By Rachel Williams
Britannic has made its first foray into the mortgage market through the purchase of a 60% stake in flexible mortgage specialists, First Active.
Commenting on the £57m deal, Brian Shaw, Britannic’s chief executive, said that the purchase would take the company a step closer to becoming a modern financial services group. He said: “I expect there to be significant opportunities for distribution both of First Active Financial’s products and of Britannic’s products through First Active Financial.”
Natasha Plackett, public relations executive at First Active, said that Britannic’s investment in the lender will become instrumental in its future growth and development. “This means we will be able to capitalise on our role in the flexible market and use our funds to introduce new products and services,” she said.
She added that this may in time lead to diversification into new areas.
Yet while the stake in First Active complements Britannic’s existing product range, the two companies will operate separately, with no cross-selling. Plackett said: “We are a non-PIA regulated company and we can guarantee that we will not be selling any life, pension or investment products.”
Ray Boulger, technical manager at John Charcol, said that Britannic’s acquisition should have a positive impact on First Active as the new parent is likely to exercise less control on the lender than First Active Plc, the Irish Bank, which does not operate in the same niche as its UK-based subsidiary.
First Active entered the market with the first current account mortgage in 1997, and was quickly followed by Virgin’s current account offering. Competition has increased over the last year with the Woolwich and Yorkshire Bank entering the market, and the imminent entrance of IF.
Boulger said: “First Active will be able to respond better to competition. Britannic will allow the existing management to manage the business without the constraints of its current parent company.”
But Plackett said that while Britannic had recognised the specialist knowledge First Active has in the flexible market and is leaving the existing management to run the company, the true difference the change in Britannic’s parentage brings is capital investment. “First Active Plc has not allowed us to develop in this way because the investment has not been there,” she said.
Cormac McCarthy, chief executive at First Active Plc, agreed that this purchase will help secure the future success of its subsidiary. He said: “The involvement of Britannic at this juncture in First Active Financial’s development secures the capital investment, product diversity and customer access necessary to fulfil its potential. The structure of the transaction ensures that we shall be able to retain a significant stake in the value of the business as it grows, as well as safeguarding our income and investment.”