City of London Group (COLG) has sold its advice firm Acorn to Oaks Financial Services as it re-focuses the business on its banking arm.
The firm sold Acorn to Oaks back to the firm’s founders for £1.15m, after acquiring it in July 2018 for £1.4m.
Run by Jason and Claire Oakley, the advice firm focuses on SME and landlord insurance products, though it has permissions to advise on investments and pensions as well.
In the financial year ending March 31, 2020 it posted a pre-tax loss of £30,000, and had total assets of £986,000 and net assets of £378,000.
In a statement to the stock exchange at the time of the sale in April, COLG said it had purchased the firm to complement its operations at the time, and sold it as part of a restructuring to focus on its SME banking subsidiary, Recognise.
It now said its plan was to set up a broader financial services business serving the SME sector. "However, following conversations with the regulator, we decided to refocus all of our efforts on Recognise Bank, which is where our current focus remains.”
COLG is also selling Milton Homes, an equity release provider it acquired in 2017, with contracts being exchanged in the next few days.
To aid the restructuring, COLG has announced a capital raise which it hopes will give Recognise Bank full authorisation by the Prudential Regulation Authority.
COLG said yesterday (August 23) that it is raising £18.3m for the bank, £11.4m through a share subscription and a further open offer of £6.9m.
Michael Goldstein, chief executive of COLG, said: "We are very pleased to have completed the final step for the PRA to lift the deposit restrictions for Recognise, a major milestone for both COLG and Recognise.
“Becoming a fully authorised bank has been our primary objective for some time, and will enable us to deliver against our key strategic goals and growth targets."
The lender will enter the commercial lending, SME, bridging, and development finance sectors.
It was created in 2017 and is headed by Metro Bank’s former managing director of commercial banking and mortgages, Jason Oakley.
Recognise was granted authorisation with restrictions by the PRA. Since then, it has launched four lending products and received over £750m in lending enquiries. It has a goal of lending £1.3bn over five years.
Goldstein said: "This latest capital raise and expected sale of Milton Homes will enable us to realise our strategic ambitions for Recognise Bank, namely increasing the size of the loan book with access to funding from depositors through our business and personal saving products.
"This has been our goal for three years, and the sale of Milton Homes will enable the group to streamline its focus on the next stage of Recognise's growth."