CYBG launches lending venture
YORKSHIRE BANK’S owner CYBG has started a joint venture with Salary Finance, a privately owned lender that provides consumer loans which are repaid via salary sacrifice.
The two companies will invest £500,000 each, with Salary Finance providing the platform and technology while CYBG will provide an initial £100m revolving funding line.
CYBG said the deal would add an innovative channel to its personal lending business.
Salary Finance is a FinTech platform that connects to the payroll of participating employers to provide financial well being benefits to employees, including salary-deducted savings, and loans, as well as financial education.
Salary Finance will provide the joint venture with all of the services required for its business, including loan origination and management, marketing, cash management and other corporate services.
CYBG said the joint venture is complementary to its existing product plans and will provide an opportunity to develop its unsecured loan business within risk appetite.
David Duffy, chief executive of CYBG, said: “We’re delighted to be expanding our lending proposition into new areas through this new joint venture with Salary Finance.
“We have been hugely impressed by the Salary Finance team and the clear social purpose underpinning everything they do and we are delighted to be able to support the growth of this innovative platform.
“The joint venture adds to CYBG’s growing range of partnerships – with over 40 per cent of UK consumers regularly using FinTech services, there is clear value in partnering with innovative new providers like Salary Finance.”
Analyst Gary Greenwood at Shore Capital said: “We understand that salary finance is one of the fastest growing and high margin areas of lending and so this provides an attractive but relatively small area of diversification for the group.
“We leave our forecasts unchanged and continue to see fair value at 305p – a 58 per cent upside.”
CYBG and Salary Finance will each acquire a 50 per cent stake in the joint venture, in return for an initial cash consideration of £500,000 each. CYBG will provide a six-month rolling credit facility to the joint venture, subject to ongoing fulfilment of its business plan.
The debt funding provided by CYBG under the credit facility will be for an initial total commitment of £100m and may increase, subject to approval of the joint venture’s total funding requirement. Last week CYBG reported a rise in first quarter lending, but warned that market conditions remain uncertain while the UK awaits the outcome of the Brexit negotiations.
The group said the UK political situation remains “highly uncertain” and the potential impact on the UK economy is unclear, although it is focused on unlocking the opportunities from the Virgin Money acquisition.
CYBG, which became Britain’s sixth largest bank after buying Virgin Money last year, took an exceptional charge of £161m in the quarter relating to the acquisition and forecast £100m more in costs for the rest of the year.
The joint venture adds to CYBG’s growing range of partnerships.
David Duffy, chief executive of CYBG