# Bank North: Jam today

- Link: https://www.directorstalkinterviews.com/bank-north-jam-today/4121067801
- Published: 2022-06-08T07:30:52+01:00
- Author: Amilia Stone

With Bank North having obtained its banking licence and progressing through its 
mobilisation period, this report updates investors on its rapid lending rollout –
currently running better than plan in volumes, margins and loan to value (LTV). 
Further progress has been made, with recruitment, systems testing (including the
savings product) and the risk management framework all moving the group forward 
out of its mobilisation period. The Series B capital raise is continuing, noting
how some financials have been adversely affected by the Ukrainian crisis, while 
the valuations of others have risen. In this note, we highlight how Bank North’s
characteristics are closest to those of the risers.

 * **Lending progress:** Applications to date have exceeded £200m, of which ca.£
   120m meet Bank North’s current criteria and £50m of which are currently in active,
   advanced stages. New applications are running at ca.£10m per week. Margins are
   ca.45bps ahead of, and LTVs are 5pps better than, expectations.
 * **More like valuation risers:** As a deposit-taker, Bank North should benefit
   from rising interest rates. In our note on Arbuthnot Banking Group, published
   on 7 April 2022, we noted how profits there could quadruple because of this factor.
   With no back book, Bank North is not facing rising impairments, but is benefiting
   from rising loan spreads.
 * **Valuation:** Given the range of outcomes, any valuation must be treated with
   caution. We provide a range of approaches that, on average, indicate Bank North’s
   value in 2029 could be treble the equity raised. The value creation, like our
   forecasts, was pushed back by around 18 months by the pandemic.
 * **Risks:** Credit risk is key for any bank. Bank North has independent credit
   functions, but some are geographically close to the borrower. The model is yet
   to be tested, but it has many options to address any loan growth shortfall. Failure
   to raise sufficient equity would see a dramatic change in the business model.
 * **Investment summary:** Bank North’s model should be low-cost and deliver a superior
   service to customers and intermediaries in chosen, niche markets. It has a conservative
   credit culture and uses heavily bespoke state-of-the-art technology to originate,
   service and manage its business. Funding will be mainly via the deep, retail 
   deposit market. The potential market is huge, profitable and under-served, and
   incumbents have become uncompetitive.

[DOWNLOAD THE FULL REPORT](https://hardmanandco.com/research/corporate-research/jam-today/?dm_i=49CL,1C045,RIBDG,65SGF,1#report-download)

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