Results for the year ended 31 December 2015

Results for the year ended 31 December 2015

3 March 2016

Shawbrook Group plc

Shawbrook Group plc ("Shawbrook" or "the Group"), the specialist lending and savings bank, today announces continued strong performance in excess of market expectations and reiterates confidence in its near and medium term outlook.

Commenting on the results, CEO Steve Pateman said:

"2015 was a significant year for Shawbrook. We achieved a successful IPO and continued to grow our core businesses, underpinned by a strong well-capitalised balance sheet which will support our ambitions for the near and medium term. Our focus remains on serving customers who value a bank that takes the time to understand their requirements and provide the right answer. This approach also enables us to optimise our risk adjusted return profile. We have invested for the future and, notwithstanding a softer economic outlook, remain confident that we will continue to generate strong through the cycle returns consistent with our stated strategy."

Highlights1

· Another strong performance with underlying PBT beating consensus, up 63% to £80.1m (2014: £49.1m) and EPS2 up 77% to 26.9p (2014: 15.2p).

Ø Statutory PBT increased by 55% to £70.1m (2014: £45.3m) and statutory EPS was 24.1p (2014: 17.7p).

· Increased profitability driven by a 44% increase in the loan book3 to £3,361m (31 December 2014: £2,331m) underpinned by a 23% increase in gross organic originations to £1,685m4 (2014: £1,366m), as 2014 momentum continued into 2015.

· NIM increased to 6.2% (2014: 6.1%), benefitting from continued reduction in cost of funds. ISA product launch in H1 2015 and full market Easy Access product launch in H2 2015 expected to further reduce cost of funds.

· Cost to income ratio reduced to 48.3% (2014: 50.5%) as the Group continues to proactively manage its cost base whilst investing in people, technology and infrastructure to build solid foundations to support future growth. We remain confident the investment made will deliver further scale efficiencies and has well positioned us for the next phase of growth.

· Strong risk-adjusted margin supported by low cost of risk at 24bps (2014: 36bps), reflecting asset quality as well as the benign economic environment. Group focus remains on originating quality business and maintaining high-quality underwriting standards.

· Track record of strong returns maintained with RoTE of 27.9% (2014: 26.9%) and pre-tax ROLA of 3.0% (2014: 2.6%), underpinned by increased customer activity. RoTE benefitted by c.1.3% from revaluation of deferred tax assets following the introduction of the Bank corporation tax surcharge.

IPO and Board

· Successful IPO with admission to the LSE in April and to the FTSE 250 index in June.

· Iain Cornish appointed Chairman and Steve Pateman as Chief Executive Officer. Stephen Johnson was appointed to Board as Deputy Chief Executive. Further strengthened the Board with the appointment of Paul Lawrence, Sally-Ann Hibberd and David Gagie as non-executive directors.

· The Executive team further strengthened with the appointments of Hugh Fitzpatrick as CRO, Simon Featherstone as MD of Business Finance and Evelyn Hamilton as MD of Consumer.

Capital and funding position

· Capital ratios strengthened by IPO, with £82m of new capital (net of costs) resulting in CET1 ratio of 14.4% (31 December 2014: 11.6%). Total capital further strengthened by £75m Tier 2 issuance in October, resulting in total capital ratio of 18.0% (31 December 2014: 13.9%).

· Strong capital base enabled Shawbrook to accelerate growth in 2015, as the Group continued to expand its support to UK customers through its SME and Consumer businesses, and made selective acquisitions to complement the Group's strategy.

· Loan book predominantly retail deposit funded, with a loan to deposit ratio of 104% at 31 December 2015 (31 December 2014: 94%).

Investing in our people, technology and infrastructure

· Significant investment made in the Group's on-going development to ensure it continues to meet customer expectations, increasing regulatory requirements and the demands of being a listed company, including increasing headcount to an average of 514 in 2015 (2014: 414).

· Group investment has resulted in progress across all areas of the business including the positive launch of ISA and Easy Access products in the Savings business. Further investment has also been made in IT and infrastructure, with the re-platforming of Asset Finance completing in Q4 2015.

· Successful launch of new lending products such as Regulated Short Term Bridging loans.

· 2016 will see further investment in people, systems and processes to ensure the operating platform remains robust, sustainable and supports the Group's growth plans.

Outlook

· We expect our strategy to continue to deliver material growth in combination with strong risk adjusted returns. We maintain our focus on the high quality of the lending portfolios, supported by prudent levels of capital, funding and liquidity. The Group continues to explore a number of attractive product and market adjacencies where attractive returns can be generated by deploying our expert approach and proven relationship-based lending model.

· The execution of our proven strategy in combination with a diverse balance sheet allows us to continue to:

Ø increase balance sheet scale through high quality origination;

Ø maintain risk discipline to generate strong through the cycle returns;

Ø enhance operating leverage with scale; and

Ø through this approach, deliver strong return on tangible equity and shareholder value.

· Management expects the increasing profitability and capital generation to enable the declaration of a modest 2016 final dividend arising from 2016 profits, building progressively in 2017 and beyond.

___________________

ENQUIRIES

Instinctif Partners

Mike Davies / Giles Stewart

020 7457 2051 / 020 7457 7938

[email protected] / [email protected]

Shawbrook Group plc

Dylan Minto

07901 567 662

[email protected]

An analyst presentation will be held at 11:00am on 3 March 2016 at Goldman Sachs International, Peterborough Court, 133 Fleet Street, London, EC4A 2BB. The analyst presentation will also be available by webcast and teleconference at 11:00am. The access details are as follows:

Webcast

To access the webcast please click on the following link http://webcast.instinctif.tv/795-1286-16922

Teleconference

The dial-in details for the conference call are:

Standard International Access: +44 (0) 20 3003 2666

UK Toll Free: 0808 109 0700

Password: Shawbrook

Please dial-in approximately 5 minutes before the start of the call quoting the password "Shawbrook"

Group Key Performance Indicators

Certain of the key performance indicators ("KPIs") presented below are measures that are not defined under IFRS. Some of these measures are defined by, and calculated in compliance with, applicable banking regulations, but such regulations often provide for certain discretion in defining and calculating the measures. Because of the discretion that the Group and other banks have in defining and calculating these measures, care should be taken in comparing the Group's KPIs with those of other banks, and such KPIs may not be directly comparable.

