Shawbrook unearths 'irregularities' in asset finance lending

Challenger bank Shawbrook Group, having seen its shares fall by a precipitous 45% of their value in two days following the Brexit vote is facing a third day's losses after revealing it will take a £9m impairment charge after finding "irregularities" in loans made by its asset finance department.

Shawbrook said a control breach, which it said had since been rectified after a thorough investigation, was "the result of a number of loans being underwritten in our asset finance business that did not meet the business's strict lending criteria".

The problems were identified after the group upgraded its risk management systems and controls earlier in 2016 and Shawbrook is confident these new systems and controls will prevent any such irregularities recurring.

"While this is extremely disappointing, the irregularities were identified by the upgraded risk management systems and controls we implemented earlier this year," said chief executive Steve Pateman.

"They have been investigated thoroughly and appropriate action has been taken.

"Since the year end we have simplified our business model into three divisions with clear management lines, implemented an upgraded risk management framework and are confident that our disciplined approach to risk is fully embedded across the business."

Asset finance is a stream withing the bank's business finance division, where management said interim results on 27 July will show an additional impairment charge will be booked in the second quarter on £14.7m of impacted facilities.

Shawbrook said that, other than that, trading has been in line with guidance given in early May, with second-quarter loan originations flat on the first and up around 35% the second quarter last year.

Pateman said the bank's performance was otherwise in line with board expectations.

"Our specialist and diversified market positioning provides a significant advantage as the group continues to grow strongly and deliver superior returns through a strong balance sheet, a stable funding platform and a clearly articulated strategy."