Manx Financial Group plc (LON:MFX) Chief Executive Officer Douglas Grant caught up with DirectorsTalk to discuss third-quarter progress, new lending products, structured finance, Payment Assist, business consolidation, and AI strategy.
Q1: Douglas, there’s plenty to cover in today’s update. Just to begin with, how would you summarise the progress Manx Financial has made during the third quarter?
A1: We’ve made a lot of progress and big strides in a lot of areas and a lot of this is reaping rewards now. You can see that in some of the stats that came through the financial performance but most of it is laying the ground for the future rewards in ‘27 and ‘28.
As I’ve always said, we’re not a short-term business, we’re constantly looking forward, looking at opportunities, and watching the market, making sure we position ourselves correctly and safely in this developing sector that we’re in.
Q2: Now, the Group delivered a quarter-on-quarter increase in net interest income to 10.3 million, alongside an improved capital ratio and strong liquidity. What were the main drivers to that performance?
A2: The financial performance is really driven by our products. I’ve said previously on this programme that we have the right products for the right market at the right time. The cost of living crisis has been going on for a few years, it’s no surprise to anyone that it’s been exacerbated by recent world events and the UK, as we know, is not immune from it.
It’s all about having the right products for the customer’s need in these markets. At the moment, it’s about short-term products. It’s about helping people get over the bumps in the road that were unexpected expenditure for them. Whether it’s our buy-now-pay-later products, our premium finance products, our bridging products, it’s all about short-term lending. Hopefully, we’ll be able to talk about the overdraft product, which again is a short-term lending product.
So, it’s about having products that the customer needs and desires at the point in time when we’ve got them. So, that’s the first thing.
On the second point, having two banking licences, the one in the Isle of Man, which is the same Class 1 banking licence as HSBC, Barclays, etc., supported by the one in the UK, it gives us a great opportunity to access liquidity and indeed to play one jurisdiction off the other in terms of minimising the cost of raising that liquidity.
So, we’ve got great access to liquidity at a good rate, and we’ve got great distribution because we’ve got the right products for this market.
Q3: So, let’s talk about that overdraft product that you mentioned just, Conister Halo, it’s expected in the first quarter of 2027. What can you tell us about the opportunity and the work taking place ahead of the launch?
A3: The market research we’ve done is showing that what the larger banks are doing is what larger banks are always doing in this type of market; they quietly pull the availability of credit away from customers, whether that’s individuals like yourself or me or small businesses.
So, what this product does, it fills that gap and it’s agnostic as to who you bank with.
It’s a lovely little product. It’s taken longer to develop than what ourselves at Fiinu had originally hoped. Strangely enough, next week we should have it into UAT. If that’s delivered in time, then I’m still hopeful that we’ll have it up and running in Q1.
The truth is, I’m not going to rush this product to the market, it’s got to be 100% right. It’s a digital product. It should have zero human intervention unless the customer wants a human touch somewhere in it.
So, to have that level of confidence in a product, it has to be tested to the nth degree and plus, the economic environment that we’re in, it’s not going away any time soon.
So, I won’t rush the product to market. We’ll get it to market and it’s another short-term lending product. I’m pretty confident that it will be a success when we launch it.
Q4: Structured finance appears to be developing into an increasingly important part of Conister Bank with more than $313 million of documented facilities and a pipeline exceeding $100 million. How significant could this business become for the Group?
A4: I’ve presented in the past that the opportunity for Conister Bank is always in the UK and in the UK, there’s something like 3,000 non-bank lenders. So, those non-bank lenders get all their money from high net worth or from other banks. That is only 350 licensed banks in the UK and probably only half of that number are lenders, the others are private banks. So, the universe of people who lend to lenders is actually very small.
We’ve been successfully accessing that market through our structured finance products and the structured finance team for a number of years and we’re now at a position where we have got a great pipeline, we’ve got great exposure, but more importantly than anything, it’s not about lending for lending’s sake, it’s about getting that money back.
This structured finance portfolio has zero arrears and zero provisions. So, it’s a really good space to be lending, a good product to be lending through at this point in the cycle as well. It complements the short-term lending that we’ve got lined up.
Q5: Now, you’ve started consolidating three businesses within Manx Ventures into Triskel Finance. With the combined entity expected to deliver a one million pound improvement in profit before tax for 2028, what is the strategic rationale behind the new structure?
A5: Those three businesses were pretty small, and they formed the perfect link, but they were small. One was a funder, one was a lender and one was a collections business. So, the problem with having three small businesses is it doesn’t take much volatility to tip it one way or the other.
By grouping the three together, not only are we bringing together a better proposition for the lending market, but we’re also creating some capacity to absorb loss. It also allowed us to remove duplicate overheads out of the businesses. So, obviously, that’s a great thing to start with and it’s given us the opportunity to refocus the business.
I’m really pleased with the young Managing Director that we brought in to manage it.
Q6: Turning to Payment Assist, the Group is planning further investment and is considering a potential minority IPO following the 2028 financial year. How do you see the business developing, particularly with the consumer credit permissions expected by the end of the year?
A6: We have a scalable platform in Payment Assist, and we’ve been working hard all this year on ensuring the collection side is scalable because it’s got great opportunity for distribution. Pretty much like the Fiinu product, the more we can take the human element out of it, the more we can scale that business.
The distribution side, we could easily double it and so we are going to go through that process of growing it and that’s where the Group is going to be investing.
In terms of the minority IPO post-2028 results, if the market conditions are right and the business has performed as it should be performing, then we’d like to do that transaction and return some capital back to the shareholders.
The third point of your question regarding the Irish licence. Hopefully that licence will come through. The strategic value of that licence is Ireland doesn’t have the same level of competition that we’ve seen in the UK in the buy-now-pay-later space.
Also, once you’ve got a consumer credit licence in Ireland, that licence allows you to translate into all the EU countries, with the only difference being that you’ve got to deal with each different country’s consumer duty restrictions.
So, it’s a safe and low-risk access into the EU and it also gives us access into some distribution that we’re not currently availing ourselves of.
Q7: Finally, the Group’s AI programme, it’s progressing ahead of schedule while several other workstreams are approaching important milestones now. What should investors be looking out for from Manx Financial over the remainder of 2026 and into 2027?
A7: We did a good presentation on our AI strategy at the AGM and what we’ve done is we’ve started to deliver ahead of that. The AI strategy, it’s two or threefold.
First of all, the governance around it is very intense and we’re deploying very much the human-in-the-loop type scenario. What we’ve already achieved is the ability to automate a lot of processes through the use of AI tools to take a lot of overhead out of the business in terms of just the workload.
What that does is it means the workload’s getting done in a very compliant way and it’s reducing the number of incidents that we’re seeing in the businesses and it’s reducing the amount of labour that we need in the business. Indeed, we’re starting to see a reduction in our headcount generated by the introduction of AI.
The AI programme isn’t just about delivering those income statement benefits straight away. It’s also about reducing our capital expenditure programme going forward as we enhance our deposit lending systems.
AI has allowed us to, well, it allows anybody, it demystifies coding, and it allows subject matter experts to sit with our AI coder and create a new system incredibly quickly.
Indeed, we’ll be announcing something in the coming week or so, which is developed in the space of a few weeks, which will be exciting news for the Group.
