B-North is being developed to serve the UK business lending market. The team is taking its deep insight into the market for lending to UK businesses and using this to place the customer right at the heart of its business model. The result will be flexible, fast-paced and borrower-friendly.
Overview of progress
We continue to make rapid progress. Both our banking licence application process and our technology build are progressing smoothly and B-North plans to commence lending activities in Q2, 2020 some 6 months ahead of plan.
Further development of the Team
As previously announced, Ron Emerson CBE has now joined B-North as Independent Non-Executive Chair. Ron is a banking heavyweight, having served as the founding Chair of the British Business Bank (BBB) and has had a long career in banking that included a period as a Senior Advisor at The Bank of England and a spell at the UK banking regulator.
More broadly, B-North continues to build its wider management team with exciting new hires coming on board to expand its Marketing capabilities and also Risk, Compliance and Internal Audit capabilities as it looks to build out its 3 Lines of Defence model.
Banking licence application well advanced
The progress that we are making with our banking licence application is surpassing our expectations. Following the Technical Challenge Session with the regulators in July, we received our invitation to submit our full banking licence application in August and this was duly completed in September.
To put this in context, of the 110 companies that have started a bank licence process in recent years, only 31 have reached the point of submitting a full banking licence application (i.e. less than one third). Of these, 19 (i.e. nearly two thirds) have gone on to receive a banking licence.
Taking into account the progress made to date and the feedback we have received through the excellent engagement we have had with the regulators throughout the process, we expect to receive our banking licence around the beginning of Q2,2020, ahead of previous expectations.
IT system build
One of the key points of differentiation will be our FinTech enabled IT platform that will help deliver a fundamentally re-engineered and enhanced SME lending journey.
As previously noted, the development of the Customer Loan Origination system, in partnership with nCino inc., continues to progress well and the productised integration of that platform with Mambu’s Core Banking system has now hit the ground running.
Alongside this, significant progress is being made on the selection of the next core components of our core IT systems, including agency banking, deposit-taking and risk management systems. Announcements in respect of these systems are expected during Q4, 2019.
Early commencement of lending
As noted above, B-North expects to receive its banking licence in early Q2, 2020. This initial licence is classified as ‘Authorised With Restriction’ which means that B-North will be a bank but will have to successfully complete a Mobilisation period before it is able to fund its lending activities through retail fixed-term deposits. B-North expects to conclude this Mobilisation period and commence deposit-taking in Q4, 2020.
However, B-North intends to commence lending activities shortly after receipt of the banking licence some 6 months earlier than planned. The aim is to fund the initial loan book through a securitised debt facility and B-North is engaged in a constructive dialogue with a major financial institution that would provide such a facility.
B-North believes that the early commencement of lending activities, some 6 months’ sooner than originally planned, would provide significant benefit to current shareholders, as it would enable B-North to prove its business proposition and become post-revenue in advance of future more significant capital raises.
Management continue to exercise tight budgetary control and, despite the rapid progress we are making, this 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’s first Annual Report for the year ended 20 September 2019 has now been completed and successfully audited by Deloitte LLP.
Our seed round raised over £4m and included a substantial six-figure commitment from the Greater Manchester Combined Authority. Following the success of this round, we have now formally launched a Super-Seed round to raise c£2m that will fund the further development of the business through to the point of obtaining its banking licence and ready the business for early commencement of lending activities in Q2, 2020.
The fundraising process is progressing well and is on track to close well before the end of the year. The raise is being supported by both existing shareholders and new investors and the management team are following on in this round.
Alongside this, B-North has commenced the process to raise c£20m of capital that will be required to underpin the bank at the point of receiving its licence. This process is progressing well and B-North is engaged in a positive dialogue with a number of potential institutional investors.
We are making rapid progress on all fronts. This is particularly the case in respect of the banking licence process and systems integration, which reflects the quality of our team. All of which gives us confidence for the future.