Shawbrook: Underlying profit dips as challenger bank’s margins narrow
Challenger bank Shawbrook has reported a dip in underlying profit for the first half of 2024 as looming interest rate cuts from the Bank of England narrowed its lending margins.
The privately-held specialist lender posted an underlying pretax profit of £124.5m for the six months, down from £149.3m during the same period last year.
Shawbrook partly blamed the decline on stronger originations in retail mortgages, leading to an expected drop in its net interest margin – measuring of the gap between interest received on loans and rates paid for deposits.
UK banks have grappled with lower interest income this year as the central bank moved closer to cutting its base rate for the first time since March 2020, ultimately doing so earlier this month.
The mortgage market, where Shawbrook is looking to grow its presence, has experienced price wars as lenders slashed rates on home loans to attract new business and capitalise on signs of recovery after a rough couple of years.
Shawbrook said it expected margins to widen as its mixture of originations reweights across all of its specialist lending segments.
The bank’s loan book grew 15 per cent on an annualised basis to £14.3bn, which it said reflected continued strong originations in its core small and medium-sized business (SME) and property segments.
It said the overall credit quality of its loan book “remained robust”, with an arrears ratio 0.4 percentage points higher at 2.7 per cent.
Shawbrook’s deposits also grew 21 per cent to £15bn on the back of its customer base swelling by roughly 100,000 to hit some 550,000.
“The attractive returns we continue to generate have been reinvested in our ‘best of both’ model, combining innovative technology and data analytics with great talent, enabling us to efficiently scale-up our specialist proposition,” Marcelino Castrillo, Shawbrook’s chief executive, commented.
“Looking ahead, our focus on our core specialist products and markets, together with continued efficiency improvements, will ensure we are able to maximise capital generation to facilitate further re-investment in our model and drive future growth and value creation.”