PCF Bank profit before tax was up 20% to £2.1 million for the six months ending March 31 this year, (2017: £1.7 million), which included its costs for new banking infrastructure and resources.
The bank said it had reached £108m in retail deposits, and that its lending portfolio had grown 40% to £179m from £128m in 2017.
Earnings per share maintained at 0.8p (2017: 0.8p), while after-tax return on equity reduced to 8.7% (2017: 10.5%) reflecting the increased capital base and investment in the banking model, said PCF.
The bank said in eight months as a bank, customer deposits had reached £108m (2017: Nil), and that it was pleased with it ‘excellent progress’ on strategic objectives and £350 million portfolio target to be reached by 2020.
Due to the lower costs of funding the bank had seen a 97% increase in new business originations to £69 million (2017: £35 million).
Growth in unearned finance charges hit £39m (2017: £28m).
PCF Bank chairman Tim Franklin wrote: “The new business pipeline is strong and we are pleased with the quality of business we are writing. This is consistent with our cautious outlook for the UK economy in the medium-term and, in the event of a downturn; the current impairment performance provides comfort, as does 24 years’ experience in our chosen sectors.
“By maintaining prudent and responsible lending, we are confident that we will continue to perform well in our existing markets.”
PCF Bank chief executive Scott Maybury wrote on the results: “This has been a rewarding period. We set ourselves ambitious targets for our first year as a bank and have made excellent progress towards achieving those objectives.
“We came into this financial year with a significantly higher cost base but have still delivered good growth in profitability. We expect this to accelerate through operational gearing, as we scale our portfolio and continue to put the new capital and infrastructure to work
Maybury told Leasing Life that in the face of potentially tougher market competition the bank had opted for prime business as a hedge against changing market conditions, after receiving its banking licence last year.
Maybury said: “I think the story here is about the delivery of the objectives we quite clearly set out before becoming a bank.
“We didn’t promise immediate diversification [after becoming a bank]: we saw the opportunity to lend into our existing space.”
The bank knew it had a small market share, and broker partners to PCF Bank said that its credit pricing meant that it priced itself out of 80% of the business that was suggested to it.
“We have been in consumer motor and SME lending for over 20 years and we understand the product well,” said Maybury.
“The board wanted to put the banking license to work quickly, but we are not going to do anything rash and out of our comfort zone when it comes to risk. So it made a lot of sense to go into our markets [into prime credit lending].
“We have effectively passed all the cost savings of our retail deposits onto the marketing effort, by lowering our headline rates, and going for the more prime customers that we were previously excluded from.”
You can read more from the Scott Maybury interview in July’s edition of Leasing Life.