Aldermore Group PLC Investor presentation Full Year Results 2015
A year on from IPO …. Delivered another excellent set of financial results 1 Generating attractive and sustainable returns 2 Strong balance sheet and capital position 3 Benefit from a diversified lending, funding and distribution model 4 Confident of driving continued significant growth 5 1
2015: Another year of strong financial delivery Underlying profit before tax (£m) (1) Underlying profit before tax (1) up by 75% to £99m 99 Net interest margin increased to 3.6% 56 Cost/ income ratio (1) improved by 9% to 51% 2014 2015 Cost of risk of 19bps reflects strong discipline Net interest margin and benign credit environment 3.6% 3.4% Underlying return on equity (1)(2) of 20.6% Net loans up by 28% to £6.1bn 2014 2015 Cost income ratio (%) (1) Origination of £2.6bn; up 10% on prior year 60 71,000 lending customers, up 27% in year 51 Strong capital position 2014 2015 Cost of risk (bps) Fully loaded CRD IV total capital ratio of 15.1% 23 19 Fully loaded CRD IV CET1 ratio of 11.8% 2014 2015 (1) Excludes IPO costs of £4.1m pre-tax (£3.4m post-tax) in 2015 and £6.0m pre-tax (£4.6m post-tax) in 2014 (2) After AT1 coupon payment in April 2015 of £3.5m pre-tax (£2.8m post-tax) 2
Driving continued double digit lending growth in 2015 Net loans to customers (£bn) Asset Finance grew by 29% to £1.3bn Strong origination of £893m; up by 21% +28% Customer numbers up by 30% to c42,000 6.1 SME Commercial Mortgages up by 50% to £0.8bn 1.4 +42% 4.8 Excellent origination of £428m; up by 42% Direct grew by over 200%; now 26% of origination 1.0 2.4 +18% Buy-to-Let grew by 18% to £2.4bn Customers numbers up by 15% to c16,000 2.0 Robust origination of £673m; down 7% 0.8 +50% 0.6 Direct grew by 10% and is now 19% of origination 0.2 -11% 0.2 1.3 +29% Residential Mortgages up by 42% to £1.4bn 1.0 Origination of £582m up by 4% 2014 2015 Asset Finance Invoice Finance 40% increase in customers to c10,000 SME Commercial Mortgages Buy-to-Let Residential Mortgages 3
Significant opportunities for growth in focus markets Lending market in the UK is estimated to be around £530bn Consumer car finance 15% £28bn Mortgages (£268bn) Credit cards Asset Finance (£28bn) Intermediated Direct 70% 30% Broker 12% Direct £5bn Remortgages 2015 market growth (%) £14bn £55bn Soft assets Hard assets £111bn Broker Sales 20% 80% £5bn £9bn Commercial 9% Mortgages Homemovers £48bn £72bn Other £8bn Personal loans 6% £20bn Buy-to-Let £38bn First time buyers £47bn £53bn £20bn 3% Invoice Finance Other consumer finance 0% 2015 market size (£bn) Aldermore’s estimated market share Source: Council of Mortgage Lenders (CML), British Bankers Association (BBA), Finance and Leasing Association (FLA), Asset Based Finance Association (ABFA), DeMontfort University. Aldermore estimates. Other consumer finance includes second charge mortgages, personal loans and credit cards (non-BBA members), retail 4 store and online credit, Point of sale (source: FLA). Invoice Finance figure is based on loan advances as at the end of September 2015. Overdrafts excluded. Mortgage distribution split excludes buy-to-let and commercial mortgages. For illustration purposes only, not to scale.