The KPIs presented below are derived from the Group's statutory accounts and its financial reporting and management information systems. In addition, some of the KPIs are calculated using underlying results.

Underlying income statements

About Shawbrook

Shawbrook is an independent specialist lending and savings bank serving UK SMEs and consumers with tailored products designed to address a selection of high growth sub-sectors of the overall lending industry. The Group's lending activities are primarily funded by a stable retail deposit book consisting of easy access and ISA accounts, variable rate long-dated notice accounts (mostly 95 - 120 days' notice) and fixed rate fixed term accounts (mostly one - five years). Shawbrook Bank Limited is an operating entity of Shawbrook Group plc. In April 2015, Shawbrook Group plc's shares (SHAW.L) listed on the Main Market of the London Stock Exchange. Shawbrook Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of the Financial Services Compensation Scheme.

Important disclaimer

Certain information contained in this announcement, including any information as to the Group's strategy, market position, plans or future financial or operating performance, constitutes "forward looking statements". Such forward-looking statements are made based upon the expectations and beliefs of the Group's directors concerning future events impacting the Group, including numerous assumptions regarding the Group's present and future business strategies and the environment in which it will operate going forward, which may prove to be inaccurate. As such, the forward-looking statements contained in this announcement involve known and unknown risks and uncertainties, which may cause the actual results, performance or achievements of the Group or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

General note to the financial information

The preliminary announcement has been prepared in accordance with the Listing Rules of the FCA and is based on the 2015 financial statements which have been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2014 or 31 December 2015. This announcement is derived from those statutory financial statements, which have been reported on by the Group's auditor. The audit reports for both the year ended 31 December 2015 and 31 December 2014 were unqualified. The statutory financial statements for the year ended 31 December 2014 have been filed with the Registrar of Companies. The statutory financial statements for the year ended 31 December 2015 will be filed with the Registrar of Companies following the Annual General Meeting.

KPI definitions and underlying income statement adjustments:

Percentages and certain amounts included in this Press Release have been rounded for ease of presentation. Accordingly, figures shown as totals in certain tables may not be the precise sum of the figures that precede them.

1. Average principal employed is calculated as the average of monthly closing loans and advances to customers, net of impairment provision, from the Group's financial reporting and management information systems, including operating leases, which are classified as property, plant and equipment in the Group's statutory accounts. For Business Credit 2014, we have taken a full year average, which includes nil assets for the pre-acquisition period. Three inorganic acquisitions were made during 2015, the last of which completed in December 2015. The average principal employed for 2015 does not include this acquisition as no underlying income or expenditure in the 2015 period related to this.

2. Loans and advances to customers is presented net of impairment provision and includes operating leases, which are classified as property, plant and equipment in the Group's statutory accounts.

3. Asset yield is calculated as the sum of underlying interest receivable and similar income, net income from operating leases, net fee and commission income and fair value losses on financial instruments, divided by average principal employed.

4. Liability yield is calculated as underlying interest expense and similar charges divided by average principal employed.

5. Net interest margin is calculated as underlying net operating income divided by average principal employed.

6. Management expenses ratio is calculated as underlying administrative expenses plus provisions for liabilities and charges, divided by average principal employed.

7. Cost of risk is calculated as impairment losses on financial assets divided by average principal employed.

8. Return on lending assets before tax is calculated as underlying profit before taxation divided by average principal employed.

9. Return on lending assets after tax is calculated as underlying profit for the year attributable to owners divided by average principal employed.

10. Return on tangible equity is calculated as underlying profit for the year attributable to owners divided by average tangible equity. Average tangible equity is calculated as total equity less intangible assets at the beginning of a period plus total equity less intangible assets at the end of the period, divided by two.

11. The cost/income ratio is calculated as underlying administrative expenses plus provisions for liabilities and charges, divided by underlying net operating income.

12. The ratio of impaired loans is calculated by dividing impaired loans and advances to customers by total gross loans and advances to customers.

13. The ratio of past due over 90 days and impaired loans is calculated by adding past due over 90 days loans and advances to customers and impaired loans and advances to customers and dividing the sum by total gross loans and advances to customers.

14. Forbearance cases are the number of cases for which the Group has granted concession to the borrower due to reasons relating to actual or apparent financial stress.

15. Forbearance principal employed is the sum of the principal employed in each of the forbearance cases.

16. The loan-to-deposit ratio is calculated as loans and advances to customers divided by customer deposits.

17. The liquidity ratio is calculated as the liquidity reserve divided by customer deposits. The liquidity reserve comprises cash and balances at central banks (excluding mandatory balances held with central banks), loans and advances to banks, off balance sheet T-Bills but excludes additional available liquidity from pre-positioned assets.

18. The ratio of liquidity buffer eligible assets to liquidity balances is calculated as the proportion of liquidity balances that are eligible for use in the liquidity buffer to total liquidity balances.

19. The CET1 (i.e. Common Equity Tier 1) ratio is calculated as common equity tier 1 capital divided by risk-weighted assets at the Group level.

20. The total capital ratio is calculated as total regulatory capital divided by risk-weighted assets at the Group level.

21. The leverage ratio is calculated as common equity tier 1 capital divided by the sum of total assets less intangible assets. Due to other off balance sheet items, this calculation may differ to the regulatory calculation of leverage.

22. Sales volume is calculated as the sum of total client turnover in the Business Credit division. The Sales Volume presented for FY 2014 includes the pre-acquisition period.

23. IPO costs include expenses incurred in 2015 in relation to the successful listing of Shawbrook Group plc on the LSE main market and recognised in the Income Statement. A further £3.7m was recognised in equity. IPO transaction costs incurred in 2014 relate to a one-off cost in respect of a former employee that materialised upon IPO.

