Ian Cowie

Shawbrook sets aside £45.8m for potential Covid-19 loan impairments

Shawbrook Bank has confirmed it has set aside £45.8m of provisions to provide for potential future loan impairments caused by Covid-19.

In its half-year financial results for the period ending 30th June 2020, the specialist bank reported it had also granted a total of 15,900 payment holidays to support its customers through the pandemic, of which 10,800 remained in force at 30th July 2020. 

As a result of such provisions, the bank’s profitability was impacted with a reduction in profit before tax by 89% to £5.9m.

Despite the challenging market conditions, Shawbrook has increased its retail savings deposit base by 25% to £7.6bn. 

During the period, Shawbrook also completed a £75m Tier 2 refinancing to further optimise its capital structure. 

“Prior to Covid-19, the group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base,” commented Ian Cowie, CEO at Shawbrook (pictured above).

“To further optimise the group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.

“We have also maintained our active position in the UK savings market. 

“However, the longer-term economic impacts of the pandemic remain hard to predict and, as a result, we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8m and on loan commitments of £1.5m.

“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”

Throughout Covid-19, the bank maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.

“Since the outbreak of Covid-19, our focus has remained on supporting our staff, customers and partners while, at the same time, safeguarding the long-term sustainability of our business.”

Shawbrook has also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering. 

“Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s specialist SME lender of choice. 

“As well as the ongoing deployment of targeted digital solutions across the property, consumer lending and savings businesses, our investment in the development of a new growth platform in our business finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.

“Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to … our specialist sectors.

"Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”

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