Profits triple at SoftBank-backed startup OakNorth

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
OakNorth cofounders Rishi Khosla, left, and Joel Perlman. Photo: OakNorth
OakNorth cofounders Rishi Khosla, left, and Joel Perlman. Photo: OakNorth

Profits at startup bank OakNorth jumped by 220% to £33.9m ($44.8m) last year, the company said on Wednesday.

Accounting filed with Companies House this week shows the bank’s loan book grew by 160% to £2.2bn in 2018 as profits soared.

OakNorth was founded in 2015 as an entrepreneur-focused bank that makes loans of between £500,000 and £40m to fast-growing businesses such as healthy fast food chain Leon and house builder Galliard.

“The companies we are lending to are home-builders, job-creators, productivity-boosters, and drivers of GDP growth, which have a transformative impact on our community and the health of the wider economy,” Rishi Khosla, the CEO and cofounder of OakNorth, said in a statement.

“To continue reinforcing this positive cycle, we will be donating 1% of group profits to supporting charitable causes and social entrepreneurship.”

OakNorth has lent £3bn to businesses to date and said it has not yet experienced a default. It received £400m of loan repayments last year.

The performance has been helped by OakNorth’s own in-house loan pricing and tracking technology, dubbed OakNorth Artificial Intelligence. CFO Cristina Alba Ochoa told a conference this week that licensing this technology to other banks around the world will be a key part of OakNorth’s growth strategy in future.

Khosla said in a statement: “Through the licensing of our platform, OakNorth Analytical Intelligence, to bank partners around the world, we will bring a similar impact to entrepreneurs and communities globally.”

The results underline the rationale for SoftBank’s $440m investment in OakNorth at the start of 2019. SoftBank’s $100bn Vision Fund backed OakNorth in February in a funding round that valued the company at $2.3bn.

Khosla was also bullish on the prospects for the bank in the UK despite Brexit. He wrote in the annual report: “Irrespective of what the future might hold in terms of Brexit and the economy, we will remain focused on helping small and medium sized growth businesses access better financing to fund their development.

“These businesses are the backbone of economies and communities, as evidenced by the thousands of new homes and jobs created from the loans we’ve made so far, so it is vital that we continue to support them.”