Adviser market ‘absolutely critical’ to £250m lending target success

Recognise Bank has confirmed it is on course to launch its commercial buy-to-let proposition in the early part of Q2 and said the intermediary market will be ‘absolutely critical’ to its success.

The newly authorised bank has set out more of its wider strategic plans which include an “ambitious but realistic target” of building a £250m loan book by the end of next financial year.

The lender will setup a series of regional hub offices around the country as the lender looks to connect with borrowers and brokers in those areas.

Its London head office will be joined by regional posts in Manchester, Birmingham and Leeds with further hubs around Bristol, Milton Keynes, the East Midlands and Newcastle to follow.

Recognise, which is part of City of London Group, was granted a banking licence in November and has already launched its bridging and commercial loans offerings as it focuses on the SME sector.

Speaking to Specialist Lending Solutions, CEO Jason Oakley said: “We understand the absolutely critical role of intermediaries in the market.

“Because of the denuding of skills, you can’t walk into a bank branch and have a sensible conversation about a commercial buy-to-let or commercial real estate loan.

“That skill set has disappeared, so the intermediary market has become first port of call.”

The bank has already started working with 40 brokers and on-boarded 16 since November to begin a regular flow of business, but Oakley admits this is barely scratching the surface and will continue to grow contacts at it completes authorisation and opens the hub centres.

Since launching the commercial property product in November Oakley has been overwhelmed with the response.

“We had a certain level of expectation for approaches and we’ve we’ve completely obliterated it,” he said.

“The demand has been significant, the quality of proposed borrower has been better and the ticket size has been bigger than expected – so we’re seeing more significant and established clients.”

Relationship-led business

Recognise is adopting a borrower-led pricing and relationship model, where it will consider deals based primarily on the borrower’s capability, backing and history.

This means it is generally looking for more complex deals or those where it can add most value, rather than focusing on volume lending.

“The principle of our approach is we are sponsor-led, so the borrower means everything to us,” Oakley continued.

“Some lenders may have a sector or a regional focus, but ours is the client and their acumen, their personal net worth, their track record.

“Our bridging deals have incredible diversity – yes residential investment because that’s the most liquid but all lenders are looking at that – we’ll look at quirkier ones and things with wrinkles that need structuring.”

£250m per year

A similar approach is in place for its commercial real estate lending which will consider loans of between £100,000 and £5m with a maximum loan to value (LTV) of 75 per cent for up to £2.5m and 70 per cent for larger loans.

And the buy-to-let proposition will follow the same path when launched.

“It’s going to be a professional buy-to-let product, not volume led. I want to build relationships, so I tend to pick on the more complex end where they have a bigger portfolio and more intricate needs,” Oakley said.

“If it’s four investment properties I’m not going to add value there and they can get cheaper rates elsewhere. I add value where I can look at a portfolio and help restructure it with more bespoke solutions.”

Oakley and his team are not lacking in ambition for the bank and are targeting a £250m loan book by March 2022 and then £250m-£350m of net balance growth per year into the future.

“By year five the aim is for a £1.4bn lending book. You’ll see a bias towards medium term lending with commercial buy-to-let, commercial real estate and professional practice loans,” Oakley concluded.

This article appeared in Mortgage Solutions on 4 February 2021.