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Shawbrook is a project borne out of the ashes of RBS. Funding for the project came from Pollen Street Capital, formerly RBS Equity Finance. Chairing the Board is George Mathewson, the legendary former CEO/Chairman of RBS. Once we get past this though, I think we have a reasonable business with a fair amount of upside at the current price.
The most attractive element here is growth. The business is conservatively funded so has a lot of room left to grow on the current funding base. Shawbrook is also more diversified than competitors, although most growth has come from Commercial Mortgages. The main risk here is funding difficulties when rates rise, this is a sector-wide issue though and I think Shawbrook’s diversification and high net interest margin leaves it less exposed than competitors. The valuation is demanding but reasonable and management should be able to justify this multiple through growth.
Shawbrook (LON:SHAW) – [email protected] 327p
Pros: Well-diversified, high net interest margin. Conservatively funded, room to grow on current funding base. High quality Asset Finance business.
Cons: Demanding valuation, we aren’t priced in for an economic downturn. Exposed to volatility in funding market which seems likely when interest rates move.
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