Aldermore's share price rises after UK challenger bank delivers record profit as it increases lending

James Nickerson
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Phillip Monks said the bank is committed to supporting UK SMEs (Source: Aldermore)

Aldermore reported better than expected growth in full-year pretax profit as the challenger bank issued more loans and mortgages to SMEs.

The bank's share price jumped over 3.5 per cent as markets opened on the news.

The figures

Aldermore reported profit before tax up by 88 per cent year-on-year to £95m for 2015.

The bank delivered earnings per share of 22.7p for 2015, up from 13p in 2014.

Net loans were up to £6.1bn, a 28 per cent increase year-on-year.

And the net interest margin increased to 3.6 per cent, in line with management expectations.

Aldermore's CET1 capital ratio was 11.8 per cent.

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Why it's interesting

Aldermore reported strong results across a range of metrics, and is now serving more customers than ever.

The challenger delivered a better than expected increase in pretax profits, driven by an increase in net lending.

Read more: Investec - Challenger banks are undervalued

The increase in the bank's lending was driven by growth in asset finance and mortgage portfolios, while it continues to lead the way in lending to SMEs.

It says that by supporting SMEs, along with homeowners and landlords, it has a clear and differentiated growth strategy.

Read more: Challenger bank Aldermore looking safe as houses

But given changes made by the chancellor - notably the three per cent increase in stamp duty on second homes and buy-to-let homes from 2016 - mortgage demand could fall.

Demand could also be hit by reductions on higher-rate tax relief on buy-to-let interest payments from 2017.

What Aldermore said

Phillip Monks, chief executive, said:

It has been an excellent year, both operationally and financially, for the Group. We have delivered record levels of profitability with our profit before tax up by 88 per cent.

Today's results clearly demonstrate our continued focus on delivery across a range of key metrics, with our net interest margin exactly as expected, continued improvement in our cost/income ratio and another strong credit performance.

In short

Aldermore reported record profit, fuelled by lending to businesses and homeowners, a segment of the market it says is under-served by the big banks.

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