Allica Bank, a fintech challenger bank and asset finance provider, has acquired approximately 2,000 SME customers and about £600m of associated lending from AIB Group (UK) Plc. 

The acquisition, which is Allica’s first major buy since gaining its banking license in September 2019, follows a decision by Allied Irish Banks to exit from the SME market in Great Britain. 

Associated risk-weighted assets (RWAs) on the SME loan transaction, the minimum amount of regulatory capital that must be held by banks to maintain their solvency, was approximately £400m in the first half of 2021. The loan portfolio incurred a loss before tax of about £9m for the full-year 2020, according to a note by John Cronin, financials analyst for Goodbody.

In a statement, Allica said since opening its doors to SME lending in March 2020, it has launched a new network of local SME relationship managers offering tailored SME lending expertise able to fully support AIB’s SME customers. It added that 85 per cent of its existing lending is to businesses outside London.

The bank said the acquisition is expected to fuel the expansion of its product offering and comes as Allica is poised to launch its Business Rewards Account early next year.

Allica is also expected to bring forward the target date for reaching profitability to the middle of 2022 upon full completion of the transaction, “given Allica Bank’s continued organic growth combined with the quality of the AIB SME lending portfolio,” it said in a statement. 

When the transaction is completed, Allica is expected to have a combined total lending book of more than £1bn.

Richard Davies, Allica Bank CEO, said:

“We’re working closely with AIB to ensure a smooth and seamless transition for AIB customers who we look forward to providing with a secure and sustainable home. We’re proud of the strong technology and tailored personal service we’re able to offer Allica Bank customers and are delighted to be able to extend this service to AIB’s customers.

“Allica Bank is fast becoming the SME lender of choice, not least due to the investment we continue to make in developing both our direct relationship with SMEs and via our broker channel. This acquisition enables us to support and scale even more of Britain’s established SMEs and growth companies at a time when SMEs are looking for more tailored support from their bank.

“As we said at our recent trading update, we’re laser focused on growing our lending to multiple billions over the coming years as we seek to support the underserved and overlooked SMEs across the UK.”

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