OneSavings Bank prepares push into small business market

Specialist lender OneSavings Bank is to launch savings accounts for small businesses and is considering a move into asset finance as part of plans to expand into underserved sectors.

The bank, which listed on the stock market last June, is aiming to offer accounts for small and medium-sized companies early next year.

Andy Golding, chief executive, said the lender was developing the ability to provide accounts for smaller businesses with a view to paying similar rates offered on their range for retail customers.

"At the moment, we are working on account functionality, to allow businesses to transfer money from their primary account," he said. "But we are not looking to enter the current account market - it's a scale game, they cost a lot of money to run and it's very competitive."

The expansion plans come amid speculation that private equity backer JC Flowers, which owns 58.5 per cent of the bank, may be looking to offload more stock to meet strong demand from shareholders.

Shares in the lender priced at 170p on listing last year near the bottom of the range but last week reached a high of 298p on Friday.

Mr Golding said the bank was also viewing options for entering the asset finance market, including a potential acquisition if the right business and team arose.

Lending to smaller businesses in certain markets such as asset finance was underserved, providing an opportunity for OneSavings, Mr Golding said.

"We can give businesses decisions on loans within three weeks - much faster than the time it takes with incumbent banks, which can be up to six months," he said.

The lender, which reported a high return on equity of 31 per cent last year - a key measure of profitability - aims to sustain growth by expanding within these untapped business sectors, in spite of a number of new "challenger" banks launching into this space.

OakNorth and CivilisedBank are two of the start-up banks to receive banking licences with a focus on lending to small businesses.

Dubbed by its founders as the bank for entrepreneurs, OakNorth aims to lend more than £1bn over the next few years.

The launches come amid regulatory and political efforts to foster more competition in the sector, with the large incumbent banks controlling 85 per cent of business banking.

The Competition and Markets Authority is undertaking an investigation into the lack of competition into the personal current account and business banking market, the outcome of which could help break the stranglehold of the incumbents.

Yet so-called "challengers" and specialist banks still only account for a small proportion of the market.

Aldermore, for example, which floated on the market in March after reporting a doubling of pre-tax profits to £50m in 2014, represents only 3 per cent of the asset finance market and less than 1 per cent of the £44bn commercial mortgage market.

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