Canada Group reports loss as subsidiary prepares for banking licence
Canada Group has reported a loss of £9.7m as its subsidiary prepares to become a fully authorised bank.
In July, Recognise Financial Services reached a major milestone in its journey towards becoming a bank when the Prudential Regulation Authority issued its Total Capital Requirement letter.
The figures
Canada Group (COLG) reported a loss before tax of £9.7m in the year to 31 March 2020, compared to a loss of £3.5m a year earlier.
The costs associated with the banking licence application for Recognise was £3.4m compared to £1.7m a year before.
The increase of £4.5m in the loss for the year before costs associated with the banking licence was in part due to a reduction of £1.5m in the provisions for impairment of goodwill and an increase of £1.1m in staff costs.
The board said it does not recommend payment of a dividend.
Why it’s interesting
COLG expects Recognise to receive authorisation to take deposits and to obtain a full banking licence in the first half of next year.
In a statement the investment group said it is in “advanced discussions with a third party on a fund raise” which, subject to regulatory requirements, will provide capital for Recognise to move to a full licence and support short-term lending activities.
“The strategy for Recognise remains robust and is potentially even more relevant given the unprecedented impact of COVID-19. It is to create a new UK SME Bank, using versatile cloud-based technology, to support a relationship-led lending operation which will focus on delivering service excellence with speed of decision-making and execution alongside flexibility of structuring.”
All new lending across the group has been put on hold since the lockdown restrictions were imposed in March. All new lending operations will be made through Recognise, and the PFS loan book will transfer to increase the subsidiary’s capital base.
Another subsidiary, Acorn to Oaks Financial Services, set up its commercial finance broking division this year and delivered a profit.
The increased losses were also in part due to the effects of the pandemic on the housing market. The valuation of its subsidiary Milton Homes’ properties dropped but generated £1.5m across the year.
What Canada Group said
Chief executive Michael Goldstein said: “Given the exceptional circumstances facing the world today, I am pleased to be able to report on another year of positive activity in delivering our long-term growth strategy of serving the vital UK SME market by establishing a new business bank.”