Aldermore reports strong profit growth in FY2024

Aldermore Group has reported a robust financial performance for the full year ending June 30, 2024, overcoming market headwinds to deliver a 14% rise in profit before tax to £253.1 million, up from £222.5 million the previous year. The bank’s growth reflects a focus on higher-return segments, reduced impairment charges, and a resilient capital base, all despite a challenging economic environment.

The Group’s overall lending portfolio grew modestly, with total customer lending increasing by 1% to £15.3 billion. This growth was achieved by targeting specialised, higher-margin areas, despite a subdued lending market impacted by elevated interest rates and market-wide pricing pressures. Aldermore’s total customer deposits also saw a significant increase, growing by 8% to £16.3 billion, supported by gains in its personal, business, and corporate treasury savings franchises.

While net interest income decreased by 3% to £604.3 million, reflecting the challenges of the current lending environment, the bank’s lower impairment charge of £18.3 million (compared to a £113.3 million charge in FY2023) helped bolster profitability. This reduction in impairment charges was attributed to a more stable macroeconomic outlook and successful remediation efforts, particularly in the motor finance division.

“Aldermore has had a strong year, despite a challenging economic backdrop,” he said. “With interest rates remaining high over the period, we are pleased to have achieved positive lending growth in a more subdued market by focusing on higher returning, more specialised segments.”

Cooper also noted the positive effects of slowing inflation and the Bank of England’s first interest rate cut in four years, although he emphasized that the bank remains cautious, particularly in supporting customers grappling with high living costs. “We remain focused on ensuring we support our customers following one of the largest increases in the cost of living in a generation,” he added.

Operating expenses increased to £351.0 million from £328.9 million, driven largely by £18.1 million in costs related to the Financial Conduct Authority’s (FCA) review of motor finance commission practices. Excluding these costs, operating expenses were relatively flat, reflecting the bank’s tight cost controls amid inflationary pressures.

Aldermore continued to invest in its customer and employee experience, as well as in upgrading its technology infrastructure. These initiatives, aimed at fostering long-term growth, accounted for £34.6 million of the bank’s expenditure, the same as in the previous year.

A significant focus for the Group is the ongoing FCA review of historical motor finance commission arrangements, which was initiated in January 2024. Aldermore has raised a £15 million provision to cover potential legal, operational, and redress costs related to the review, which covers MotoNovo Finance transactions from May 2019 to January 2021. Despite this, the Group maintains that its practices were compliant with existing regulations at the time.

Looking ahead, Cooper expressed optimism for the Group’s future. “With signs of a normalising market, Aldermore is well-positioned to build on what it has already achieved to deliver significant future growth,” he said.