Despite a very challenging market backdrop, substantial progress has been made in the second quarter of the year. The bank licence process has been completed, subject only to the completion of capital, which is progressing well. We have also finalised the development of both the lending and deposit taking platforms and continue to build an exceptional team, ready to commence lending later this year.
- Banking licence process complete subject to capital - The team is delighted that the PRA and FCA have now confirmed that we have satisfactorily completed all of the information requests required to conclude the authorisation process, including confirmation of our TCR (Total Capital Requirement). The only residual threshold condition is for the business to complete its £20m Series A raise to provide the necessary regulatory capital.
- Series A equity raise gaining momentum – since the beginning of June, B-North has seen increased interest and is engaging in a positive dialogue with a number of potential investors. Against the current Covid-19 backdrop the need for, and value of, an SME-focused lending bank with no legacy loan book has increased significantly.
- The build of both the Lending and Deposit-taking plaforms is complete - Over 5,000 person days have been invested in developing what is, quite simply, the best SME lending platform in the UK. A recent joiner from another challenger bank noted that ‘it is light years ahead of any other lending platform they had seen’.
- Leading fintech Wiserfunding added to the suite of risk management solutions - Wiserfunding is a market-leading platform providing risk assessment of SMEs based on a combination of financial and sentiment analysis.
- Yet another high calibre addition to the team - B-North has appointed Becky Owen to launch our first lending pod in Manchester, as Managing Director. Most recently she was the Head of Origination at a challenger bank, following 20+ years at RBS where she spent the majority of her career working with SMEs in various senior positions.
Overview of progress
B-North has continued to take a sensible approach during Q2, working remotely during that period. As can be seen from the outstanding progress made during this quarter, the impact on productivity has been negligible with B-North using market-leading collaboration tools to ensure ongoing teamworking and effective communication.
The team continues to monitor the situation closely and is mindful of potential changes to government guidance. As such, it has already conducted a risk assessment of the head office premises and has prepared detailed operational guidance for staff in anticipation of a potential phased return to work during Q3, 2020.
More significantly, financial markets have been significantly dislocated and it is clear that Covid-19 is having serious implications for existing lenders with legacy loan books. Indeed, several have already announced that they have completely stopped all new lending activity. The government support schemes have provided some temporary respite; however, deployment of the core scheme for larger SMEs has been problematic.
Banking licence process completed - subject only to regulatory capital
We submitted our banking licence application in September, a milestone that less than two-thirds of those starting the process achieve. Since then, we have had a series of monthly meetings with the PRA and the FCA to keep them updated on progress in the business. We also received formal feedback from the PRA’s Capital and Liquidity Committees, including confirmation of our Total Capital Requirement (‘TCR’).
The team is delighted that the PRA and FCA have now confirmed that we have satisfactorily completed all of the information requests required to conclude the authorisation process. The only residual threshold condition is for the business to complete its £20m Series A raise to provide the necessary regulatory capital.
Jonathan Thompson, Chief Executive Officer, commented:
“After 2 years of hard work, we have successfully navigated the bank licence process, subject to approval of shareholder/controllers, and continue to make outstanding progress across all core areas of the business. I could not be prouder of the team and am confident that we will be bringing B-North to market later this year, at a time when it has never been more needed by UK SMEs.”
The Covid-19 dislocation of financial markets has certainly had a timing impact on the process of raising the £20m of capital required to underpin the banking licence. The team’s ability to engage with potential investors was particularly hampered between March through to the end of May.
However, the level of engagement has increased significantly since the beginning of June and there is strong alignment with the view that the need for, and value of, an SME-focused lending bank with no legacy loan book has increased significantly. The team is, therefore, aiming to convert this interest into committed investment in the coming months to enable it to become a bank and commence lending.
IT system build
One of B-North’s key points of differentiation will be its IT platform that will deliver a fundamentally re-engineered and enhanced SME lending journey.
During Q2 the team completed the fourth iteration of its Customer Loan Origination system. This is a major milestone as this will be the version of the platform that will support lending activities later this year. Over 5,000 person days have been invested in developing what is, quite simply, the best SME lending platform in the UK. A recent joiner from another challenger bank noted that ‘it is light years ahead of any other lending platform they had seen’.
The team is also delighted that the build of the deposit-taking platform, in partnership with Newcastle Strategic Solutions Limited, was also completed during this quarter. Once fundraising has completed, third-party expert suppliers have been identified who will complete final testing before these platforms become live.
Ewan Hutton, Chief Technology Officer: “Over 5,000 person days have been invested in developing what is, quite simply, the best SME lending platform in the UK. A recent joiner from another challenger bank noted that ‘it is light years ahead of any other lending platform they had seen’.”
The business has also made significant progress in the identification and selection of FinTech partners to ensure that the risk management elements of the lending process are as robust and technology enabled as possible. During the quarter, the team added Wiserfunding, a leading UK Fintech, to its suite of risk management solutions. Wiserfunding has a market-leading platform that provides risk assessment of SMEs based on a combination of financial and sentiment analysis.
The team has also conducted an extensive review of the impact that Covid-19 is having on the market and certain sectors in particular. As a result, it has proactively modified its credit and concentration policy in advance of commencing lending to ensure that the business is well placed to take of the enhanced market opportunity and manage its risk profile effectively.
Further development of the Team
B-North is delighted to have appointed Becky Owen as the Managing Director of our first regional banking operation in Manchester. She brings with her more than two decades of business and commercial banking experience – leading teams through demanding environments, such as the Global Financial Crisis, and building strong relationships to ensure delivery for her SME customers. Most recently she was the Head of Origination at a challenger bank, following 20+ years at RBS where she spent the majority of her career working with SMEs in various senior positions.
Becky will build the team in Manchester prior to the commencement of lending. The recruitment of the next wave of high calibre recruits is well advanced with a number of appointments agreed subject to completion of fundraising.
Early commencement of lending
As previously noted, B-North intends to commence lending activities shortly after receipt of the banking licence. The aim is to fund the initial loan book through a securitised debt facility and B-North is making good progress with a major financial institution in respect of such a facility.
The team has recently completed an application for a £10m award as part of the Banking Competition Remedies process with winners being announced at the end of Q3, 2020.
It has also completed a smooth and clean external audit of its results to the end of June 2020 in conjunction with external auditors, Deloitte.
Management continue to exercise tight budgetary control, which is ensuring that the cost of developing the business is lower than the initial forecast. There is no change to previous guidance that the overall build the bank cost is expected to be over 20% lower than original expectations.
B-North in the press...