24. Corporate activity costs in 2015 include a final £0.6 million of deferred consideration incurred in connection with the acquisition of Money2Improve in November 2012. In addition, costs incurred in relation to the acquisition of three asset portfolios (including the incremental costs of raising additional deposits to fund inorganic growth) have been excluded from the underlying results. 2014 corporate activity costs include both external costs incurred in acquiring businesses and internal costs, such as surplus funding costs, incurred whilst building up the liquidity required to complete a deal. The majority (£2.5m) of costs related to the acquisition of Centric Commercial Finance in June 2014. In addition, corporate activity includes £0.6m of deferred consideration incurred in connection with the acquisition of Money2Improve in November 2012. Within this adjustment, £2.1m is disallowable for tax purposes.

25. Income tax charge on underlying adjustments has been calculated at the implied corporation tax rate. Income tax charge on certain underlying adjustments has been assumed as £nil on the basis of being disallowable for tax purposes.

CEO & CFO STATEMENT

Exceeding our IPO guidance for 2015 has seen Shawbrook post a strong set of 2015 financial results demonstrating the successful execution of our strategy during 2015 and positioning the Group for future profitable growth.

We made further significant progress in establishing Shawbrook as a leading Specialist Bank within the UK market and exceeded our guidance in respect of loan originations, net interest margin and cost-income performance. As a result we grew underlying profit by 63% to over £80m (2014: £49m), with Total Assets reaching £4bn for the first time. We also improved our already strong customer and staff advocacy and delivered a number of strategic initiatives.

Delivering a successful IPO in early April was a tremendous milestone in our development as a well-capitalised player in our chosen SME and consumer markets. Since the IPO, investors have understood our strategy and the benefits that our diversification and strong balance sheet bring to set us apart from peers.

Our access to capital markets has enabled us to raise £90m of primary capital during the IPO (£82m net of costs), and we further diversified and optimised our capital base with the maiden public issue of Tier 2 capital of £75m in October. This has resulted in a well-capitalised position to support our future growth ambitions, which is combined with our prudent funding position and conservative Treasury position to reinforce our confidence in the future and our key capital ratios are at market leading levels amongst our peers in the 'challenger' bank sector.

Laying these strong foundations has enabled us to achieve a successful 2015 and reaffirm confidence in the medium term outlook. Our diverse business model brings about many benefits, allowing the whole Group to thrive and deliver strong returns for shareholders. At the same time we further increased our already high customer 'net promoter score', largely due to the high levels of colleague skill, engagement and commitment which are at the heart of Shawbrook's success, as well as the continuing investments we have made in technology and service improvement.

The improvement in performance is more impressive due to having been achieved in a more liquid market. The Group has managed this pressure well through reductions in the cost of funds that have offset yield pressure, where a significant proportion of the reduction in the yield has been mix driven.

During the year we made significant investment across the Group, ensuring our platform and processes are sufficiently robust and scalable to accommodate safely and efficiently the next phase of the Bank's growth. Our continued reduction in the Cost:Income ratio to 48% is evidence of our scalable platform, however as we look forward we are confident the investments made will deliver further scale efficiencies, and position us for future growth.

A key source of our advantage is our human underwriting approach and deep market knowledge that allows us to understand and manage risk that standardised, automated processes cannot match. We think of this as managing idiosyncratic risk as against managing generic risk pools. The diversity of our balance sheet across our specialist and carefully selected markets is critical to this and our growth ambitions can be met whist maintaining this approach as we avoid the need to be market share orientated.

Our strategy is underpinned by our conservatively positioned balance sheet and focus on building a bank to deliver strong through the cycle risk-adjusted returns. This requires us to consistently deliver for our customers whilst maintaining strong risk disciplines. Our areas of focus remain the Property, Business Finance and Consumer markets, and we will leverage our capabilities in respect of our people, platform, funding and liquidity to accelerate growth where appropriate. We have achieved this with organic originations ahead of expectations for the year and the securing of portfolio acquisitions that will benefit us in the future.

We are disciplined and focus on opportunities where the market is not crowded, the risks are manageable, the returns meet our criteria and we have an effective distribution mechanism. There are many opportunities in our chosen markets and our ability to manage idiosyncratic risk allows us to seize them successfully, which requires the strong risk and financial disciplines that lie at the heart of our strategy.

We continued to evolve our risk management processes during 2015. Hugh Fitzpatrick joined as Chief Risk Officer during Q4 and his arrival has further reinforced the significant progress that has arisen from our on-going investment in our ability to manage risks within the Group. Our investment in an Enterprise Wide Risk Management Framework and Risk Appetite will enable us to continue managing our risk appetite, make informed decisions, demonstrate to regulators and other stakeholders that we have a robust governance and control framework and ensure we maintain a strong credit risk culture across Shawbrook. We view this as an on-going source of competitive advantage.

Steve Pateman joined Shawbrook as CEO and we have further strengthened our team with Evelyn Hamilton joining to lead Consumer and Simon Featherstone joining to lead Business Finance. We believe that our leadership team will enable us to achieve our medium term objectives as we aspire to profitably grow the Group in the coming years with a strong focus on maintaining good cost discipline to generate optimal operational leverage. Our hunger and ambition remains to build the UK's leading specialist bank.

We aim to achieve that objective by diversifying in our three distinct markets of Property, Business Finance and Consumer.

In Business Finance, we will bring together our asset finance and business credit businesses as two central parts of a holistic SME working capital solutions provider. Our objective is to become established as a market-leading specialist provider for SMEs.

In the Consumer market, which is worth around £200 billion, we will continue to create relationships with partners who have the appropriate customer base. At the same time, we will explore opportunities to use technology to improve the way in which we compete online and in-store.

In Property, we will bring together our Commercial Mortgages and Secured Lending businesses. There is speculation that there may be regulatory change which could create a slowdown in buy-to-let or change the shape of the market. Our differentiation is that we operate to a more conservative risk appetite than many in the market, for example LTV, interest rate stress and in addition we have the advantage of being less exposed to buy-to-let than our peers and we are strongly capitalised. Our focus will be on diversification into areas such as 'interest only in retirement' solutions.

