Challenger bank Aldermore has reported a 34 per cent jump in profits, thanks to higher mortgages and loan demand from homeowners and businesses.
Phillip Monks, the bank's CEO, said Aldermore hasn't seen "any tail-off in demand post-Brexit".
“To date it’s been business as usual: we have seen no direct impact on either the lending or deposit side of our business," Monks told City A.M. "In 2016 we delivered a strong performance both before and after the EU referendum, with underlying profitability for the year increasing by 34 per cent to £133m."
Loan originations, the process by which a borrower applies for a new loan, grew by 24 per cent to £3.2bn from the previous year, resulting in total loan growth of 22 percent at £7.5bn.
Total mortgage lending rose by 24 per cent year-on-year to £5.7bn while the total customer numbers reached an all-time high of more than 30,000.
Shares in the bank are currently up 3.38 per cent.
Why it's interesting
Monks said Aldermore remains positive about 2017 despite uncertainties around Brexit.
“Brexit negotiations will clearly lead to uncertainty during 2017 and while the economy has proven resilient so far, we will continue to closely monitor our operating environment for any change. We are also listening to what our customers are telling us. Recent research amongst our SME brokers suggests they remain very confident and 91 per cent believe that their SME clients are also feeling positive about their business prospects in 2017,” he said.
What the analysts said
RBC Capital Markets hiked its target price by 30p to 280p for Aldermore.
"While we acknowledge that Aldermore's loan book is unseasoned, we do not believe investors require any additional return to hold the stock given the diversified nature of the loan book (and) sustained momentum in the business," it wrote.
What Aldermore said:
The bank said in a statement:
“2016 was another remarkable year for the Group. We’ve continued our track record of delivering strong growth, achieving record underlying profitability of £133m before tax, up 34 per cent. This has been achieved whilst maintaining a healthy net interest margin of 3.5 per cent, and by using the scalability of our operations to become even more efficient.
“More than 220,000 businesses and individuals now choose Aldermore for their banking needs and in 2016 the amount we lent to customers increased by £1.3bn to £7.5bn, driven by record levels of organic origination across both our Mortgage and Business Finance divisions. Our straightforward savings business grew by 16 per cent, with around 30 per cent of balances coming from businesses. Growth has been achieved across our diversified portfolio whilst maintaining a robust approach to risk management."