Aldermore generates more loans and profits in first half

The 'challenger' bank, which said it would continue to keep an eye on wider economic effects and had taken a more cautious approach to provisions, increased loan origination 26% to £1.5bn in the first six months of the year, with a net 11% in the loan book to £6.8bn.

Chief executive Philip Monks said new lending increased by more than a quarter compared with the first half of last year as the customer base continues to expand.

Net interest margin held stable at 3.6%, as expected, allowing reported profit before tax to rise 50% to £59m and underlying PBT by 45% to £63m, 5% ahead of consensus expectations. Reported return on equity (RoE) slipped to 16.3% from 16.8%.

Looking at the various customer segments, SME commercial mortgages grew 12% and profit by 55%, buy-to-let grew loans 12% and profit 18%, residential mortgages loans and profit were up 9% and 43%, while asset finance was up 11% and 17%.

As the young bank grows up, Monks and his team continue to improve operating efficiency, with the cost-income ratio further improving to 45% from the 53% reported last year.

Credit quality was strong, with impairments of just £6.4m, while the bank's total capital ratio slipped to 14.0% from the 15.1% six months before and the CET1 capital ratio fell to 11.0% from 11.8%, as expected.

The Bank of England's August rate cut will be fully passed onto both our lending and deposit customers so the impact of the change and a further potential rate reduction are not expected to be material in terms of net interest income.

"We remain optimistic about our future," Monks added. "We are a diversified business and continue to focus on supporting our customers who are under- or poorly served by the wider banking market.

"Building on our strong track record of delivery across our prudently constructed portfolio and with our experienced management team, modern systems and efficient operating platform, we remain confident that we will successfully navigate the challenges ahead as well as take advantage of the opportunities that change may bring."

Analysts at RBC Capital Markets marginally reduced their forecasts and lower the price target for Aldermore's shares by 10% to 175p to reflect a lower ROE.

"Given this and Aldermore's nearly 30% share price increase so far in Q3, we downgrade to 'sector perform'."

Shares in the bank, which had recovered more than half their losses since the Brexit result, were down 7% to 143.2p by lunchtime on Thursday.