Shawbrook delivers jump in profit on higher interest rates and lending growth
Challenger bank Shawbrook has posted a jump in annual profit on the back of interest rate hikes and higher lending.
The privately held lender reported a 27 per cent increase in underlying pretax profit to £302m last year, from £238m in 2022.
UK banks’ margins were boosted by higher borrowing costs for much of last year, with the Bank of England hiking its base rate to a post-financial crisis high of 5.25 per cent.
However, this tailwind has died down as the Bank is expected to start cutting rates this year and competition for deposits and mortgages intensifies.
Shawbrook’s underlying return on tangible equity was 0.1 percentage points higher at 20.2 per cent in 2023, which it said was “supported by the diversification of our proposition and disciplined approach to pricing and returns”.
Its loan book grew 24 per cent to £13.3bn from £10.5bn, driven by the bank’s performance in the SME and property markets.
Shawbrook is looking to grow its market share in the mortgage space, having completed the acquisition of Bluestone Mortgages last May.
Its underlying cost-to-income ratio fell to 38.2 per cent in 2023 from 40.0 per cent in 2022, which the bank said was helped by its use of technology and “careful cost management”.
“From growth businesses to professional property investors, consumers and homeowners, more customers than ever are choosing Shawbrook to meet their specific and often event-driven funding needs,” said chief executive Marcelino Castrillo.
“By delivering a premium experience, choice and consistently great value to c.350,000 savers, we also grew our savings franchise to £13.6bn.
“The business model we have created is unique and difficult to replicate, centred around our ‘best of both’ approach that combines deep human expertise with advanced digital, technology and data capabilities.”
He added: “While the macroeconomic landscape continues to evolve, we are encouraged by both the resilient performance we have delivered to date and the improving sentiment seen across our markets.”
Private equity firm Pollen Street floated Shawbrook on the London Stock Exchange at a valuation of £725m in 2015, before taking it private again with the help of BC Partners for £868m in 2017.
The owners are reportedly considering another IPO for the bank. They previously explored selling or listing the bank in 2022, but abandoned plans amid volatile markets and a dealmaking slump.