Recognise Bank received its banking licence in November last year, having started the application process in 2017. The bank is now undergoing a mobilisation, where the regulator checks to see if the IT platform, outsourcing arrangements, staff, policies and procedures work effectively.
Speaking to Mortgage Solutions, deputy chief executive officer and co-founder Bryce Glover said that the business is still aiming to get its loan book over £200m by the end of its financial year and was weeks away from getting approved to raise deposits.
He said: “The sooner we can get access to deposits the quicker we can make sure that we hit those targets as we go forward.”
He added that it is aiming to take savings from personal customers first and then business customers towards the end of the year.
It currently offers commercial property loans, working capital loans, professional practice loans and bridging loans, with plans to bring out a professional BTL offering by the end of the month.
Professional BTL market
Glover said that professional BTL market was an area that Recognise Bank wanted to “stand out” in, and that despite the competitiveness of the market its “core characteristics” were very promising.
He said: “If you get your product right it is a fairly safe and secure market to go in to. If you are looking at your customer sensibly and carefully and looking at the serviceability you shouldn’t be writing lots of bad debt in that market and it should be very creditworthy.”
He added that the sector had continued to grow during the pandemic and was slated to continue to grow in the foreseeable future, making it a key sector to target.
Glover said that whilst the sector was very competitive, with lots of lenders in the space, Recognise would focus on good rates and offer product flexibility. He added that it was looking at interest-only options.
Bridging market “busy” again
Glover said that the bridging market was now a “busy market again” following some uncertainty during the pandemic where some lenders reduced their appetite.
He said: “My view is that it’s a good market to be in and you’ve got to move very quickly but then the larger banks don’t like that, because they’re not as versatile as they need to be, so there’s a good opportunity for smaller challenger banks to try and get a share of the market.”
He said that as it was a short-term market you had to “keep going all the time” to ensure that you replaced bridging loans that were running off with new loans.
He added that the demand was high and that there were plenty of lenders in the market to satisfy demand but Recognise Bank was “creating opportunities” by going with brokers with a good reputation in the market.
The importance of brokers and regional markets
The bank now has 17 business development managers across the country, covering London and the South, the Midlands and the North.
Earlier today it said it had hired Paul Bagan as its BDM for the North West and Yorkshire regions.
He said that looking ahead over the next couple of years, brokers would be responsible for 70 per cent of its business flow.
Glover explained that whilst customers were increasingly going online to find deals there was still a “degree of nervousness” about securing deals online and customers still wanted the “personal touch” from a broker.
He said: “I think we go on the online to look at what might be available and then they [the businesses] say when I want to engage with that, I’d still rather talk to somebody whether it’s a BDM directly or going through the broker I got the deal from last time.”
He added: “I think it will be a long while yet before everybody goes direct, because good brokers know the customer, the banks and the products. It saves an awful lot of time for busy business people.”
From a regional perspective, he said that the next likely locations for the bank would be Bristol, Milton Keyes and Liverpool. He also added that once it was established, Scotland would be a key area for the bank.
The business currently operates in London, South, Midlands and Manchester. When explaining the logic of its growth he said that they had looked at the economic growth across the country and matched it with concentration of businesses.
He said: “There is a lot of good SME businesses that know how to ride difficult times, build a strategy going forward in the good times and then hunker down when they need to.
“A lot of these regional areas have got lots of good SMEs in a close radius, and ideally we don’t want to be traveling more than 30 miles, because otherwise our BDMs are spending their whole time on the road and that’s not productive for them.”
Glover said that looking ahead he had a “cautious confidence” about the fates of SME businesses. He said that there were some businesses who would struggle to repay loans and the pandemic would have aggravated businesses that were already under strain, but others were now seeing increased opportunities in the market.
Glover said: “We’ve got to be careful over the next six to 12 months because I think there will inevitably be still some more casualties. People who have not yet got back to paying full rent, they can’t get the employees they want and things like the pingdemic don’t help.
“But for us, it’s a good time because we’re taking new customers on and what’s really interesting is quite a lot of the entrepreneurs are now seeing opportunities in the market at the right price. So, they’re seeing value that they can get from businesses or properties, and then come to us and ask if we can help.”