OakNorth has suffered its first two defaults, ending a remarkable four-year run in which the digital business bank saw no loans go bad.
The start-up admitted that two property loans have fallen into default, but added that the event has not yet led to credit losses.
The bank, said the loans represent less that one per cent of the £4bn it has lent to small businesses since it was founded in September 2015 by Rishi Khosla (pictured).
The loss is notable, because OakNorth is one of the few fintechs to make a profit, despite the billions investors have pour into these firms, betting they will disrupt long-established banking and financial leaders.
Underwriting standards
The London-based digital bank has boasted that its tight underwriting standards and credit monitoring technology, helped it post a pre-tax profit of £33.9m in 2018, up from £10.6m the previous 12 year.
A spokeswoman for the bank said “the fact that we’ve only had two defaults and no losses, is pretty phenomenal”.
OakNorth said it was also seeking large lenders to help manage larger loans of around £60m as its business grows. It currently works with property investor Cogress, splitting the risk on larger loans.
The digital bank said it is currently looking for partners on “five to six loans where we have large exposure”.
Reducing exposure
However, the spokeswoman for the digital bank added “there is no connection between the two defaults and us wanting to partner with institutions to reduce exposure”.
In February, OakNorth landed a $440m of investment led by WeWork investor SoftBank, as the start-up prepares to drive into the US market. Other OakNorth backers of the business include UK investment firm Toscafund and Singapore’s sovereign wealth fund GIC.
That investment valued the digital bank at around $2.8bn, making it almost a triple ‘unicorn’ business, which refers to any privately-held firm valued at over $1bn.
