Aldermore recommends First Rand offer alongside Q3 results
Aldermore Group
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Challenger bank Aldermore has recommended a bid from South Africa's First Rand bank, while also reporting continued loan growth in the third quarter.
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First Rand on Monday confirmed last month's 313p per share offer, which Aldermore's board said it was now recommending to shareholders, valuing the FTSE 250-listed bank at around £1bn.
"With the backing of their considerable resources and wider capabilities, we will be able to accelerate the delivery of our strategy and further expand the products and services we offer our customers," said Aldermore chief executive Phillip Monks.
Some analysts suggested there was the potential for a bidding war, with Peel Hunt saying the level of the indicative offer could tempt rivals to make a higher bid and Investec saying the shares "have been grotesquely undervalued for the past year" and regarded the indicative offer was "reasonable, certainly not over-generous".
FirstRand has received irrevocable undertakings to support its offer from 25% shareholder AnaCap, the private equity firm that founded the Aldermore, and the bank's directors, together amounting to 26.3% of the shares.
The South African bank, which owns UK motor finance provider MotoNovo, said its current UK retail and business/SME operations will be integrated into Aldermore to form a combined UK business led by Monks.
QUARTERLY RESULTS
Aldermore's net loan climbed to £8.4bn in the first three quarters of the year, up from £8.1m at the end of the first half and £7.5bn this time last year.
This was driven by £2.4bn of new lending and customer deposits up 8% to £7.2bn as the bank reported "continuing traction" in its mortgages retention strategy across both residential and buy-to-let.
Net interest margin remained unchanged from the first half of the year at 3.5%.
Regulatory capital improved to 12.1% from CET1 of 11.8% at the end of the first half and 11.5% at the end of last year.
Monks said the group remained on track to reach the guided range of 10-15% growth in new lending.
"We have increased our support for SMEs, providing the vital financing they need to succeed, and have continued to see strong levels of growth in our buy-to-let portfolio as we capitalise on the trends of increasing professionalisation in the market.
"We continue to remain vigilant to changes in our operating environment with a key focus on driving a robust credit performance. As a result we continue to anticipate our cost of risk in 2017 remaining below our medium term guidance of 25 - 35bps."
Aldermore shares rose 2.5% to 310p by 1030 GMT on Monday.
Investec analyst Ian Gordon said he assumed completion will be achieved on the agreed terms within three to four months.
"We continue to anticipate little likelihood of any counter-bid or 'sweetener' to the existing offer."