Thursday 11 August 2016 9:39 am

Aldermore becomes the latest challenger bank to shrug off Brexit with 50 per cent boost to profits

Aldermore has today reported a huge boost to its bottom line, while revealing it feels it can keep on smiling throughout the Brexit uncertainty. 

The figures

The challenger bank reported profit before tax of £59m for the first half of 2016, up 50 per cent from the prior year's £40m. Meanwhile, underlying profit before tax increased to £63m, up 45 per cent from £44m.

The lender's net interest margin, something many investors will be keeping a close eye after the Bank of England slashed interest rates last week, stayed steady at 3.6 per cent

The bank's loan creation increased to £1.5bn, up 26 per cent from £1.2bn in the first half of 2015. However, origination for residential mortgages was down by 14 per cent

The market, however, was less impressed with the news. Shares are currently down 4.95 per cent at 146p

[charts-share-price id="471"]

Why it's important

It's been a tough old time out there for banks lately. June's Brexit vote plunged share prices across the world, and so-called challengers bore the brunt of it. A report by the Bank of England shortly after the vote, which voiced concerns the smaller lenders were less well protected from any downturn in the commercial property sector, did very little to help matters

Aldermore today moved to address investors' woes about what Brexit meant for its business, commenting that, although "the outlook faced by all participants in the UK economy is undeniably more uncertain", its UK-centric business model made it reasonably sheltered from the worst of the fallout and had seen "no direct impact either on the lending, deposit or credit aspects" to date.

The challenger did, however, note it had "proactively added a further element of caution into our collective provision charge by extending the mortgages emergence period assumptions by three months to reflect increased economic uncertainty".

But the UK's impending departure from the EU isn't the only problem facing the banking sector right now. Earlier this month, the lower for longer interest rate environment got even lower when the central bank cut rates to 0.25 per cent. 

Aldermore noted it intended to pass this cut into its customers and did not expect the change to have a material impact on its net interest income. 

What Aldermore said

Phillip Monks, chief executive, told City A.M. he was "absolutely delighted" with today's set of figures.

Monks said he was "not seeing anything in the market which caused [him] any concerns" when asked about the slump in residential mortgage creations, particularly as the bank had refocused its efforts on the buy-to-let market to take advantage of the spike in the marketplace at the time. 

Monks added, while the challenger had "chosen the markets [its] in very deliberately for a number of characteristics", he thought "there's areas where we can expand within those businesses, within our risk appetite". 

In short

Brexit vote? What Brexit vote?