Consumer and commercial lessor PCFG was granted a banking licence at the end of 2016, and has since rebranded as PCF Bank to target retail sales. Brian Cantwell talks to managing director Robert Murray
The process of becoming a bank has made sense for many UK leasing businesses following the credit crunch, when access to credit lines was withdrawn as larger banks stopped lending, and sourcing new facilities was not easy.
“Up to and around 2012 it was difficult to gain access to credit from banks for lending. Part of the reason that we applied for a banking licence was a strategic decision to avoid that situation again,” says Robert Murray, PCF Bank’s managing director.
“By focusing on raising retail deposits we have a reliable source of capital, and it gives us the ability to compete on rates for leasing that previously we were not able to offer.”
PCF Bank will now offer two-, three-, four- and five-year fixed-rate savings bonds to the retail market, with a minimum bond value of £1,000 to the mum-and-dad investor market.
“It was only recently that we began to appreciate the size of the private retail bond market, and how much potential there was there to access funds from it,” says Murray.
It is a competitive market with One Savings Bank, Aldermore, OakNorth and Masthaven Bank, among others, all operating on similar principles: collecting retail deposits to gather capital to lend.
Murray says handling this competition from the deposit side will depend mainly on rates and fixed-term interest calculations, but that a lack of banking legacy systems has freed up the lessor in the market. “We have made great investment in our systems to allow us to compete for retail deposit customers, with £2m invested in the Temenos and Sandfast platforms that will allow us to automate the application process as well as bond and interest calculations,” he says.
Indeed, there has been an explosion in banking licences granted by the Bank of England since 2014, meaning competition will be tight on offers to savers, but also on the lending side of the market.
Private & Commercial Finance Group (PCFG) has a £128m loan book spread over 12,000 customers. On the consumer side it lends predominantly on used cars, with niche expertise in classic cars, high-value vehicles, motorhomes and horseboxes, while the commercial lending and leasing side focuses on commercial vehicles, coaches and buses, yellow goods and plant and machinery.
The strategy is to grow the business to an eventual loan portfolio of £750m, and in this respect PCF Bank is in a stronger position that perhaps a new market player might be.
Its existence in the leasing market for over two decades means it will be growing broker relationships rather than having to create them, and it will only be going to market through brokers, with no direct proposition.
“It is through our existing relationships and reputation with brokers that our growth will come: They already know our service levels and depth of knowledge of the market,” explains Murray.
“We are well diversified throughout our loan book across the sectors we lend through, so our broker partners know that we will be in a good position to lend in both the challenging times and periods of economic growth.” <