Shawbrook Bank, (“the bank”) the UK’s leading specialist lender, said it was ideally positioned to continue supporting customers through the economic recovery after posting a “resilient and robust” financial performance in its last trading year (Year ended December 31, 2020).
The bank, which focuses exclusively on property finance, business finance, consumer lending and savings, said it grew its loan book 5% to £7.1bn (2019: £6.8bn) in the year to 31 December 2020 whilst maintaining strong credit quality and prudent levels of capital.
It said demand had been most evident in its property and business finance divisions as more entrepreneurs and SMEs seized opportunities and strengthened balance sheets “in the face and in the wake of the pandemic”. Its property finance products include buy to let mortgages, commercial investment funding, bridging finance and second charge mortgages, whilst its business finance product range includes asset finance, structured finance, development finance and corporate lending solutions.
Operating income was broadly flat at £398.2m (2019: £408.3m).
The bank - which celebrates its 10th anniversary this year - reported a 40% reduction in profit before tax to £73.5m (2019: £122.4m), driven predominantly by increased impairment charges of £54.9m (2019: £29.9m), as modelled and required under IFRS 9 impairment standards, and increased provisioning for liabilities relating to Consumer Credit Act claims where the supplier has become insolvent.
Commenting on its support for customers during Covid, the bank granted payment holidays on a total of £1.9bn of balances, with 91% either expired or resumed payments and not in arrears.
Whilst its overall cost of risk increased to 80 basis points (2019: 47 basis points), the bank said it remained confident in the underlying quality of its loan book with levels of arrears on track to return to pre-pandemic levels.
Its gross asset yield reduced to 5.8% (2019: 6.4%), reflecting the product mix weighting, the disposal of a £0.1 billion higher yielding consumer loan portfolio and the impact of the Bank of England base rate reduction on its variable rate loan book.
Despite this, the bank said its cost to income ratio decreased to 46.5% (2019: 46.9%), reflecting its careful management of costs. It also said capital ratios had strengthened throughout the year with its Common Equity Tier 1 (CET1) ratio at 12.6% (2019: 12.0%). Its return on tangible equity was 8.0% (2019: 15.7%) but proved resilient against the bank’s medium-term target of 20%.
Shawbrook, which also provides a range of savings products for businesses and individuals, said it had successfully grown deposits to £6.9bn (2019: £6.1bn) during the same period, which continued to support the growth of its lending volumes and maintain prudent and elevated levels of liquidity throughout the pandemic.
The bank, which supports almost 300,000 small and mid-sized companies and individuals, also said the two acquisitions it made last year – from RateSetter and The Mortgage Lender - had significantly strengthened its position in those markets. It also said it would continue to look for strategic opportunities to further deepen its core franchise.
Commenting on the results, Ian Cowie, who steps down as Chief Executive Officer later in the year, said: “The pandemic has highlighted the operational and financial resilience of our business, which is underpinned by the simplicity of our model, our focus on core propositions and the tenacity of our people. This has enabled us to support our customers and grow our franchise. I believe the business is also in a strengthened position as a result, further driving us towards our strategic goal to become the UK’s Specialist Lender of Choice.”
Mr Cowie will be replaced by Marcelino Castrillo, until recently Managing Director of Customer Engagement & Distribution at Natwest Group.
Dylan Minto, Chief Finance Officer of Shawbrook, added: “The pandemic brought Shawbrook’s reason for being into sharp focus – to provide access to finance for those customers whose needs aren’t being met by incumbent banks. This was especially relevant during the pandemic as customers focused swiftly on either surviving or taking advantage to scale. It also underlined the importance of our differentiated approach to underwriting, which relies on a deep understanding of our customers’ needs and forward prospects.
“Looking ahead, our strong presence in our chosen markets, reputation for outstanding customer support and further investment in technology-driven service make us ideally positioned to continue growing our lending and savings franchises whilst helping to secure the UK’s economic recovery.”