ALDERMORE, Britain’s first private equity-backed bank, expects to turn a profit this year, less than 18 months after it began lending to small businesses and entrepreneurs.
The institution, which is owned by buyout house AnaCap and investment bank Morgan Stanley, is eyeing a small gain after its commercial mortgages, asset finance and invoice finance arms performed ahead of expectations. The bank has lent around £300m to small and medium-sized enterprises (SMEs) since it opened its doors last summer and has been processing 500 mortgage applications from companies each quarter.
Chief executive Phillip Monks said: “We are ahead of plan across all our business lines. The clear fact is the established banking industry is not able to satisfy the needs of the SME community – banks are having to recapitalise and the poor SME is not getting a look in.”
Monks and AnaCap began planning a new bank during the turmoil of the financial crisis in 2008. They bought Ruffler, a small family bank in Surrey, for an undisclosed sum and inherited its Financial Services Authority (FSA) banking licence. Renamed Aldermore, the firm began lending last July, benefiting from Ruffler’s £50m deposit base and book of business focused on providing finance to the slot machine industry.
AnaCap and Morgan Stanley have so far injected £68m into the project, with more capital committed to fund future growth.
Aldermore made a pre-tax loss of £12.9m in the nine months to December 2009 as it overhauled Ruffler’s technology systems and made goodwill write-downs. Monks said he hoped to beat his personal record of delivering a profit within 18 months at Europe Arab Bank, which he set up for Arab Bank in 2005.
Aldermore will continue to grow its balance sheet slowly, Monks said, and would “stick to its knitting”.
ALDERMORE aims to be a conservative lender, but in its past life as Ruffler it has a colourful history.
Ruffler was founded in 1969 by Roy Ruffler, a businessman who made his money importing coin-operated gaming machines. Ruffler decided to start lending to his industry colleagues and was soon running a small institution providing asset-backed finance to slot gambling, amusement arcade and fairground companies from a single branch in Epsom, Surrey.
AnaCap pounced on Ruffler in late 2008. After talks with the bank’s owners, and a three-month “change of control” application to the City watchdog, AnaCap and chief executive-to-be Phillip Monks took control of the bank in May last year. Monks, who spent 23 years with Barclays before setting up a European division of Arab Bank, says the process of gaining regulatory approval was “reassuringly difficult”.
A thorough makeover followed. AnaCap, which brought in?Morgan Stanley as an investment partner, changed the deposit taker’s name to Aldermore and ripped out the company’s IT infrastructure, installing a new system. AnaCap swiftly bought Base Commercial Mortgages and Absolute Invoice Finance, the commercial arm of sub-prime lender Cattles, and merged them into Aldermore.
Since then the bank has opened a further five offices around the country and stepped into the residential mortgage lending market. Although Monks believes small businesses in Britain are desperately short of financing, he is determined to expand at a gradual rate.
Other buyout houses are now casting their eyes over Aldermore and wondering whether they can do the same.