Steve Pateman

Steve Pateman of Shawbrook Bank

The bank that solves complex funding needs

Shawbrook Bank focuses on providing financial solutions for complicated businesses, and has already funded tens of thousands of small firms. Steve Dyson interviews Steve Pateman, the bank’s chief executive.

When top banker Steve Pateman first came across Shawbrook Bank, he was impressed with how it was helping businesses whose complex needs meant larger banks had stopped serving them. At the time, Patemen was head of UK banking at Santander, but in early 2016 he moved to become Shawbrook chief executive, and he’s very clear on what enticed him to join the challenger bank.

He says: “What I saw at Shawbrook that interested me was a bank that was doing things I’d been doing 15 or 20 years ago but that mainstream banks were no longer doing. And that’s solving complex financial challenges.

“Today’s mainstream banking has become so technically calibrated, using the least amounts of capital to help support the production of the highest amounts of revenue.

“Basically, all high street banks are after the ‘perfect customer’ because that’s how they get to use the least funds for the greatest growth with the lowest risks.

“But the problem with that approach is that it leaves out all those small and medium-sized enterprises whose borrowing requirements are not that simple. And there are loads of really good customers who are being left by the wayside because they simply don’t match high street banks’ modern, low-risk strategies.”

What Pateman saw in Shawbrook was a detailed and bespoke approach to risk management, looking into potentially difficult areas served by complex businesses and solving them with the correct financial packages.

“It’s all about the management of risk rather than playing the capital arbitrage game,” says Pateman. “In short, Shawbrook is paid to provide solutions that other banks are no longer providing, and those are not crowded markets because mainstream banks are all chasing the same safe customers.

“There’s plenty of support for start-ups and large corporates out there, but we’re seeing strong demand from those in the middle – smaller, established, regional and specialist businesses who seem to fall through the cracks.

“They are businesses who might be working in difficult areas, but we can create financial packages that work, which is something we believe the banking industry should be putting money into.”

One example Pateman gives is the work Shawbrook Bank has undertaken to support a group of in vitro-fertilisation (IVF) treatment clinics that were finding it difficult to offer a finance package suitable to support their patients wanting to undergo a course of IVF. Shawbrook’s experts carefully worked with the clinics to produce a financial arrangement that was only triggered if patients’ IVF treatment was a success.

“This was all about the morals and ethics of loaning money, and helping people sensibly manage the costs of IVF treatment,” says Pateman. “It was a dilemma the main high street banks shied away from.

“Through careful and considered collaboration, we helped to create a financial package that is only activated if and when the IVF is successful; and if its unsuccessful the debt is written-off.

“That’s what we’re good at – listening to the story, addressing the problems and coming up with solutions that make the economics work.

“This was too complicated for other banks, but I thought: ‘Why shouldn’t people be able to borrow for IVF?’ and ‘How could we make this work?’ It’s these neglected ‘too difficult to do’ areas that Shawbrook Bank excels at.”

Another example Pateman cites is a Scotch whisky company that needed funds but found it difficult to engage with conventional banking because of the demand for short-term repayments. The whole economics of whisky is based around the age of the product, which means that what’s been produced one year might not be on sale for another 12 years.

“It’s all about looking into the problem and coming up with a solution that’s not crazy,” says Pateman. “We simply sit down, listen and figure out an answer using our experience from many years of banking.

“In this case the conventional finance model doesn’t work because the company was producing far more Scotch than it was selling, but still needed more finance. We had to work on the long-term plans, and were able to fulfil a market need that commoditisation had left behind.”

Another scenario that Pateman describes is the owner of a tugboat in Hull, wanting new funding to help plans for servicing offshore windfarms.  He says: “Six years ago, any bank would have loved to finance such operations. Today, there’s not a business manager in a main high street bank that could do anything for the tugboat owner except open them an account and refer them to a call centre.

Steve Pateman“And there’s not one mainstream call centre that has ‘tugboats’ on their list of products and services, which leaves the business desperately asking: ‘Where do I go?’ That’s when they ask their accountants for advice, and they introduce Shawbrook Bank.

“We’ve got the experts to assess the challenge and to solve such problems. We’re a bank that takes time to understand the needs of our customers and to find the solutions they need.

“It’s what complex businesses need. Mainstream finance is as cheap as chips, but customers that can’t access that need Shawbrook Bank. We grow by providing those solutions for more complicated banking issues that are difficult to understand.
“Our approach is to be seen as a bank that customers go to when they can’t get their needs met elsewhere. After all, if the big banks were still providing credit in these more difficult areas, Shawbrook wouldn’t exist.”

Shawbrook Bank was launched in 2011 as a collection of various finance businesses, and floated on the stock market in 2015. Its profits that year were £49m, a figure that it more than doubled in 2016 when pre-tax adjusted profits reached £104.5m.
The bank is now worth around £840m, with private equity company Pollen Street owning just under 40% of its shares. The bank has already loaned funds to tens of thousands of SMEs across the UK.

Shawbrook Bank’s main offices are in the City of London, with around 100 staff, and in Brentwood, serving the South East, which houses some 500. Another 50-odd staff are spread across current offices in: Glasgow, serving Scotland; Greater Manchester, serving the North West; and Dorking, which serves the Thames Valley.

As it continues to grow, Pateman is keen to build its brand with a new network of business centres in selected locations.
The bank will soon launch new business centres in Edinburgh to help serve Scotland, near Leeds to serve the North East, in Birmingham to serve the Midlands, and near Bristol to serve the South West.

Pateman says: “In the past, Shawbrook built its asset and invoice finance by word-of-mouth and referrals. I felt we needed to move away from being peripatetic by putting down some roots in markets to say: ‘We’re here to stay, we’re not just passing through.’

“We want to work with businesses in communities across the UK, with people on site who know the regions and business sectors. Until now, we’ve been a bank that does not have a branch network, so our business centres will start to promote our direct business operations for the first time.

“This will come on top of what we already offer through introducers, intermediaries and accountants, and through partnerships as varied as retailers, home improvement companies and the likes of Saga and the RAC.

“We’re perfectly happy to work with other distributors to get our product and solutions to the market, and soon we will have offices covering all regions as well.

“We will be targeting niche sectors that will value a superior, bespoke service – particularly where asset classes are highly complex and wouldn’t fit a standard model. That’s what impressed me, and I’m confident that this approach is what will continue to help us grow.”

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For more information on how Shawbrook Bank can help your business grow please contact Kevin Boyd, Managing Director, Scotland. Email: kevin.boyd@shawbrook.co.uk
Tel: 0330 123 1740