Shawbrook has reported a 94 per cent rise in underlying pre-tax profit after its recent IPO and amid ongoing concerns of a bank surcharge.
Shawbrook, the challenger bank founded in 2011 to fill the gap left by high street lenders when they tightened restrictions on lending to small firms, has performed strongly in the first half of 2015, with underlying pre-tax profit up 94 per cent to £34.8m from £17.9m in the first half of 2014, in line with market expectations.
Earnings per share for the first half of 2015 came to 11.1p.
The increase in profitability has been driven by a 17 per cent increase in the loan book to £2.7bn from £2.3bn at 31 December 2014.
Meanwhile, the company also reported a reduction in the cost to income ratio to 48.9 per cent compared to 52.6 per cent for the same period in 2014.
Why it's interesting
The earnings come after the bank's successful IPO in April, raising £90m for the 25 per cent stake it floated, where investor appetite for challenger banks was strong.
However, the introduction of a new surcharge in the Budget, which would take a significant chunk out of the industry’s profits resulted in its share price falling by over 10 per cent. Under the government’s new policies, challenger banks will pay a corporate tax rate of 28 per cent next year.
The company said that while competition remains high “and we saw some slowdown in volumes ahead of the election following a very strong” first quarter, they remain confident they can deliver targets outlined at its IPO.
What Shawbrook said
Interim chief executive Tom Wood said:
The business remains well placed to respond to the changing regulatory environment and deliver growth by maximising opportunities in our existing markets, capitalising on the embedded growth in our current loan origination capability and working closely with customers and business partners to develop new products and expand into new specialist markets.
While competition remains high and we saw some slowdown in volumes ahead of the election following a very strong first quarter, we remain confident that we will continue to originate good quality, profitable business and remain on track to deliver our targets outlined at the IPO, including £1.6bn of originations in 2015 and targeted annual net loan book growth of £700-800m.
Shawbrook continues to build on strong performance since its IPO despite challenges in the industry regarding competitiveness and the bank surcharge.