to £54.5 million ($US83.8 million) in the 9 months to September 30;
- Organic loan originations up 27% in the 9 months to September 30 to £1.21 billion ($US1.86 billion);
- Net loans & advances to customers increased by 23% to £2.86 billion ($US4.4 billion) in the same period;
- Commercial mortgages increased by 23% to £441 million ($US678.4 million) in the same period;
- Consumer loans up by 36% in the third quarter to £64 million ($US98.4 million);
- Asset finance increased by 36% to £126 million ($US193.8 million) in the third quarter.
So pretty much everything is growing at a double-digit clip. The key, according to interim CEO and CFO Tom Wood, is “growing demand for lending from UK SMEs” — small and medium enterprises.
Lending to small businesses by the big banks fell off a cliff in the years following the recession, as shown by the below chart from LendIt Europe conference in London earlier this year.
Shawbrook is one of a number of so-called “challenger” banks that have sprung up since then aiming to address this market imbalance and offer more choice to customers. Shawbrook was founded in 2011 and listed in April this year.
Shawbrook said in its statement Thursday it has seen particular growth in commercial mortgages in the wake of May’s election, as well as asset financing. The company also recently moved into the short-term property finance market.
But Shawbrook is increasingly moving into consumer loans and savings products alongside business products, as the 36% rise in consumer loans shows. Wood says:
The full roll out of personal lending and savings offerings and a number of further attractive product and market adjacencies will reinforce future growth and we remain confident in our continued ability to deliver our near and medium term targets.
This is a much tougher market to crack than small business lending. A recent competition report into the sector found the big problem was not enough consumers switching, which meant banks didn’t have enough of an incentive to improve their consumer business.
As previously announced, Santander’s Executive Director and Head of UK BankingSteve Pateman will join as CEO on January 1.
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