Chief executive Scott Maybury was in buoyant mood at the company’s results presentation at the end of last week noting that with a banking license now granted, the company’s ability to accept retail deposits from customers from next summer will be transformational to the business and its profitability. He has a point as the average cost of wholesale funding on Private & Commercial Finance’s existing debt facilities which support £122m of receivables on its balance sheet cost the company around 6 per cent a year, whereas Mr Maybury points out that a three-year retail bank term deposit currently only offers an interest rate of around 1.3 per cent to savers.
Of course, the hefty differential between the two rates will not all be pure profit for Private & Commercial Finance as there are costs involved in running a bank which Mr Maybury calculates at about 100 basis points. Capital expenditure of £2.5m on IT systems to support a ramp up in lending to both consumers and businesses will be needed over the next five years and the bank’s start up costs will be around £1.25m next year, rising to £1.5m in 2018, according to Mr Maybury.