SoftBank-backed lender OakNorth Bank almost doubled its profits in 2019, but slowed down its pace of expansion as economic concerns discouraged business borrowing.
The five-year-old UK company maintained its record as one of the few so-called neobanks to generate a profit, reporting a pre-tax gain of £66m, compared with £34m the previous year.
OakNorth provides loans of between £500,000 and £45m for midsized businesses, funded mainly through savings deposits from retail and business customers.
The bank reported total revenues of £104m for 2019, up 74 per cent year on year. Despite efforts to broaden its customer base outside its core market of London and the south-east of England, however, its overall pace of growth slowed.
Loans and advances to customers grew 58 per cent to £2bn, compared with a more than 100 per cent increase in 2018.
Rishi Khosla, OakNorth chief executive, said the company had taken a “measured” approach to expansion. “Giving away money is very easy, but to lend it well you need to make sure you have the right discipline. Last year there was a lot of uncertainty,” he said.
OakNorth suffered its first two defaults in 2019, as the bank and its customers grappled with factors including Brexit, a UK general election and extreme flooding.
Mr Khosla said uncertainty would continue to affect business activity this year, particularly after the coronavirus outbreak. But he added “we absolutely believe we will continue to grow at a healthy rate . . . and we have very consciously built our business to be able to continue to grow in a down cycle”.
The figures published on Monday do not include contributions — and costs — of OakNorth’s other main business, which involves licensing the credit decision technology that powers its lending to overseas banks. OakNorth Holdings, the bank’s Jersey-registered parent company, does not report public financial figures but Mr Khosla said “the overall business is still profitable”.
He said OakNorth was now working with 17 overseas banks, with a total of £17.5bn assets under management on its credit platform.
OakNorth was valued at $2.8bn in a deal led by SoftBank’s Vision Fund last year. Mr Khosla said the bumper investment — the $440m round was at the time the largest ever European fintech investment — and OakNorth’s profitability meant it had “no plans” to raise new capital.
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