Aldermore boss: Challenger banks need stimulus

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Aldermore is on the up, but chief executive Phillip Monks admits that so far the challenger bank experiment has been far from a complete success.

The bank that sells itself as the “bank for go-getters” had a strong half year, with loans up 4% to £9.4 billion, and profits jumping from £63 million to  £75 million.

Now under the ownership of First Rand, Monks says the South Africans are hands off.

“They are leaving us to get on with it,” he said. “The fear is that head office comes over the wall to help you, but they have been clear that we are the experts, the board is the custodian of the business, we run it.”

Aldermore, which targets small and medium-sized firms, will be 10 years old in May. Other challenger banks are presently mired in controversy or seeking merger deals.

He said: “The original reason for the challengers was to create diversification. It is fair to say that hasn’t been as successful as we would have hoped. You can see why mergers are taking place.” Monks had sympathy with the smaller challengers, saying some fintechs have struggled to get distribution for their products. 

He said: “Challenger banks have been almost ignored by investors in the last few years. Some of those shares are undervalued. There is a lack of research into the sector… it needs a little bit of stimulus.”

Aldermore managed to maintain its profit margin at 3.6%, a level few other banks beyond the giant Lloyds can get close to. Over 10 years, Aldermore has gone from 30 staff to 1000.

Monks admits the cost of managing Brexit risks is on the rise. There is a concern about an increase in bad loans once the UK leaves the EU, with accounting rules demanding that banks take a more cautious approach about the impact of the economy on their loan books.

Said Monks: “There’s is a degree of, when we look at our IFRS 9 models, cautiousness in terms of the forthcoming Brexit issues. It’s us taking a prudent view of what might come with Brexit.”

Aldermore was bought by First Rand in March last year.

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March 13, 2019 |
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