First Brexit, then Covid-19 has made boss Mark Harris feel at times as if he’s “driving with brakes on,” he said.
The mortgage, insurance and wealth management brokerage separated from global real estate corporate Savills Plc a decade ago, when it rebranded from Savills Private Finance. Investor Cabot Capital bought a majority stake seven years later, in 2018, and specialist lender Lendco was born.
Simon Knight, former boss of US lender GMAC, and UK broker John Charcol, was named chief executive of the new lender.
The two men both boast long careers in the mortgage market. “We’ve known each other for 26 years. I had more hair, fewer wrinkles,” Harris (pictured, above) said.
“Simon was a business sales director for lenders and I was an up-and-coming broker. I was open to new ideas, new lenders, and used some of Simon’s products,” he said.
Knight (pictured, below) said: “It’s a small industry. When you get to a certain age, you’ve met most people. Certainly we go back to the 1990s.”
With those deep contacts as backdrop, the lender launched “on a friends and family basis,” targeting experienced buy to let landlords, Knight said.
“We have both been around a while, so we know a few people. That’s how we started out — let’s make sure our unique selling point (USP) of manual servicing and underwriting can be sustainable,” he said.
“Everyone says, ‘our USP is service,’ or ‘our USP is underwriting,’ but actually, we wanted to really deliver on that, and we started with a handful of brokers and added as we’ve gone along.
“A lot of it has been word-of-mouth, a lot of people have heard about us, we have a very, very good repeat business level from brokers – always a great sign – and we’re at over half a billion of lending in 18 months,” Knight said.
Stop-start path to securitisation
Knight said: “We originally planned to come to market in Q1 last year. Then of course the pandemic hit, so we put everything on hold.
“In October we looked at it again, but you had the US election and a second lockdown.
“We decided to wait until the New Year, and we came to market on 2nd January, £300m securitised and more than four times oversubscribed. We were thrilled. Really, really really pleased,” said Knight.
Proving naysayers wrong
The strategy of the lender to fill unserviced gaps in the market has proved sound, Harris added.
He said: “People said there was no appetite for a lender than can fill gaps, because there are no gaps. But we were convinced that actually there are gaps to fill.”
Lendco’s approach of tailored underwriting had paid off too, Knight said. “You’d be surprised how many cases require a bit of joined-up thinking. There’s a good credit there, it just might not tick all the boxes first hand.
“It’s easier to say, ‘no, we want the vanilla stuff.’ Lendco doesn’t do adverse, or really high loan to value lending. It takes the time to get under the skin of a deal and to offer a solution to a borrower.
“That is something we want to retain at all costs,” Knight said.
The lender has completed £550m of lending since launch in October 2018 to end of March 2021, with more than £1bn of applications. And in Q1 2021, more than £90m completions.
It has seen zero arrears.
In the first year of trading, it achieved half a per cent market share according to UK Finance data.
“The focus will continue on buy to let and bridging for the next 18 months, and other asset classes may follow later,” said Knight.
“We are growing our distribution. Every week we add brokers to our panel. And that is helping us maintain that growth. That’s something you’ll see a bit more of,” he said.
It will also “continue with wholesale funding and look at other opportunities on the funding side,” Knight added.
In the relationship between SPF Private Clients and Lendco, normal rules apply.
Harris is chief executive of the group, covering SPF Private Clients and Lendco, and his day-to-day role is leading the brokerage. He said: “We as a business distribute approximately £3bn of debt yearly. We gave Lendco £60m, so two per cent of our distribution.
“They are a key strategic partner on the broking side of the business, but they have to deliver on rate, price, service, criteria,” he said.
Harris’s focus now is on lifting the pressure off those brakes that have been felt on the broker side of the business, particularly with the clock ticking on the private equity deal.
“Private equity money doesn’t come into businesses and stay there forever. Everybody knows that. We are three years in to our cycle with Cabot Capital,” Harris said.
“I would expect that in the next three or four years we will do another transaction.
“Therefore the next couple of years are about fulfilling some of the potential we have stored in the business, that normal market conditions will allow us to enjoy.
“We just hired a load of people. How do you train? How do you get banter going? How do you get people to understand values and work ethic, and learn from more experienced colleagues?
The hope is for “an uninterrupted remainder of the year,” and “a return to normality. Putting a suit on. Going to work,” Harris said.