Shawbrook Group has reported issues with its asset finance lending and the departure of its chief financial officer (CFO).
As a result of irregularities in one office in the asset finance part of its business finance division, the group expects to book an additional impairment charge of around £9 million in Q2 2016 on impacted facilities of £14.7 million.
Shares in Shawbrook were down 27% in early trading.
The irregularities, which Shawbrook says have now been rectified, were the result of a number of loans being underwritten in its asset finance business that did not meet the business’s lending criteria.
This control breach was identified by the group’s upgraded risk management systems and controls. After an investigation, the company says it is confident that the upgraded risk management systems and controls would prevent the recurrence of such irregularities in the future.
Shawbrook said trading has been in line with guidance given at the Investor Day, 5 May 2016, with Q2 2016 originations flat on Q1 2016 and up c.35% on Q2 2015.
Steve Pateman (pictured), Shawbrook’s CEO, said: “While this is extremely disappointing, the irregularities were identified by the upgraded risk management systems and controls we implemented earlier this year. They have been investigated thoroughly and appropriate action has been taken.
“Since the year end we have simplified our business model into three divisions with clear management lines, implemented an upgraded risk management framework and are confident that our disciplined approach to risk is fully embedded across the business.”
CFO Tom Wood will leave the company on 30 June. He joined Shawbrook in 2012.
Dylan Minto, who is currently director of strategy, will become interim CFO. He joined Shawbrook in September 2013 and played a significant role in the IPO preparations and the development of the 2020 strategy evolution.
Pateman said: “Shawbrook has come a long way in a short period and Tom has played an important part in the development of the bank, including helping it to achieve a successful IPO. He leaves with our appreciation and best wishes for the future.
“Dylan has played a key management role during and since the IPO and has been integral to the development of our 2020 strategy. He has extensive finance experience and first-hand knowledge of the UK banking and finance sector and will have the full support of the board, the executive management team and a strong finance function.”
Wood said: “After a hugely enjoyable four years with Shawbrook, and the immense privilege of leading the group for a period of time post the IPO, I have decided that after a very intense couple of years I need to make more time for my family. I have seen little of them in the past two years.
“I am confident that the next steps in the Shawbrook journey under the leadership of Steve, the board and the senior team will be as successful as the first years of the group.”
Pateman added: “Whilst the additional impairment charge arising from these irregularities will impact pre-tax profit for the year, performance is otherwise in line with our expectations. Our specialist and diversified market positioning provides a significant advantage as the group continues to grow strongly and deliver superior returns through a strong balance sheet, a stable funding platform and a clearly articulated strategy.”
Shawbrook will announce its results for six months to 30th June 2016 on 27th July 2016.