Loans at Home owner pauses cash call after questions from watchdog

Leeds-based Non-Standard Finance (NSF) said the Financial Conduct Authority has a number of concerns about operating procedures in parts of its business.

The worries surround the company's guarantor loans division, which includes George Banco and TwoTrust.

On its website, NSF claims that the guarantor division, which lends on a guarantee from a friend or relative that they will pay back the loan if the borrower cannot, is the number two player in the UK market.

In a statement to shareholders, the business said: "NSF announces that it has been informed by the Financial Conduct Authority that, following a visit to the group's guarantor loans division in March 2020 as part of a multi-firm review into the sector, and having examined a selection of customer files, it has raised a number of concerns regarding certain aspects of the operating procedures and processes at the division."

NSF said it is carrying out an in-depth review and it is working with the FCA to clarify the scope of its concerns and find ways of addressing them.

It has now put a potential fundraising on hold, but still has the backing of its biggest investors should it need to go to shareholders for cash.

"Pending the outcome of this review, the group's consideration of a possible equity issue has been put on hold for the time being," it said.

"Alchemy, the group's largest shareholder, who was supportive of the proposed capital raise, has confirmed that it remains supportive of providing further capital to the group and is engaging with the board in this regard."

Analyst Gary Greenwood at Shore Capital said: "In an unexpected turn of events, Non-Standard Finance has announced that the Financial Conduct Authority has raised concerns about certain operating procedures in its guarantor lending division.

"Consequently, the group is now working with the FCA to perform an in-depth review of the business, the duration and outcome of which remains uncertain. To that end, the previously announced plan for a potential equity raise (to bolster the balance sheet and support future loan book growth) has been put on hold, although the group states that its largest shareholder, Alchemy (which owns 29.9 per cent of the company’s ordinary share capital), remains supportive.

"We make no changes to our base case forecasts at this stage, which are currently predicated on the group not raising equity and managing balance sheet growth to ensure that it continues to operate within its main lending covenant. However, we reflect that this announcement increases risk to the downside."