Shawbrook Bank has published its interim results for the six months to 30 June 2016.
Profit before tax (PBT) increasing by 14% to £38.0 million and statutory PBT increased by 43% to £35.2 million (H1 2015: £24.7 million).
The average headcount increased to 556 during the first half of 2016 compared to an average of 514 in 2015. Key new initiatives include building out the direct personal loan proposition, lending into retirement mortgage product, building out its regional SME footprint and beginning the test and learn strategy in development finance.
The Group has achieved a 14% increase in the loan book from £3.4 billion at 31 December 2015 to £3.8 billion at 30 June 2016. Gross organic originations amounted to £993 million, an increase of 22% compared to H1 2015.
Organic originations in the property finance division increased by 19% from £416 million in H1 2015 to £495 million in H1 2016 as volumes have remained robust following the stamp duty changes which came into effect on 1 April 2016. Included in the total originations of £495 million are second charge mortgage originations of £103 million. Despite disruption arising from the transition from the Consumer Credit Act to the Mortgage Credit Directive in the second charge mortgage market, originations have remained in line with management’s expectations.
The business finance division achieved £363 million of organic originations, a 19% increase from £306 million in H1 2015. This growth has been driven by the group’s structured finance portfolio. It has launched new product ranges in two specialist sectors of marine leisure and technology finance.
Consumer lending originations for the period amounted to £135 million, an increase of 50% from the same period in 2015. The consumer lending division is in the process of developing a direct to consumer proposition for the personal loans products which is expected to go live in H2 2016.
CEO Steve Pateman (pictured) said: “I am delighted to report that the business achieved a strong first half performance with underlying Profit Before Tax up 14% from the same period in 2015 to £38.0 million. This strong result is after taking into account the additional impairment charge announced on 28 June 2016 and absent this charge, underlying PBT in H1 2016 would have been 41% higher when compared to H1 2015 (78% on a statutory PBT basis). This performance was driven by continued growth in the book to £3.8bn as we progressively increased originations by 22% to £993 million, with strong growth across all three divisions.
“We have continued to deliver strong, sustainable returns with an underlying 12 month rolling RoTE to 30 June 2016 of 21.2%, 23.3% excluding the impairment charge. This reflects our disciplined approach to strong risk adjusted returns alongside continued investment to support the future growth of the loan book. Cost to income ratio of 47.9% demonstrates the benefits arising from economies of scale. Underlying EPS increased to 11p and we reaffirm our previous dividend guidance.
“On management, I’m delighted to announce we have appointed Angela Wakelin to chief operating officer who will lead the work on implementing the underlying operating model to support our growth strategy. This is a further important step in building a strong team at both a business and functional level to deliver on our stated goals and ambitions.
“It is clear from the rapidly evolving and ever changing view of the future for the UK economy post the decision to leave the EU, that the situation will remain fluid for some time; we have already seen economic forecasts move from a near certain recession on the 24th June to lower but still respectable growth rates for 2017 in the latest IMF forecasts. Much remains to be resolved and this will undoubtedly influence consumer and business confidence as the future of our relationship with the EU becomes clearer – at present we are not seeing any material change in activity and indeed some markets that slowed in the run up to the referendum have picked up. However it is too soon to fully assess the medium term impacts on the broader economy given the number of outcomes that remain possible.
“The significant structural opportunities for Shawbrook to grow and to grow safely at the returns we have targeted remain and if anything, the probability of those structural opportunities being greater than we envisaged is higher as the incumbent banks accelerate cost reduction programmes to offset compressed margins in the safe haven markets upon which they will continue to focus.
“We did not extend our risk appetite during the more benign part of the cycle and we therefore do not anticipate making fundamental adjustments to accommodate this potential cyclical downturn, this conservative approach is reflected in where we see our cost of risk now and going forward.”