During the year we saw a number of changes to our Board. Sir George Mathewson, left the Board along with Sir Brian Ivory. We are grateful to them for their contribution since they joined in 2011. Richard Pyman, who had been Shawbrook's CEO since 2014 departed the Board for personal reasons. We owe Richard a debt of gratitude for his contribution to the success of the Group and our IPO. We also welcomed several new non-executive directors to the Board. Paul Lawrence, who was formerly Global Head of Group Internal Audit for HSBC, Sally-Ann Hibberd brings significant experience of operations, IT and change and David Gagie brings substantial financial services experience and was until recently a Senior Advisor to the Financial Conduct Authority. Graham Alcock has indicated that he will not be standing for re-election at the forthcoming AGM and we would like to thank him for his service to the Group.

Uncertainty, whether it be regulatory, economic or political, may be a given, but fundamentally, Shawbrook's business model is strong and diverse, the opportunities we have are large and show no signs of diminishing, and our business is built on a set of values and an approach to people and business partners which have allowed us to build a strong and sustainable market position. We expect our strategy to continue to deliver on our ambitious objectives through continued pursuit of our strategy and as we progress through 2016, we have every confidence that our management team will execute our strategic vision and deliver the plans set out at the IPO.

OUR STRATEGY

BUSINESS REVIEW

Group performance

The Group's underlying profit before tax has improved significantly from £49.1m in 2014 to £80.1m in 2015 due to both the growth in the Group's asset base, lower cost of funds and the benefits that increased efficiencies of scale in the Group's infrastructure create. This improvement is against the background of more liquid market.

Underlying PBT increased by 63% to £80.1m (2014: 49.1m) and statutory profit increased by 55% to £70.1m (2014: £45.3m). This increased profitability has been driven by a 44% increase in the loan book to £3,361m (2014: £2,331m), underpinned by a 23% increase in gross organic originations to £1,685m (2014: £1,366m), as 2014 momentum continued throughout 2015.

Net interest margin ("NIM") increased to 6.2% (2014: 6.1%), benefitting from continued reduction in the cost of funds. ISA product launch in H1 2015 and full market Easy Access product launch in H2 2015 are expected to further reduce cost of funds.

Track record of strong returns maintained with ROTE of 27.9% (2014: 26.9%) underpinned by increased customer activity. ROTE benefitted by c.1.3% from revaluation of deferred tax assets following the introduction of the Bank corporation tax surcharge.

Capital ratios strengthened by the IPO, with £90m of new capital (£82m net of costs) resulting in a CET1 ratio of 14.4% (2014: 11.6%). Total capital was further strengthened by a £75m Tier 2 issuance in October, resulting in a total capital ratio of 18.0% (2014: 13.9%).

The Cost:Income Ratio reduced to 48.3% (2014: 50.5%) as the Group continues to proactively manage its cost base despite significant investment in people, technology and infrastructure to build solid foundations to support future growth and we remain confident that the investment made will deliver further scale efficiencies.

The pre-tax ROLA increased by 0.4% to 3.0% (2014: 2.6%) and underpins the Group's focus remaining on originating quality business and maintaining high-quality underwriting standards.

The statutory results for the Group improved over the previous year, from a profit before taxation of £45.3m in 2014, to a profit before taxation of £70.1m in 2015.

In addition the Statement of Financial Position reflects the results of the strong year the Group has had, with total assets increasing from £2,754m to £4,000m, an increase of 45.2% in the year.

Divisional performance

The Group has six reportable operating segments as described below which are based on the Group's five lending divisions plus a Central segment which represents the Retail Savings business, central functions and shared central costs.

(1) Since acquisition on 9th June 2014.

Commercial Mortgages

Since its acquisition by the Group in February 2011, the division has originated over 6,000 loans with a total value of over £1.7bn. The loan book for the Commercial Mortgages division stood at £1,596m at 31 December 2015.

The gross asset yield for 2015 was 6.5% (2014: 6.5%); cost of risk was 0.03% for 2015 (2014: 0.14%); and its contribution to the Group's overall operating profit for the year ended 31 December 2015 was £40.3m, an increase of £17.0m from 2014.

Key performance indicators

Activity

The Commercial Mortgages Division has a well-diversified product range serving property professionals in both residential and commercial investment markets, across short term and more traditional mortgage terms.

Whilst the majority of the division's loans are to established landlords and property professionals, it also lends to well-established SME owner-occupiers.

In 2015 the business achieved steady growth in the loan book to £1,596m (2014: £969m); continued its excellent loan performance with a 2015 gross asset yield of 6.5% (2014: 6.5%) and retained strong credit discipline in terms of loan to value and income coverage ratios. It also maintained healthy diversification across a number of residential and commercial property segments as well as between short-term and more traditional mortgage finance.

Differentiation

Commercial Mortgages has a well-diversified product range delivered through expert teams using experience and judgement to make individual decisions, supported by the use of credit scoring tools as part of our rigorous underwriting process. Our specialised knowledge, personalised approach and product diversification continues to earn industry accolades and ensures that the business can continue to grow in a sustainable and considered way. Maintaining our conservative risk appetite will position us well should there be changes to the regulatory environment.

Sector Trends

The market remained buoyant throughout 2015 with capital values and rents appreciating together with a continuing shift towards greater private rented tenure of UK housing. 2015 saw some initial market disruption around the general election and Stamp Duty Land Tax ("SDLT") reforms in the first half of the year, but the markets accelerated in the second half with traditional year-end seasonality. This market buoyancy has taken place against a backdrop of multiple political and regulatory developments that have combined to create a more challenging outlook for property investors.

Asset Finance

The loan book for the Asset Finance division stood at £761m at 31 December 2015 (2014: £564m). The gross asset yield for 2015 was 9.9% (2014: 10.3%). The reduction of 0.4% in the gross asset yield is driven by the increased liquidity in the market (resulting in a more competitive market) and the overall growth in the wholesale book.

Cost of risk was 0.2% for 2015, 0.1% lower than 2014 (0.3%).

