Last week the digital-led OakNorth claimed to have become the first new bank to both break even and achieve cash profitability within one year of launching.
OakNorth’s retail products offer a source of funding for its lending business and in the last three months since Brexit, the bank has doubled its loan book.
The bank believes that if this momentum continues, as it expects, it would need a larger pool of deposits to source funding from.
OakNorth has therefore decided to launch additional retail products to help with the growing demand.
To find out more about the bank’s future plans Bridging & Commercial caught up with Rishi Khosla, CEO and co-founder of OakNorth.
Rishi Khosla, CEO and co-founder of OakNorth
“A lot of the innovations will be coming on the deposit side of the book as that is where we feel there is more to be done.
“On the lending side fundamentally each loan we do is a new product because each loan we do is bespoke to our client.
“That’s the big difference between us and other banks as most of them have products which say: this is our invoice discounted product, this is our refinancing product, this is our inventory finance product etc.
“Our approach is very different as we don’t want to create all these artificial boxes for the borrower. What we want to do is provide an overall facility which they can use for all of those things as and when they need to.”
The new easy access accounts are set to be launched in the next quarter and when asked whether OakNorth will improve on its successful first year, Rishi is confident.
“For next year we expect to make a good profit.
“We come from the traditional school of business which is that you are in business to make money and if you build a robust business you will make money.”
The bank claims that no other new banks in the UK have managed to break even and achieve profitability within their first year of launching. Rishi thinks OakNorth’s success is the result of sensible investing.
“It is fundamentally driven by the fact that we are entrepreneurs who built a previous business (Copal Amba) when we had no money, so our attitude is to build in a frugal manner.
“You build very robustly, creating the necessary processes and policies to enable you to run as efficiently as possible, as well as investing money where it’s needed – hiring the right people, developing the right technology etc. And you invest it smartly, you can’t be careless with it.”
Rishi concluded with an example of how OakNorth’s approach differs to other new banks.
“Most people who go through the licensing process to become a bank will have a stream of consultants behind them and they will probably rack up a bill of a few million.
“Our total consulting bill on our licensing process was around £200,000.
“That shows how we do things so differently – it’s just a totally different DNA.”
In August, OakNorth revealed that it had funded almost £50m worth of deals post-Brexit, while it secured a £66m investment from India’s largest non-bank SME lender in November last year.
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