Fred Crawley
catches up with Mike Hirst, the specialist funder’s broker
relationship manager.
Go deeper with GlobalData
Having long led
the car finance market on the Isle of Man, specialist funder
Conister Bank has been making bold moves to grow its presence on
the UK mainland.
Entirely funded by its
investors and home-grown retail deposits, the island lender has
used its strong liquidity position to sell into the UK motor and
asset finance markets via a growing network of brokers.
Last August, it hired
intermediary specialist Mike Hirst, formerly of National Australia
Bank, to strengthen its mainland sales operation. One year on, Fred
Crawley catches up with him to check on the bank’s progress, its
strategy and its plans for the future.
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By GlobalDataFred Crawley (FC): Mike,
how does your role fit into the wider growth plan for
Conister?
MH: The
bank’s route to market is via brokers – to build a direct
distribution network would be very expensive, and so the decision
was made that intermediaries were the most cost-effective way
in.
I manage our southern broker
portfolio from Bournemouth, while my colleagues Iain Griffin and
John Rozbottom manage portfolios from Peterborough and Liverpool
respectively.
FC: Conister has
historically worked in both consumer and B2B asset finance in its
home market – does this carry through to its UK
operations?
MH: Our
brokers cover everything from cars through to cranes. We do a lot
of work with the SME market and even some asset finance for large
plcs, but the majority of the business we do is consumer motor
work.
Our asset finance capability
grew when we acquired ECF Asset Finance in Manchester, which does a
lot of refinance work.
Overall, the bank decided
that, with the tough market of the past few years, consumer motor
finance was something to focus on since it represented relatively
stable values and straightforward underwriting
decisions.
As such, that side of things
made up around 75% of the business that was introduced through my
broker network in the past year.
FC: What has the pattern
of growth been like since you have been with the
business?
MH: We have
written a growing volume in the UK every year – growth over the
last reporting period has been in double figures.
Of course, we have to be
careful not to grow at a rate that exceeds the bank’s risk
appetite. I think of us as something like a mutual building society
– we haven’t got infinite supplies of wholesale money, since all of
our capital is drawn from investors and retail deposits.
This structure is an
advantage in many ways, but I wouldn’t say our cost of funds is
less than anyone else’s in particular – we still have to attract
investors, after all.
FC: Presumably then, you
are looking to grow in specific niches rather than play the volume
retail game – what type of business are you
targeting?
MH: We are
indeed a niche player rather than a generalist. A lot of the
brokers we work with, like Meridian Finance and Oracle Finance, are
highly active in the classic, prestige and sports car
markets.
Many of our brokers will draw
introductions from dealerships, but specialists like these will
gain a lot of business through affinity marketing – circulating
among groups like the Porsche owners’ club or sponsoring events
like polo games.
That said, we are not
exclusively targeting the prestige and classic market – we do a lot
of ‘bread and butter’ deals too.
Altogether our average
consumer deal size is around £25,000 – we are relatively well
spread, but I suppose the deals you remember most are the ones for
the really nice cars!
FC: Variable rate deals
have been popular with some prestige funders recently – is this
something you have been involved in?
MH: We have
definitely been asked a few times, but no – all of our lending is
fixed rate, with around 90% being regular hire purchase.
People like the idea of
variable rate, but the latest terms of the Consumer Credit
Directive mean it is not as advantageous a product as it was last
year.
In any case, fixed rate is a
relatively easy sell at the moment, since rates can only go one
way.
FC: How do you see the
prestige market developing in future, and what stance are you
intending to take within it?
MH: That
market has done very well in the past year, and doesn’t seem to be
affected too adversely by dips in consumer confidence.
Buyers are using money that
they would otherwise invest to put big deposits on vehicles of
brands that they know will grow in value.
There is a growing global
demand for luxury vehicles – China is now Bentley’s second-biggest
market – and so I think we will continue to see wealthy consumers
looking to make investments that they can take pleasure from as
they appreciate in value.
At the same time, we are
seeing an increasing level of competition – Santander Consumer
Finance and Close Motor Finance are both very active in our niche,
as is ING Lease – although we have an advantage in that we are
prepared to take on classic vehicles that require more specific
underwriting.
FC: What sort of rates
are you offering at present?
MH: We
generally lend at between 10 and 13% APR but, depending on the
deal, we can go as low as 8 or 9%. Overall, I would say we are
competitive – not expensive but not the cheapest around
either.
Ideally, we would collect
business just very slightly past that picked up from brokers by
some of the volume funders.
FC: Finally, what’s next
for your UK sales operation?
MH: From 1
August, we will be joined by our new sales director, Brian
Cartwright – he is moving to us from Barclays’ asset finance
division, where he was a regional director. He will be based in
Manchester, and will be a line manager to Iain, John and
I.
I think it is an encouraging
sign for Conister that we are acquiring someone from one of the
UK’s largest banks.