Activity

The Asset Finance division is a proven lender to established businesses in the UK SME and healthcare markets providing financing secured against a range of business critical assets.

Asset Finance operates against four main product categories:

· Leasing Finance: principally against business critical assets

· Block Discounting and Wholesale Finance: lending to SME finance companies secured against receivables within their portfolios, with the security given by the ultimate borrower taking the form of a hard asset or residential property and lending to other small specialist lenders secured against a pool of loan receivables

· Healthcare: operating leases for healthcare equipment to NHS trusts and finance leases to private healthcare partners

In 2015 the business saw growth across all its asset disciplines with momentum building in the second half of the year. We put a number of key initiatives in place to drive continuing development in 2016 and beyond as it continued to identify new asset classes to complement its portfolio, including the launch of its Professional Practices funding. Wholesale and Block Finance were significant drivers of revenue with market leading teams. In Healthcare, we completed a notable deal that supported funding of the first Proton Beam Therapy clinics in the UK. Its more mature lending operations continue to perform well despite increased competition due to increased liquidity in the market. The business invested significantly in a new operating platform which will enhance its service offering to customers and our introducer base while also driving efficiencies to shorten cycle times.

Differentiation

The business has a well-diversified range of asset classes. Our ongoing customer relationship model, with its entrepreneurial edge, is founded upon a tailored risk management approach and expert business teams, who possess deep sector understanding. Combining extensive human skill, with advanced analytics, the business focusses on assets where we can leverage our deep credit expertise and relationships, exemplified in our notable funding of the Proton Beam Therapy clinics, which was achieved down through our in depth understanding of this market and business area.

Sector Trends and opportunities

Increasing levels of liquidity in the market increased competition; however, our lending approach based on experience and judgement to make decisions that balance risk, return and customer needs, combined with our customer service and expertise ensured that the business continues to see sustained growth. The business will continue to identify opportunities arising from our core and adjunct markets, offering strong risk adjusted returns that meet our risk appetite profile. Wholesale, Marine and Professional Practices funding are successful examples of this strategic approach to business growth.

Business Credit

The loan book for the Business Credit division stood at £183m at 31 December 2015 (2014: £170m).

The business had a challenging year, with increased margin pressure driven by increased liquidity in the market resulting in a decrease in the Net Interest Margin from 7.7% in 2014 to 7.2% in 2015. Furthermore, the business experienced increased fraud where legal action remains ongoing, resulting in the cost of risk increasing by 0.9% from 0.3% in 2014 to 1.2% in 2015.

Liquidity and lending appetite in our market, particularly from the High Street banks, has resulted in some yield compression both on the front book and on the back book when contracts are up for renewal. This, together with the unwind of the fair value at acquisition of the business unit, drove a decrease in the asset yield to 9.4% (2014: 10.2%).

Activity

Business Credit provides funding to UK SMEs with revenues of between £2 million and £100 million, across 20 different business sectors, competing on quality of services, range of financing solutions and speed of delivery. Invoice discounting is at the core of our asset based lending facility: we offer other asset based lending products (plant, machinery, stock and cash flow) in tandem only with our invoice discounting proposition.

These facilities are mainly secured against working capital assets to support a number of business operations, including working capital, growth opportunities, mergers and acquisitions, refinancing, restructurings, management buy-outs and buy-ins and turnarounds.

Notwithstanding a challenging year, Business Credit made progress in 2015. The highlights of the year included further success in working with Private Equity Houses, which accounted for circa 20% of business originations. The business provided extensive support to existing clients while also working to exploit new opportunities. Business Credit was proud to be voted Business Money Intermediary Index Winners for the third successive year.

Differentiation

Business Credit employs a high touch, high class approach, focused upon understanding the real needs of our customers and their businesses. The experience of the senior management team in structuring and delivering asset based lending and invoice discounting sets them apart, and they are known for high touch delivery, providing customers with a high level of access to senior people and certainty of delivery.

Trends and opportunities

Increased liquidity in the market increased competition in 2015. The business met this associated risk by sustaining focus on its relationship based customer offering: service and efficiency; access to experienced senior people, combined with speed and certainty of delivery and maintaining discipline in pricing. In addition it extended into adjunct markets, providing a wider offering to its pharmacy clients, private equity and trade finance.

Secured Lending

The loan book for the Secured Lending division was £487m as at 31 December 2015 (2014: £401m).

The gross asset yield for 2015 was 9.1%, a reduction from 9.7% in 2014 mainly driven by a combination of lower cost of funds being passed on, more business written on lower loan-to-value's ("LTV's"), higher quality prime products and an overall increase in liquidity in the market. Cost of risk was 0.1% for 2015 (2014: 0.0%).

Activity

Secured Lending provides a wide range of secured loans predominantly to super prime and prime borrowers with a very small percentage of near prime borrowers (the Total % for Near Prime borrowers is 4.8% of the portfolio value).

Loans are secured by a second charge against residential property and are provided for a wide variety of purposes, including home improvements, loan consolidation and large consumer purchases.

In 2015 Secured Lending grew its loan book to £487m (2014: £401m) and remained market leading despite intense competition. The business is well advanced on preparations for the Mortgage Credit Directive ("MCD") which comes into force in 2016. It held a series of learning academies for its broker partners in 2015, providing an introduction to the MCD and the regulatory changes that will widely impact the first and second charge mortgage market when advisers will become required to advise customers of the potential suitability of second charge mortgages.

Differentiation

The business focuses activity where our strong relationships, specialist knowledge and commitment to service can be clearly evidenced, and where opportunities to generate strong risk adjusted returns have been identified. This model, combined with a pragmatic and personal approach generates strong, positive feedback from customers and has received widespread industry recognition.

Trends

The business has led the industry supporting broker partners to prepare for the MCD, and has extended its reach to those networks that it believes will play a leading part post-MCD. The business has focused on reinforcing its market leading service proposition, building on existing relationships and leveraging the benefits of its proprietary broker platform.

