Specialist Finance Newsletter, October 2018

The last year has seen the specialist finance sector continue to thrive, with more than £5bn of M&A activity. Non-bank specialist lenders dominated the activity by volume, accounting for 19 deals out of 34, driven by high levels of confidence in wholesale funding and the increasing scale of non-bank players. Growth investment increased in terms of both numbers and scale during the period with the average deal value rising to £55m (and three companies, OakNorth Bank, Neyber and Atom Bank, raising over £100m each).

Nick Field, Director at Arrowpoint Advisory said: “The growth and returns reported by quoted specialist lenders continue to demonstrate the attraction of differentiated business models. Despite news headlines regarding pressure on pricing, credit quality, and rising base rates, lenders in specialist verticals have generally continued to report robust interest margins and impairment performance. Supportive wholesale funding markets have resulted in particularly strong performance by non-bank lenders, whose average returns on equity and quoted valuations now exceed those of specialist banks.”

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