LP-owned bank profits from refinancing flurry

Cambridge & Counties Bank (CCB), jointly owned by Cambridge University Endowment Fund and Cambridgeshire Local Government Pension Fund, is profiting from a surge in refinancing activity by UK-based SMEs. 

The number of businesses seeking to refinance their maturing loans accounted for approximately half of all loans issued and approved by Cambridge & Counties Bank (CCB) between June 2012 and April 2013, figures provided by the bank revealed.

The bank has issued approximately £35 million ($54 million: €41 million) in loans, made up of 80 individual loans to small to mid-sized businesses.

“Refinancing loans accounted for around half of all loans issued,” Gary Wilkinson, chief executive of Cambridge & Counties Bank, told Private Debt Investor. “Many SMEs who traditionally relied on conventional banks are coming to us seeking refinancing solutions.”

CCB was launched in June 2012, after Cambridgeshire Local Government Pension Fund and Trinity Hall, part of the University of Cambridge, witnessed, “an unprecedented opportunity to marry a strong investment promising good returns with support for small businesses at a time when they need it most,” Paul Davis, chairman of Cambridge & Counties Bank, said in a statement.

Davis describes the traditional high street banks as “too pre-occupied with legacy problems,” which he believes is in turn “having a negative impact on their ability to lend”.

Wilkinson argues the banks unique structure – in that it’s owned by two institutions who are investing for the long term – will prevent it being subject to some of “short-term pressures that private equity-owned banks are facing”.

In the UK, alternative lending has become a deep and widely tapped market, according to Wilkinson. “Many SMEs have their hands tied by bigger banks unable or unwilling to lend, and it shows that there needs to be more activity from alternative lenders. We have already lent around £35 million, with a further £35 million approved, and are on course for our book to hit the £100 million mark by the end of this year,” added Wilkinson.

The bank focuses on the “lower risk end of the spectrum,” typically only providing SMEs with loans secured against commercial property. Further, it adopts “a local and personalised relationship approach,” whereby business development managers’ focus primarily on Cambridgeshire, Northamptonshire and Leicestershire-based firms.

“This allows us to maintain a balanced growth across geographies, market sectors and property types, avoiding inappropriate concentration risk,” Wilkinson added.

Nick Clarke, Cambridgeshire County Council leader and non-executive director of Cambridge & Counties Bank, believes the bank will not only strengthen the pension funds’ returns, but will also “give local SMEs a real boost and the chance to grow, at a time when it’s proving hard to secure funding even for viable business propositions”.