Consumer Lending

The loan book for the Consumer Lending division stood at £333m at 31 December 2015 (2014: £227m). The gross asset yield for 2015 was 10.6% (2014: 11.5%), the decrease of 0.9% was mainly driven by increased liquidity in the market. The cost of risk decreased by 1.6% to 0.7% in 2015 (2014: 2.3%), mainly driven by the continuation of lower arrears and a debt sale during the year.

Activity

Consumer Lending provides unsecured loans for:

· Home Improvement: working with selected leading national and regional home improvement companies. Sales take place in clients' homes to home owners

· Holiday Ownership: the business has an established reputation in this sub-sector, working with carefully chosen holiday ownership companies to offer customers holiday ownership finance in the UK and Europe

· Retail: working with in-store and online retailers, as well as dental clinics and veterinary practices, to tailor consumer finance packages

· Consumer Personal Loans: through a selected network of business partners.

In 2015 Consumer Lending strengthened its position as one of the key lenders in the home improvement market and secured some notable relationships. Consumer Lending saw significant growth in 2015 across both its retail finance business and personal loans building its loan book to £333m (2014: £227m).

Differentiation

Consumer Lending delivers specialism and a deep understanding of the markets in which it operates, through the expertise of our teams of industry specialists who innovate and build our specialist propositions to meet clearly identified customer needs. The business benefits from innovative solutions; including E-signature tablet technology that allows clients to sign paperless consumer agreements within their own homes, plus excellent risk metrics and scoring techniques. These innovations contribute to Consumer Lending's recognition as a leader in its chosen markets as it streamlines and shortens the cycle time for consumer credit approvals and completions.

Trends and opportunities

Although the home improvement and holiday ownership markets benefited from increased consumer confidence, increased liquidity created greater competition. The intermediary consumer markets also faced new regulatory hurdles, with responsibility for consumer credit moving to the FCA. The Government's new Feed in Tariff has reduced demand for solar installations, but as the market regroups the business is well placed to extend its support to key solar suppliers.

With its strong relationships, sound service proposition and personal approach, Consumer Lending is able to counter price-led competition with value-added propositions. The business has invested significantly to support its intermediary partners meet new regulatory requirements and works with partners to ensure that we can deliver the right product for the right customer at a fair rate.

Retail savings

Activity

The retail savings business provides bond deposits for terms of up to five years, ISAs, easy access savings and notice accounts, sourced from personal retail depositors as well as from business, trust and charity customers. This deposit base provides a stable source of funding for the Group's five lending divisions, and the Retail Savings team works closely with the Treasury and Finance functions to manage the on-going funding and liquidity requirements of the Group.

Whilst the business attracts deposits from all customer demographics, nearly two thirds of the deposit base continues to be sourced from affluent customers with a wide range of savings needs and high average balances.

In 2015 Savings increased its deposit base to £3,186m (2014:£2,421m) whilst continuing to deliver quality service through our dedicated customer service teams, achieving a 94% customer satisfaction score. Retail Savings continued to raise funds at a lower rate than its historic book, providing a positive downward trajectory in the overall Savings book cost of funds. Cost of funds in 2015 was 2.3% (2014: 2.9%). 

Differentiation

The business offers transparent pricing for existing and new customers, and maintains consistently competitive rates across its suite of simple and straightforward savings offerings. In the interest of ensuring fair customer outcomes the business is pro-active in communicating new interest rates to existing customers and there is no bond auto-rollover. Its high service standards, showcased through its UK contact centre, and non-advised service with no sales incentive, continue to win praise from customers.

Trends

During 2015, savings rates were impacted by the number of new market entrants in the savings market, while consumer appetite shifted to shorter duration products in anticipation of an interest rate rise.

The business addressed these challenges by continuing its investment in infrastructure, analytical capability and new product development while also extending its distribution options.

PRINCIPAL RISK CATEGORIES

The principal risk categories faced by the Group are as follows:

Credit Risk

This risk has two main components:

· Customer risk (from core lending activity); and

· Treasury credit risk (from treasury activity).

The Group's Treasury Credit Risk exposure is limited to short term deposits placed with leading UK banks.

Credit Risk Approval Process

The Group operates a hierarchy of Lending authorities based principally upon the size of credit risk exposure to counterparties, group of connected counterparties or, where applicable, a portfolio of lending assets that are subject to a single transaction. In addition to maximum amounts of credit exposure, sole Lending Mandates may stipulate sub-limits and / or further conditions and criteria.

Each division has a maximum credit approval authority delegated to named individuals operating within a policy framework. Above the divisional authority, an independent second line credit risk officer requires to approve the proposal. All facilities above the authority of the second line credit officers are approved by the Credit Approval Committee.

Lending is advanced subject to Group lending approval policy and specific credit criteria. When evaluating the credit quality and covenant of the borrower significant emphasis is placed on the nature of the underlying collateral. This process also includes the review of the Board's appetite for concentration risk.

Approval and on-going monitoring control is exercised both within the businesses and through oversight by the Group Credit Risk function. This applies to both individual transactions as well as at the portfolio level by way of monthly credit information reporting, measurement against Risk Appetite limits and testing via risk quality assurance reviews.

The Divisions operate timely collections and arrears management processes. It is recognised that the credit environment is currently benign and we plan in 2016 to undertake a group level strategic review of operational arrangements and capabilities for non-performing loan management to ensure that the Group is capable of operating in a more challenging environment where interest rates are rising and there is lower demand and liquidity in property markets.

Liquidity and Market Risk

Liquidity risk is the risk that the Group is unable to meet its current and future financial obligations as they fall due, or is only able to do so at excessive cost.

Market risk is the risk associated with adverse changes in the fair value of positions held by the Group as a result of movement in market factors such as interest rates, currencies, volatility and credit spreads.

The Group has, therefore, developed comprehensive funding and liquidity policies to ensure that it maintains sufficient liquid assets to be able to meet all its financial obligations and maintain public confidence.

