Aldermore Group’s chief executive has admitted that banking surcharges and restrictions on buy-to-let tax relief both have the potential to impact future returns, as first half underlying profit before tax rose by 109 per cent to £44m.
The recently listed bank’s profits before tax were also up by 112 per cent to £40m during the first six month of this year, compared with £19m during the same period last year.
This was backed, in part, by residential mortgages increasing by £365m or 14 per cent to £2.9bn, from £2.6bn at the end of last year.
However, chief executive Phillip Monks, admitted that along with the rest of the banking sector, they face a “changing regulatory and legislative environment”.
He cited the summer Budget introduction of an 8 per cent surcharge on UK banking profits above £25m, effective from 1 January 2016, “which will increase our corporate tax rate and impact returns”.
Mr Monks promised to mitigate the impact on returns to the extent possible and remained committed to generating growth and maintaining a disciplined approach to risk management.
The summer Budget also introduced plans to restrict relief on mortgage interest for individual buy-to-let landlords to the basic rate of income tax, to be applied from April 2017 and phased in over four years.
“Although it is too early to be completely definitive, we do not believe that this will have a significant impact on the economics of investing in, or demand for, buy-to-let properties,” Mr Monks stated, adding that a demographic shift means many households are expected to be renting within the private sector, which should generate further growth in the buy-to-let sector.
“As expected, we are seeing some signs of increased competition with a few new entrants in asset and invoice finance and mortgage lenders exhibiting a greater focus on buy-to-let,” read the results.
“We see this less in owner-occupied residential mortgages where we continue to target prime credit quality customers who fall outside of the ‘cookie-cutter’ approach adopted by some larger banks.”
Continued investment in technology to improve our brokers’ experience is on differentiating factor, with the recent launch of lead-generation functionality in invoice finance, a new buy-to-let website hub and updated sites for mobile and tablet visitors, which together now represent close to half of all visitors to the mortgages site.
“This approach is working and, as described below, we are holding gross margins broadly stable while remaining on track to achieve our target of growth in net lending of around £1.4bn for 2015.”
Aldermore stated that it maintained market share in residential mortgages, while in commercial mortgages, demand for property development finance continues to grow with planning applications and consents now at their highest level since 2007.
New lending through the residential mortgages division was up by 12 per cent to £536m - from £480m in the first half last year - with a fairly even spread between owner-occupied and buy-to-let mortgages.
peter.walker@ft.com
