Lender suspends fundraising as FCA investigates

Non-Standard Finance has suspended plans to raise money from shareholders while it works with the Financial Conduct Authority (FCA) about issues found in a key business division.

The FCA visited the Leeds lender in March as part of a multi-firm review and it has now “raised a number of concerns” operating procedures and processes at the group’s guarantor loans division.

Non-Standard Finance has launched its own in-depth review, working closely with the FCA, to “clarify the scope and scale of its concerns” and to look at possible redress.

This has led to it pausing its negotiations with investors about an equity raise, which was planned to strengthen the lender’s balance sheet and give it the ability to seize opportunities that the recession may bring.

In a statement to the stock market this morning it said the group’s largest shareholder, Alchemy, “remains supportive of providing further capital”.

However other investors reacted much less positively, and Non-Standard Finance’s share price dropped by more than 25% in early trading.

Non-Standard Finance’s chief executive John van Kuffeler had already described the previous 18 months as “difficult and disappointing”. It failed in its hostile takeover bid for Yorkshire rival Provident Financial while its own businesses were affected by large write-downs even before the impact of Covid-19.

Non-Standard Finance explained the rationale for its fundraising plans a few weeks ago, as it sought to take advantage of what it thinks “could represent an exceptional market opportunity”.

It said: “Previous recessions have taught us that prime lenders are likely to become increasingly risk averse and tighten their lending criteria, leaving a large and expanding pool of higher quality applicants who require access to regulated and responsible credit markets.”