On Saturday 14th December, the UK's most highly valued fintech “unicorn”, OakNorth Bank revealed that it has suffered its first two defaults on property-backed loans and is seeking to offload a portion of its larger deals to reduce risk. The two defaults are understood to represent less than 1% of the bank’s £3bn net lending and have not yet led to credit losses. The defaults are the first since it began lending in 2015.
Founded by Rishi Khosla, OakNorth has grown at breakneck pace to reach a valuation of £2.1bn. The start-up is backed by SoftBank via its $100bn Vision Fund and provides loans to small firms secured against property and other assets. This year in a funding round it had raised about $440m (£338m).
OakNorth, which has not had a single default due to its tight underwriting standards and technology, is also in the process of seeking partners to buy chunks of five or six of its largest loans, in an attempt to cut its exposure. This means that it can look to offload about £20m-£30m in each of the larger loans. The bank already works with smaller companies such as property investor Cogress, but the latest push will target larger groups. OakNorth has developed from lending a few million pounds to loans as high as £60m.
“We’ve always worked with partners on our loan exposures, given we’re scaling up. We are looking to find more institutions who can take larger positions,” Khosla said in a statement to The Times.
The bank posted a pre-tax profit of £33.9m in 2018, up from £10.6m the previous year, and recorded its first profit just a year after launch.
