LONDON (Alliance News) - Shawbrook Group Ltd Thursday joined a growing list of new UK lenders coming to the stock market, reflecting the growth of a sector that has been encouraged by the UK government in the wake of the financial crisis that damaged the lending abilities of the traditional banks.
Shawbrook, whose loan book grew to GBP2.3 billion in 2014 as it made GBP1.4 billion of new loans to UK businesses and consumers, is mainly focused on lending to UK small businesses which it says are poorly served by the traditional large lenders. That's the same focus as Aldermore Group PLC, which has enjoyed a strong performance since it listed on the London Stock Exchange's Main Market on Tuesday.
Aldermore shares were trading at 220.00 pence Thursday morning, well above the 192 pence price of its initial public offering.
Aldermore's debut on the stock exchange followed the IPOs of Virgin Money Holdings (UK) PLC and TSB Banking Group PLC, as UK regulators and government authorities aim to stimulate competition in the banking sector, which is dominated by the traditional 'Big Four' of Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC and Royal Bank of Scotland Group PLC. Virgin Money and TSB are less specialised than Shawbrook and Aldermore, with larger consumer loan books.
According to media reports, the UK arm of Spanish banking giant Santander, retail lender Metro Bank, and Clydesdale, owned by National Australia Bank Ltd, are also thought to be mulling listing shares in London at some stage.
Shawbrook, which was formed in 2011, said a listing will mark the next stage in its growth strategy and it is expecting to raise about GBP90 million for the company in the IPO. It wants to list on the LSE's Main Market, but didn't give any further details of the offering. Sky News said Thursday the initial public offering could value it at almost GBP1 billion, which would make it the biggest London listing so far in 2015.
Shares are expected to begin trading in London in early April, one month before the UK General Election. The election is seen as a risk to business due to uncertainty over the outcome, but so-called challenger banks, such as Shawbrook, are expected to be unaffected, as the drive to boost lending to small and medium sized businesses is set to continue whatever the outcome of the election.
Shawbrook is chaired by George Mathewson, who was chairman of RBS between 2001 and 2006, and its current majority owners include fund Pollen Street Capital, which will sell part of its stake. Mathewson, who guided RBS through its acquisition of the larger Natwest in 2000 when he was still the bank's chief executive, will remain Shawbrook's chairman through the IPO process. According to Shawbrook, Mathewson will then step down as chairman once a "suitable successor" has been identified.
The case for investing in Shawbrook is that the bank should offer a high return on equity and good growth, at a time when the Big Four are distracted by the need to restructure their operations and deal with legacy issues that have led to fines from regulators and litigation costs.
Shawbrook made a pretax profit excluding some acquisition-related costs of GBP49.1 million in 2014, up from GBP16.9 million in 2013, and its post-tax return on tangible equity rose to 26.9% from 13.6%.
It said it expects to pay a modest maiden dividend for 2016, rising to 30% of post-tax profit in 2017, and then to progressive after that.
Bank of America Merrill Lynch and Goldman Sachs are joint sponsors, joint global co-ordinators and joint bookrunners for the offer, with Macquarie Capital acting as a joint bookrunner and Keefe, Bruyette & Woods as co-lead manager.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
Update by Samuel Agini; samagini@alliancenews.com; @SamuelAgini
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