Pressure from the UK motor finance mis-selling fallout is reshaping options for lenders with exposure to the market. Lloyds Banking Group is exploring a possible takeover of Aldermore as FirstRand seeks to sell its British challenger bank business.
Highlights
- Lloyds is considering a bid for Aldermore to gain small business lending and project finance capabilities, though a formal offer is not certain.
- FirstRand plans to exit Aldermore due to the UK motor finance redress scheme, raising provisions for mis-sold motor loans to 750 million pounds ($994 million).
- Potential buyers, including Lloyds and Shawbrook, may seek indemnity against compensation liabilities amid ongoing uncertainty over the Financial Conduct Authority's redress programme.
Potential deal and sale backdrop
As first reported by Sky News, Lloyds is examining Aldermore for its small business lending and project finance capabilities, although it is not certain to move ahead with a formal bid.FirstRand said in April that it planned to exit Aldermore, pointing to a costly and "deeply flawed" UK motor finance redress scheme. The South African bank also raised provisions for mis-sold motor loans to 750 million pounds, equivalent to about $994 million.
Sector risk and buyer considerations
Sky News said any buyer is likely to seek an indemnity against further compensation liabilities because uncertainty remains over the timing and scope of the UK Financial Conduct Authority's redress programme.Shawbrook is also examining a combination with Aldermore, according to the report. Reuters says it cannot immediately verify the report, and Lloyds and Aldermore do not immediately respond to requests for comment.
In our earlier article on Barclays’ partnership with Earth Capital Nexus, we highlighted how the bank paired its nature-based risk assessment push with a £500 million share buyback and leadership updates. We also noted that while the technical picture looked strongly bullish, multiple overbought indicators were flashing, raising the risk of volatility and mean reversion despite the positive corporate news flow.
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