In August last year, the FT reflected that the Coronavirus pandemic posed a significant challenge to the financial services industry. Above all, it noted; “particularly those focused on bread and butter lending to small businesses and consumers — (which) are facing their toughest test since the financial crisis of 2008.”
Within the same article the manager of one fund that is a major shareholder in British banks expressed the challenges facing the investment community and noted; “Now more than ever, it’s about picking the business models that are right for the future and sticking with them.”
One of those right business models might well be specialist motor finance lender MotoNovo Finance, whose latest securitisation fundraising programme very significantly exceeded all expectations. It seems investors like what they are seeing.
The threat to the financial community created by the pandemic and its impact on businesses and individuals has been evident. The significant “forward-looking” expected credit losses (ECLs) published across the financial services sector as required under (International Financial Reporting Standards (IFRS 9) have illustrated the very significant depth of concern about future bad debt.
Concern about future bad debt was also illustrated by restrictions or temporary pauses in lending reported by Moneyfacts.co.uk in September, as the publication pointed to a reduction of 59% in the supply of loans during lockdown (April to June 2020) compared to the first three months of 2020.
It is sometimes said that the worst of times can bring out the best in people. MotoNovo Finance, one of the UK’s largest car finance providers, switched its team of over 700 people to home-working. Fully equipped, continuity was assured with the business up and running within 24 hours. Pressure points to support worried customers and their forbearance needs were addressed with the rapid redeployment of people and new technology. The business was highly proactive in communicating with customers and retailers, keeping them up to date with help and support options.
Crucially the business kept lending with no changes to its credit approach. As MotoNovo CEO Mark Standish notes; “We have a proud, successful history of innovation and change. When lockdown struck, our immediate reaction was to care for our people and then to press ‘Go’ on reimagining and reinventing the future.”
The impact has been impressive; a series of innovations have been launched to support the reinvention of dealer finance which have been well-received, by car retailers and consumers. Success has seen the business win a series of awards in the UK and Europe. From a business perspective, while volumes inevitably dipped during the lockdown, they surged in the aftermath of the initial lockdown.
Record volumes created a critical business test, investor confidence in MotoNovo’s approach as the business announced its latest funding securitisation programme (Turbo 9). The support from investors was remarkable;
- The fundraising target was to exceed £300m; the result was a £520m issuance across 16 investors. It was a figure well beyond all expectations
- This was the largest issuance across MotoNovo’s securitisation programme and the largest order book with over £800m orders secured during a short two day fundraising window
Reflecting on the result Mark notes; “Against such an unprecedented market backdrop, it was reassuring to have such strong demand and support from both long term investors as well as new investors to the programme. I couldn’t be prouder of the way our team has stepped up to the challenge and embraced the opportunity to reinvent the future of car finance.”