Shares in Aldermore Group are down by more than one per cent this afternoon, after spiking earlier today on the news that the British challenger bank had reported a better-than-expected 88 per cent jump in profit for 2015.
The bank's chief executive, Phillip Monks, told City A.M. that while the share price moves were "perhaps a little bit frustrating", he saw them as "more of a reflection of the external market" than of Aldermore's performance.
"I think there are so many issues in the marketplace at the moment, whether it's China, whether it's oil, whether it's Brexit, the US elections," Monks said. "If you wanted to, you could scare yourself silly."
Aldermore, which was set up in 2009 and floated exactly one year ago today, specialises in lending to small businesses, homeowners and landlords. The bank said today that its £95m profit for the year ended 31 December was driven by £6.1bn in net loans, a 28 per cent increase over the previous year.
Analysts were expecting the bank to earn £91.4m, according to company-compiled estimates. Out of 14 analysts covering Aldermore, seven rate the bank a "buy", one recommends "sell" and five say "hold".
Monks told City A.M. that the "organic" growth in the bank's balance sheet was the result of the challenger's focus on customer service.
"The differentiation of providing excellent customer service and providing a really robust credit experience using human credit advice is paying off," Monks said, claiming that 97 per cent of Aldermore's customers say they would recommend the bank to a member of their family or a friend.
Monks brushed off concerns about a slowdown in SME growth or the housing market, telling City A.M. there is "plenty of headroom" for Aldermore to continue to grow in its existing markets.
When asked about new rules from the Treasury to tighten the buy-to-let market, Monks said: "The underlying demand for privately rented housing is rising in its own right. You have got a growing market."
Monks added that while the bank has "seen a spike in applications during November, December, coming through in completions in the first quarter of this year" ahead of an increase in stamp duty for buy-to-let properties next month, he remains confident that Aldermore can continue to generate strong returns through its mortgage book, 70 per cent of which is focused on remortgaging.
Monks also dismissed worries about the impact of the referendum on Britain's European Union membership on 23 June, saying "confidence is there at the moment", with SMEs continuing to invest.
"We as an organisation are neutral on Brexit," Monks said, adding that "so long as the UK economy continues to grow" the Britain-focused bank would be "comfortable".
Aldermore was one of multiple challenger banks hit hard by chancellor George Osborne's announcement at the summer Budget of a new so-called bank tax surcharge, which will take an additional eight per cent of banks’ profits each year for the government, on top of the existing corporation tax.
When it goes into effect next year, the new tax will apply to challenger banks and building societies currently exempt from the existing bank levy – including Aldermore, which suffered its worst day on record on the day of the summer budget.
The bank said today that the surcharge will impact shareholder returns going forward, bringing guidance for return on equity (ROE) from 20 per cent down to the "high teens".