The lender is also making a baseline prediction that house prices will fall 2.6 per cent in 2020 with another slight dip of 0.3 per cent in 2021, before recovering by more than three per cent in each of 2022, 2023 and 2024.
Overall, the lender posted a profit before tax of £5.9m in the first six months of 2020, down from £55.6m in the same period of 2019.
It expects coronavirus-related loan losses to reach more than £47m, in addition to its already projected £61.1m loss allowance.
Shawbrook said it had granted a total of 15,900 payment holidays to support customers with 10,800 still in force as at 30 July 2020.
Its property finance loan book, which includes buy-to-let, second charge and other specialist mortgages, grew by £300m during the period to £4.7bn.
However, Shawbrook did not disclose how much new lending it had completed during the period.
It said 6,200 property finance payment holidays had been granted up to 30 July 2020 covering 29 per cent of balances. Some 60 per cent of customers had matured from their first payment holiday with 4,100 still in force at 30 July.
The lender admitted property-related profit before tax has been hit by expected loan losses and slowing originations in the second quarter of 2020, but net operating income was two per cent higher at £72.5m.
“The property finance division had a positive start to the year and while Covid-19 inevitably slowed progress, the business delivered well throughout H1 2020, reflecting the depth of relationships held with our intermediary partners and the commitment and ability of staff to work remotely,” the lender said.
“The seamless move to remote working enabled us to maintain the strong relationships held with our specialist partners and customers, underpinned by a regular communication programme and the delivery of several product and system initiatives including the use of automated valuation models and new online application functionality for payment holiday requests.”
Second charge and BTL
On the residential side it said 2020 started well, “reflecting our renewed focus on the second charge mortgage market”.
“In January 2020, we restructured our sales team to deepen relationships with our existing intermediary partners and to adopt a more proactive approach to new business.
“As a result, in Q1 2020 we saw improved levels of new lending and, although this has since fallen, we have continued to complete new business throughout the period,” it added.
Where buy-to-let (BTL) was concerned, it noted: “We have now laid the foundations for a fully digitalised mortgage journey across all of our products and in H2 2020 we will continue to develop this technology to improve the application process.”
Development finance is included within the business finance division, alongside asset finance, corporate lending and structured finance for SME customers.
Here, 4,300 customer payment holidays were granted up to 30 July 2020, covering 39 per cent of balances – 66 per cent of these customers have matured from their first payment holiday with 2,500 still in force at 30 July.
It noted that with several transactions completed in January 2020, the business exceeded £500m of facilities for the first time, but added that the lockdown had delayed some projects.
“The solid Q1 momentum advanced the business through the second quarter, delivering on commitments made pre-lockdown, despite the practical and logistical challenges created by the crisis,” it said.
“To date our existing development finance portfolio continues to perform well, however, active monitoring suggests some schemes may take longer to complete due to delays caused by the UK lockdown.”
Recovery in new lending
Shawbrook chief financial officer Dylan Minto said that even allowing for the loss adjustments the group was profitable for the half year, with strong liquidity and capital ratios.
“While we have started to see a recovery in loan originations across some of our markets, H2 2020 trading performance will be dependent on the speed of economic recovery as the lockdown restrictions ease,” he said.
“However, the longer-term economic impact of Covid-19 remains unclear and will be tested further when the UK government relief packages are withdrawn and as payment holidays end.”