February 17, 2015 / 7:36 AM / in 4 years

UPDATE 2-Aldermore doubles profit, challenging big British banks

* FY underlying pretax profit 56 mln stg

* Lending up 42 percent to 4.8 bln stg

* CEO says bank picking up business from ‘big 4’ banks

* Says bank did not hold takeover talks with TSB (Adds chief executive comments)

By Matt Scuffham

LONDON, Feb 17 (Reuters) - British bank Aldermore IPO-ALDE.L said its pretax profit more than doubled in 2014 and its profit margin improved as it increased lending to small firms and homeowners, picking up customers from bigger rivals.

Aldermore, founded in 2009 by former Barclays executive Phillip Monks with backing from private equity firm AnaCap, has established itself among the newcomers trying to challenge Britain’s largest banks.

The bank said on Tuesday its underling pretax profit grew to 56 million pounds ($86 million) in 2014, while its net interest margin, the difference between the rate at which a bank lends and what it pays to savers, expanded by 40 basis points to 3.4 percent.

Aldermore, which does not have branches, focuses on lending to small businesses, as well as on savings products and home loans. It has picked up customers from larger banks which are downsizing and building capital to meet tougher regulations.

Its founder and chief executive officer Monks said Aldermore was taking customers from bigger rivals such as Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC.

“Customers are coming to us in droves ... they’re still finding the big banks very, very difficult to deal with,” Monks told Reuters in an interview.

British regulators and lawmakers are keen for banks such as Aldermore to challenge the dominance of the so-called ‘Big Four’, which provide nine out of every 10 business loans. The country’s competition watchdog is investigating banking services for small businesses.

Aldermore said its net lending to customers grew 42 percent to 4.8 billion pounds last year and said it expected its net lending to grow in line with the current rate in 2015.

Monks said he expected Aldermore’s return on equity (RoE), a measure of profitability, to hit 20 percent by the end of 2016, earlier than an original target of 2017. The bank’s RoE increased by 3 percentage points to 15 percent in 2014.

Last October, Aldermore cancelled a planned stock market listing which would have valued the business at about 800 million pounds, after a fall in stock markets sapped investor interest in new listings.

The bank plans to relaunch its initial public offering but Monks declined to comment on the likely timing. He said a report in The Times newspaper which said that Aldermore had held talks over a takeover by TSB was incorrect.

“I haven’t had any conversations with TSB,” he said.

$1 = 0.6509 pounds Editing by Liisa Tuhkanen

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