# B-North Taking the next steps forward

- Link: https://www.directorstalkinterviews.com/b-north-taking-the-next-steps-forward/412808529
- Published: 2020-03-13T07:22:21+00:00
- Author: Amilia Stone

**B-North** aims to raise capital ahead of getting its banking licence (due spring
2020) and attacking the huge, profitable and poorly served SME lending market. B-
North combines i) state-of-the-art technology (built from scratch to address customers’
needs), ii) offering an unparalleled service/innovative remuneration to the £20bn
+ p.a. commercial broker channel, and iii) experienced bankers based in empowered
regional hubs. It should be lower cost than peers, and technology will bring it 
close to customers. The financial model leads to a market share of just 2.5% in 
2027. Delivery of this sees a highly profitable, and valuable, bank, in our view.

 * **Investor returns:** We again emphasise the importance of investors considering
   a range of possible forecasts and valuation ratings. Updating for the impact 
   on ratings of the recent market turmoil, we still see a base-case scenario of
   a market value of ca.3x the capital raised, with the most likely exit in three
   to four years.
 * **Bank capital raises:** Several banks/near banks have raised capital, but what
   may appear a crowded space is not. Few are direct competition, let alone with
   the same business model. B-North’s reasons for raising capital are different.
   There is clearly appetite to fund challenger banks and potential buyers of B-
   North down the line.
 * **Valuation:** Given the growth profile of the company and associated uncertainties,
   any valuation must be treated with extreme caution. In our initiation, we gave
   a range of approaches and sensitivities. Updating these for recent market moves
   still indicates a market value around three times the equity raised.
 * **Risks:** Credit risk is key for any bank. B-North will establish independent
   credit functions, and its technology brings it close to customers interfacing
   with their internal information. It has multiple options to address any loan 
   growth shortfall. The economic cycle is important. The model is yet to be tested,
   and capital raised.
 * **Investment summary:** B-North is still at the pre-revenue stage. Its model 
   should be low-cost and deliver a superior service to customers and intermediaries.
   It has a conservative credit culture and uses state-of-the-art technology, written
   from scratch, to originate, service and manage its business. Funding will be 
   via the deep best-buy retail deposit comparison sites. The potential market is
   huge, profitable and under-served, and major incumbents have selectively become
   uncompetitive.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/wp-content/uploads/2020/03/B-North-report-13-March-2020.pdf)

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