Aldermore is a diversified, specialist lender …. Customer loans Focused on large, growing customer segments which are under- or poorly served by the wider market Asset Finance 22% 23% Invoice Finance Targeted human underwriting facilitated by modern, legacy-free systems and combined with a rigorous 3% SME Commercial £6.1bn (1) focus on credit risk management Mortgages Buy-to-Let 13% Diversified lending portfolio provides multiple Residential Mortgages avenues to drive continued significant growth 39% Funding base Dynamic online deposit franchise anchors diversified funding base 3% 1% 6% Retail deposits 2% Expanding distribution; leveraging strong intermediary SME deposits relationships as well as growing direct capability Corporate deposits 22% £6.4bn (1) FLS Delivering award-winning customer service RMBS 66% Other wholesale Leveraging operating platform successfully to drive efficiency and innovation (1) As at 31 December 2015 5
Confident of sustained momentum across the business Net loans to customers (£bn) Diversified lending portfolio provides multiple growth £1.3bn levers within our current prudent risk appetite 6.1 £1.4bn Small shares of addressable markets 4.8 £1.3bn Continue to extend distribution reach and mix 3.4 First time buyers Buy-to-Let £33bn £23bn £0.9bn 2.1 Ongoing investment in technology supports customer experience, innovation and broker service 1.2 Proven ability to leverage our specialist underwriting capability into adjacent market segments 2011 2012 2013 2014 2015 6
Asset Finance: a breadth of industry and asset expertise Portfolio split by industry (%) Specialist and experienced credit underwriters remain at the core of our growing business Logistics 18% 18% Manufacturing Modern technology enables the team to focus Construction 2% their time on the key credit issues Plant hire 5% Wholesale and retail trade £1.3bn (1) 13% Pro-active deal maker; able to tackle Financial intermediation 8% complex transactions Agriculture 6% 10% Community activities Utilities 12% 8% Other Industry-leading reputation for expert and Portfolio split by asset type (%) responsive service underpins strong franchise 2% 7% Treat our brokers as an extension of our team Plant & Machinery 6% Commercial Vehicles 34% Consistent decisions provide clarity of appetite 10% Professional Loans £1.3bn (1) Cars - used Credit approvals made in hours and not weeks Cars - new 11% Rapid application to pay-out time IT equipment Other 30% (1) As at 31 December 2015 7
Asset Finance: Clear strategy for delivering continued growth Aldermore Asset Finance net loans (£bn) Pre-eminent Asset Finance lender for UK brokers 1.3 Maintain market-leading share of growing 1.0 broker-distributed market Continued investment and relentless focus on flexible and responsive service Training the next generation of UK brokers 2014 2015 Continued push into soft assets Asset finance market origination by channel (£bn) (1)(2) Deepening relationships with specialist brokers 28.1 25.2 5.0 4.6 Further penetration of sales channel 9.0 8.2 Leverage Dealer Services proposition into key industry segments of agriculture, construction, 14.1 transportation and materials handling 12.3 Target manufacturers with Stocking facility 2014 2015 Direct Sales Broker (1) Source: Finance and Leasing Association (FLA). Total market originations for 2015 excluding high value (deals over £20m). (2) “Sales” finance includes origination where the finance company has an indirect relationship with the customer through the manufacturer, dealer, supplier 8 or distributor of the equipment and includes vendor programmes.
Award-winning, innovative and integrated Mortgages business Comprehensive proposition SME Commercial Mortgages One-stop shop; SME Commercial range spans property development to purchase and refinancing 5% 3% Shop Seamless buy-to-let offering supported by 8% 31% Property development dedicated, expert teams Office 14% £0.8bn Residential mortgages target otherwise under- or Warehouse poorly served prime credit worthy customers Residential Other 17% Modern, legacy-free systems support targeted 22% Industrial Unit manual and dedicated expert underwriting 9% Make speedy and consistent lending decisions Buy-to-Let and Residential Mortgages Able to underwrite creditworthy business that the high street banks can’t 5% 6% 13% 5% 8% 35% Systems also support best-in-class service 8% 21% Portal provides decision in principle in 90 seconds 9% £2.4bn £1.4bn 10% and enables online application tracking by brokers 9% Allow brokers direct access to underwriters 16% 57% 13% 9% 20% 13% Differentiated proposition will continue to deliver significant, profitable and diversified growth Greater London South East Midlands East Anglia North West South West Yorkshire Other £xbn Balance as at 31 December 2015 9
Buy-to-Let remains a significant growth opportunity Trends in UK housing tenure (%) (1) Buy-to-let will remain a key part of the UK market 40 Around 20% of UK households are currently living 39.7 32.7 in privately rented accommodation 30 30.7 30.5 Expected to grow by 1.1m households in 5 years 19.4 20 17.7 17.3 10 12.2 Prudent underwriting approach 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average LTV at origination is c70% Social Rental Private Rental Mortgaged Owned Outright Minimum DSCR of 150%; stress for 2% increase in interest rates plus 1% for voids/ maintenance UK Buy-to-Let market origination by purpose (%) (2) 100% Driving continued growth at attractive margins 80% Expect overall buy-to-let market to remain resilient 60% c70% of our portfolio relates to remortgages 40% 57% 20% Span all landlord types and simple to complex properties so responsive to shifting market dynamics 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Remortgages Purchases Other (1) Source: English housing survey (2) Source: Council of Mortgage Lenders (CML) 10
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