The Group's Treasury function is responsible for the day to day management of the Group's liquidity and wholesale funding. The Board sets limits over the level, composition, and maturity of liquidity and deposit funding balances, reviewing these at least annually. Compliance with these limits is monitored daily by Finance and Risk personnel independent of Treasury and additionally, a series of liquidity stress tests are performed weekly by Risk and formally reported to ALCO and the Board to ensure that the Group maintains adequate liquidity for business purposes even under stressed conditions.

The Group reports its liquidity position against its Liquidity Coverage Ratio, Net Stable Funding Ratio and other key regulatory ratios for regulatory purposes.

A liquid asset buffer of government Treasury Bills acquired under the FLS, and reserves with the Bank of England, are maintained as a source of high quality liquid assets that can be called upon to create sufficient liquidity in order to meet liabilities on demand. 

Operational Risk

The Board Risk Committee received regular reports across the spectrum of operational risks and information security. These reports covered incidents that have arisen to allow the Committee to assess management's response and proposed remedial actions. Although a number of incidents were raised during the course of 2015, the Committee was satisfied that the action taken was appropriate and that the control of operational incidents continued to improve. In response to the growing threat posed by Information Security, a full Cyber Crime risk assessment was undertaken to assess the adequacy of the Group's internal control framework to respond to this threat and our planned investment to deal with increasing levels of cyber risk. The operational risk reports were developed throughout 2015 to include a focus on forward looking risks which permits a more strategic discussion at the Board Risk Committee level.

Conduct, Legal and Compliance Risk

The Group continually reviews its risk management approach to reflect the regulatory and legal environment in which it operates.

The Group has no appetite for knowingly behaving inappropriately, resulting in unfair outcomes for its customers. During 2015 the Group reviewed its Risk Appetite for Conduct Risk to introduce measures across the conduct risk lifecycle, which includes product design, sales or after sales processes and culture. These measures are reported to the Board monthly and provide the basis for demonstrating that the Group is operating within its risk appetite. Where the Group identifies potential unintended outcomes for customers the Group uses its risk management process to proactively escalate, agreeing appropriate actions and communicating clearly with its customers to ensure a fair outcome is achieved.

Strategic Risk

Strategic risk focusses on large, long term risks that could become a material issue for the delivery of the Group's goals and objectives. Management of strategic risk is primarily the responsibility of the Executive. The management of strategic risk is intrinsically linked to the corporate planning and stress testing processes and is further supported by the regular provision of consolidated business performance and risk reporting to the Executive and Board. The Board has received and approved a number of reports during 2015 including the five year plan, the Group's Risk Appetite and active engagement in the formation of the Group's ICAAP and ILAAP that are critical tools to managing strategic risk.

Systems and Change Risk

Customer expectations for service availability are rising with the rapid pace of new technologies leading to a significantly lower tolerance for service disruption. The Group recognises that in order to continue to be recognised for very high levels of customer satisfaction it needs to continually monitor systems risk and ensure that change is delivered with minimum disruption to customers. During 2015 the Group has reviewed its Risk Appetite for Systems and Change Risk and plans in 2016 to review and further enhance its business continuity and disaster recovery capability.

Top And Emerging Risks

The Group's top and emerging risks are identified through the process outlined in the 'Risk Management Framework' section and are considered regularly by management and subsequently by the Board Risk Committee.

The Group sees six themes as its top and emerging risks:

· Economic Environment;

· Pace of Regulatory Change;

· Business Performance and Scale;

· Intermediary and Outsourcing;

· Pace, Scale of Change and Management Stretch; and

· Information Security.

These themes, together with the Group's strategy to mitigate the risk and the direction of each theme, are considered further in the following sections:

Statement of Directors' Responsibilities in respect of the Annual Report and Accounts

The Directors are responsible for preparing the Annual Report and Accounts and the Group and Parent Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial report

The Directors as at the date of this statement confirm that to the best of their knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Daniel Rushbrook

Company Secretary

2 March 2016

The notes on the following pages are an integral part of these financial statements.

These financial statements were approved by the Board of Directors on 2 March 2016 and were signed on its behalf by:

Iain Cornish Tom Wood

Chairman Chief Financial Officer

Registered number 07240248

Notes to the Financial Statements

1. Basis of preparation

1.1 Reporting entity

Shawbrook Group plc is domiciled in the UK. The Company's registered office is at Lutea House, Warley Hill Business Park, Brentwood, Essex, CM13 3BE. The Consolidated Financial Statements of Shawbrook Group plc, for the year ended 31 December 2015, comprise the results of the Company and its subsidiaries (together referred to as the Group and individually as group entities).

1.2 Basis of accounting

The Group's financial statements have been prepared on a historical cost basis and in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The financial statements are drawn up in accordance with the Companies Act 2006. No individual profit or loss account or related notes are presented for the Company as permitted by section 408 (4) of the Companies Act 2006.

1.3 Functional and presentation currency

The consolidated financial statements are presented in Pounds Sterling, which is the Group's functional currency.

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currencies are translated at the rate prevailing at the balance sheet date. Foreign exchange gains and losses resulting from the restatement and settlement of such transactions are recognised in profit or loss. Non-monetary items (which are assets and liabilities which do not attach to a right to receive or an obligation to pay a fixed or determinable number of units of currency) measured at amortised cost and denominated in foreign currencies are translated at the exchange rate at the date of the transaction.

1.4 IPO Costs

Qualifying costs directly attributable to the issue of share capital were charged directly to equity and other associated costs were charged to the Income Statement.

1.5 Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group has the resources to continue in business for at least twelve months following the year end. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including the current state of the balance sheet, future projections of profitability, cash flows and capital resources and the longer term strategy of the business. The Group's capital and liquidity plans, including stress tests, have been reviewed by the Directors.

The Group's forecasts and projections show that it will be able to operate at adequate levels of both liquidity and capital for at least twelve months following the year end, including a range of stressed scenarios, the availability of alternative sources of capital if required and appropriate management actions.

After making due enquiries, the Directors believe that the Group has sufficient resources to continue its activities for at least twelve months following the year end, and the Group has sufficient capital to enable it to continue to meet its regulatory capital requirements as set out by the Prudential Regulation Authority.

