Aldermore announces flotation next month

Aldermore chief executive Phillip Monks.

Last October the bank, founded in the wake of the financial crash to take on established banks, planned to raise £75 million in an initial public offering (IPO) that would have valued it at £800m.

Aldermore said yesterday that it still planned to raise £75m of new money when it floats next month “to support the medium term growth of the business”. But sources said this time the company is targeting a smaller valuation of between £600m and £650m.

The group, which also revealed that it more than doubled underlying pre-tax profits to £56.3m in 2014, plans to sell about 40 per cent of the company to City institutions.

Its private equity buyer Anacap is to sell some of its holding. Aldermore said yesterday that, depending on available distributable reserves, it would consider paying an initial shareholder dividend from 2017. Phillip Monks, the former Barclays executive who is Aldermore’s chief executive, said: “Now is the right time for Aldermore to seek a listing on the London Stock Exchange.

“As our strong performance in 2014 highlights, we have consistently delivered on our ambitious targets and we have proven our ability to grow organically and profitably.”

The group, which focuses on lending to small businesses and homeowners, said its net loans had grown from about £76m in 2009 to £4.8 billion at end-2014, with £2.2bn going to small businesses and the rest to residential mortgages.

Banking analysts said that although Aldermore was targeting a smaller stock market valuation next month compared to last autumn, it was still seeking a significant premium to its book value of £450m.

Rival challenger bank Virgin Money got a public listing last November, after also briefly shelving its plans because of equity markets’ turbulence, valuing the business at £1.25bn.

Santander UK, the Spanish-owned bank that has grown over more than a decade through the acquisition of Abbey National, Alliance & Leicester and Bradford & Bingley, has also flagged its intention to join the stock market at some undisclosed juncture.

Aldermore does not have a branch network, keeping its costbase down, but its return on equity of 15 per cent is above nearly all European rivals.

The much larger HSBC said last Monday that it was reducing its mid-term target for return on equity from a previous target of 12 to 15 per cent to “more than 10 per cent”.

Aldermore has said it focuses on four main target areas that it believes are “underserved by incumbent banks”: asset finance, invoice finance, small and medium sized enterprises (SMEs) commercial mortgages and residential mortgages.

The company’s workforce has grown from 50 to 875 in the past six years. Monk said: “The combination of a modern, digital, legacy-free platform and award-winning expertise in otherwise underserved market segments enable us to offer banking services the way they should be.”

Credit Suisse Securities (Europe) and Deutsche Bank (London) are acting as joint global co-ordinators and joint bookrunners to the offer, with Nomura Bank and Numis Securities acting as co-lead managers.

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