<
p>Last week’s Finance Professional Show saw a discussion on the role of challenger banks and their impact on alternative lenders.
Prompted by Shawbrook’s entry into the regulated bridging market, some observers believe that a growing number of challenger banks offering short term lending will have a detrimental impact on niche players.
However, speaking at the FP Show, James Bloom, Chief Executive of Regentsmead, said any limitations placed on banks would mean that there would still be a place for unregulated lenders.
“They are still going to be a bank, they still won’t be able to do what a niche provider can do - particularly those that lend their own capital,” said James.
“They will always have constraints and regulation, and they will not be able to perform [ever], as they freely admit, in the same way as a niche lender.
“They will certainly have an effect on some of the more traditional lenders, but I think the niche lenders that have their own space and their own way of working – there will always be a place for them.”
Last week, however, Shawbrook reported that it had already seen regulated bridging demands ‘ahead of expectations.’
This past year has seen challenger bank Cambridge & Counties Bank launch into bridging, and the parent company of Precise Mortgages set up its own challenger bank, Charter Savings Bank.
In December last year, Regentsmead said it was looking to work with a rising challenger bank, and more recently it mentioned high street bank Metro.
This together with news that Masthaven Finance is set to become a bank next year, has raised an important question: Will alternative lenders partner up with challenger banks or become challenger banks themselves?
“Whether a new raft of challengers are waiting in the wings is open to debate, but I suspect not,” said Bob Sturges, Head of Communications at Omni Capital.
“I doubt, too, that most alternative lenders will take the big step up to a banking licence, but only time will tell.”
Bob said it was more likely that established challengers, frustrated by slow progress in attracting mainstream custom, would look for acquisition opportunities in the alternative sector to scale up.
“This need not be a hostile tactic as the challengers and alternative providers share much in common: enterprise, flexibility, funding and the ability to build long-term relationships,” added Bob.
“Blending the two could really give the big banks something to think about.”
However, Keith Aldridge, Managing Director at Amicus, thinks more alternative lenders will look to join forces with the larger banks.
He said: “The apparent short term success of recent converts is encouraging but the success criteria is a complicated one, and so again it is likely that some will look to partner with mainstream banks as the proposition offered by the leading alternative lenders are attractive to the mainstream as they continue to be reluctant to commit their own funds.
“The upfront costs and the constraints of the market are considerable and any lender who wants to make the move has to have significant backers with funds that for most, with the aspirations, will not be attainable.”
Ashley Ilsen of Regentsmead believes we will see a rise in the number of challenger banks, but didn’t think many alternative lenders would be going down that route. He agreed with Bob and Keith that acquisitions or partnerships are the way forward.
“As with Metro Bank, we have been able to assist a lot of their clients that have been looking for development funding, and similarly they have been able to provide a refinance once the project is done,” said Ashley.
“This wouldn’t necessarily work if we operated as a bank, as this wouldn’t allow us to offer such an immediate, quick and flexible service for our clients.”
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Last week's Finance Professional Show saw a discussion on the role of challenger banks and their impact on alternative lenders.
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