1.6 Basis of consolidation

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Entities are regarded as subsidiaries where the Group has the power over an investee, exposure or rights to variable returns from its involvement with the investee and the ability to affect those returns. Inter-company transactions and balances are eliminated upon consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that power over an investee, exposure or rights to variable returns and the ability to affect these returns ceases. A Special Purpose Entity (SPE) is an entity which is formed for a single, well-defined and narrow, lawful purpose. The Group did not have any SPEs in the year. Accounting policies are applied consistently across the Group.

These financial statements consolidate the results of the subsidiary companies set out in note 31.

1.7 Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS adopted in the EU requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on Management's best knowledge of the amount, actual results may differ ultimately from those estimates.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed within the notes to the financial statements which the estimate or judgement relates to as follows:

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

1.8 New Standards and interpretations not yet adopted

A number of International Accounting Standards Board (IASB) pronouncements have been issued but are not effective for this financial year. The standards considered most relevant to the Group are as follows:

· IFRS 9 'Financial Instruments'

Effective from 1 January 2018 and not yet endorsed by the EU. The standard largely replaces IAS 39, addressing recognition, bases of valuation, income recognition methods, impairment and hedging for financial instruments.

While areas such as the amortised cost basis of valuation and the effective interest rate method of recognition are largely unchanged in the new standard, the new basis of accounting for impairments is likely to have a significant impact on the Group due to the requirement of earlier recognition of losses. Changes to the hedging rules are not expected to have a significant impact on the Group as the Group currently uses limited hedge accounting.

Early adoption is permitted once endorsed by the EU. The Group has started to design systems to facilitate phase one of the process, and has plans in place to build and implement all required systems and processes before the effective date. The Group has commissioned external consultants to assist in monitoring the development of IFRS 9, considering the associated impact on the Group's financial statements and ensuring total compliance with the standard; the Group intends to adopt the standard on the date it becomes effective.

· IFRS 16 'Leases'

Effective from 1 January 2019 and not yet endorsed by the EU. The standard replaces IAS 17, IFRIC 4, SIC-15 and SIC 27. It applies to all leasing arrangements. The standard introduces a new recognition model that recognises all leases on a lessee's balance sheet (subject to certain exemptions), reducing off-balance sheet financing and increasing balance sheet value and operating profit. Lessor accounting is largely unchanged. Early adoption is permitted if IFRS 15 'Revenue from Contracts with Customers' has also been applied. The Group is considering the impact on the Group's financial statements, although the standard is not anticipated to have a material impact on the Group; the Group intends to adopt the standard on the date it becomes effective.

· Amendments to IAS 16 and IAS 38 'Clarification of Acceptable Methods of Depreciation and Amortisation'

Effective from 1 February 2016 and not yet endorsed by the EU. The amendments introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. This presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are 'highly correlated', or when the intangible asset is expressed as a measure of revenue. While this is not an outright ban, it creates a high hurdle for when these methods may be used for intangible assets. This is unlikely to have a material impact on the Group. The Group intends to adopt the standard on the date it becomes effective.

· IFRS 15 'Revenue from Contracts with Customers'

Effective from 1 January 2018 and not yet endorsed by the EU.

The standard replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC-3. It applies to contracts with customers but does not apply to insurance contracts, financial instruments or lease contracts, which fall under the scope of other IFRSs. It also does not apply if two companies under the same line of business exchange non-monetary assets to facilitate sales to other parties.

The standard introduces a new revenue recognition model that recognises revenue either at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much, and when revenue is recognised. This is unlikely to have a material impact on the Group. The Group intends to adopt the standard on the date it becomes effective.

2. Operating segments

The Group has six reportable operating segments as described below which are based on the Group's five lending divisions plus a Central segment which represents the Deposit business, Central functions and shared central costs. The underlying basis is the basis on which financial information is presented to the chief operating decision maker which excludes certain items included in the statutory results.

The following summary describes the operations in each of the Group's reportable segments:

· Commercial Mortgages - provides the following key products, distributed primarily via a broker panel of c. 400 accredited brokers:

o Residential: loans to experienced buy-to-let property investors;

o Semi-Commercial: loans for mixed use residential and commercial property operated by either seasoned SMEs or investors;

o Commercial: loans for properties operated by either seasoned SMEs or investors;

o Short term loans: loans for property refurbishment for professional property investors; and

o HMO Investment: loans for multilet properties operated by property investors.

· Asset Finance - provides the following key products, predominately originated via a direct origination team who have long standing relationships with clients:

o Corporate Asset Finance: provides full pay-out finance leases and hire purchase agreements to UK SMEs secured on hard, mainly wheeled, assets;

o Block and Wholesale Finance: provides block lines and wholesale facilities to SMEs secured against loan receivables; and

o Healthcare Finance: provides operating and finance leases to the NHS Trusts and other private healthcare providers.

· Business Credit - provides asset based working capital and loan facilities to SMEs with invoice discounting as the core product for all clients accounting for 77% of the book. It also complements the invoice discounting facility with loans secured against stock, plant and machinery and property. New business is originated through a national network of direct sales staff providing full UK coverage.

· Secured Lending - second charge mortgage lender, loans typically used for home improvements, large consumer purchases and debt consolidation. The book is weighted towards London and the South East, distributed through a broker panel of c. 85 accredited brokers.

· Consumer Lending - provides the following key products, predominantly to prime home owners:

o Home improvement loans sold by c. 100 established suppliers focussing on products such as windows, kitchens, bedrooms, bathrooms, conservatories and solar panels;

o Holiday ownership loans sold through proven specialist time share providers;

o Retail point of sale loans sold through c. 20 retailers; and

o Personal loans 'Test and Learn' process launched in January 2014.

· Central - this represents the reconciling items between the total of the five lending segments and the consolidated income statement. As well as common costs, Central includes the Group's Treasury function and Retail Savings business which are responsible for raising finance on behalf of the lending segments.

Information regarding the results of each reportable segment and their reconciliation to the total results of the Group are included below. Performance is measured based on the product contribution as included in the internal Management reports. All revenue for each operating segment is earned from external customers.