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Charter Court Financial Services in £500m IPO

by: Chris Menon
  • 05/09/2017
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Charter Court Financial Services in £500m IPO
Charter Court Financial Services Group has announced its intention to go ahead with an initial public offering (IPO) by early October on the main market of the London Stock Exchange.

It will float at least 40% of the banking group in a move expected to value the company at more than £500m.

Established in 2008, Charter Court is one of the leading specialist lenders serving the UK residential mortgage market and operates through its three core brands: Precise Mortgages, its property lending business, Charter Savings Bank, its online retail savings bank and Exact Mortgage Experts.

The IPO and listing are intended to position the group for its next stage of development, including further raising its profile, assisting in retaining and incentivising employees and providing it with a platform for future growth.

The IPO will comprise a small issue of new shares by the company to raise £20m in capital as well as the sale of a portion of the company’s existing shares held by its major shareholders, Elliott International and Elliott Associates and certain members of the Charter Court Financial Services management in aggregate, to achieve a free float of at least 40 per cent.

The shares will be offered in the IPO to institutional and other professional investors in the UK and internationally.

Alan Cleary, managing director of Precise Mortgages said: “We see an exciting future ahead for Charter Court as a specialist lender, purpose-built by the management team from the ground up for growth in our specialist mortgage markets as they continue to professionalise and increase in complexity. We are well positioned to take advantage of this trend.” 

Financials

Charter Court is a leading specialist lender in the UK in its core buy-to-let, specialist residential, second charge and bridging markets, based on volume of mortgages generated in 2016. Its £4.4bn net mortgage loan book as at 30 June 2017 has grown at a compound annual growth rate of 92% since 31 December 2014, substantially all organically through its network of more than 17,000 group-registered intermediaries.

It generated £2.5bn of mortgage originations in 2016, up 55% against 2015 and originated £1.3bn in the first six months of 2017, up more than 10% against the first six months of 2016. 

Charter Court Financial Services recorded a cost of risk of just 0.4 bps for the first six months of 2017 while its cost:income ratio for the same period was 34.6%, improving from 45.9% for the full year 2016. The net interest margin rose to 3.18% for the first six months of 2017, up from 3.03% for the full year 2016 as profit before tax for the first six months of 2017 increased to £59.3m from £20.2m year-on-year.

It aims to maintain net loan growth of at least 20% per annum in the medium term and maintaining its cost of risk through the economic cycle. 

The group also intends to adopt a dividend pay-out ratio to reflect the growth profile of the business and is currently targeting a dividend pay-out ratio of at least 15% of the profit for the year, with the aim of increasing the pay-out ratio over time. It intends to commence dividend payments with an interim dividend in for the first half of 2018, which will be payable in the second half of 2018.

Shawbrook

Shawbrook  Group floated on the London Stock Exchange back in April 2015, raising £90m to support its capital position and growth plans. It was subsequently taken private in July this year, bought for £868m by a consortium led by BC Partners and Pollen Street Capital.

Charter Court Financial Services has been rumoured to have been planning a float since a planned £400m auction failed to go ahead last year .

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