Bank Case Study | OakNorth Credit Intelligence

A compelling proof of value in the UK

Launched in the UK in September 2015, OakNorth Bank was the first bank globally to leverage the ON Credit Intelligence Suite. This has enabled it to achieve results that rank it among the top 1% of commercial banks globally.

Cumulative defaults since inception

LTV

NET LEVERAGE

TOTAL LENDING SINCE 2015 LAUNCH

DEALS/RM vs. 5-8 AT OTHER UK BANKS

EFFICIENCY RATIO TARGETING <20%

NET PROMOTER SCORE vs. 42 FOR UK BANKS

ROE TARGETING 30+

Challenge

In 2005, OakNorth’s co-founders, Rishi Khosla and Joel Perlman, were looking for a working capital facility to support their growing business, Copal Partners, a financial research firm they’d founded three years previously.

They approached numerous high-street banks in the UK where the business was headquartered and kept getting variations of the same response – “the computer says ‘No’”. Despite being a profitable business with strong cash flow and retained clients, none of the commercial banks were willing to lend to them. It was too small a ticket to offset the costs the bank would incur in doing a fundamental assessment of their business and structuring a finance facility for their needs.

A few months later through one of their institutional client’s special situations desk, they managed to secure 100x the amount of debt for a dividend recap. So, an institutional division of a bank was able to support them, but the commercial lending part of the bank was not.

This experience stuck with them.

After they scaled Copal Partners to a 3,000-employee business and it was acquired by Moody’s Corporation (NYSE: MCO) in 2014, they then set out to address the funding gap they had experienced first hand.

"ON Credit Intelligence enables us to provide businesses with the bespoke deal structuring that’s typically reserved for large corporations. It brings credit insight about a borrower’s business back to the front line, democratizing this knowledge, so that our relationship managers have a deeper understanding of the business, its industry, and its sub-sector."

Neil Evans
Head of Credit Risk at OakNorth Bank

Opportunity and outcomes

Rishi and Joel wanted to first prove the proposition within their own bank in the UK – OakNorth Bank – which would leverage the ON Credit Intelligence Suite from the beginning.

Launched in September 2015, OakNorth Bank leverages ON Portfolio Insights and ON Credit Analysis to provide fast, flexible and accessible debt finance (from £500k to £45m) to the Missing Middle of commercial borrowers in the UK.

Despite experiencing not one, but two unprecedented events (Brexit and COVID-19) in its fairly short history, OakNorth Bank has leveraged ON Portfolio Monitoring to lend several billion pounds to hundreds of businesses across the UK.

In 2020, OakNorth Bank was ranked as the fastest-growing business in Europe by the Financial Times (FT 1000), and has performance metrics that place it among the top 1% of commercial banks globally - an ROE of 23%, an efficiency ratio of 27%, and a borrower Net Promoter Score of 82. Its loans have directly helped with the creation of tens of thousands of new homes and jobs across the country, as well as adding several billion pounds of GDP to the economy.

"The relationship managers on my team are able to transact several times more deals a year than they’ve been able to at other banks, as the technology unlocks efficiencies for them at the back end, so they have more time to originate new deals at the front end."

Ben Barbanel
Head of Debt Finance at OakNorth Bank

Let's get ON with it

Brochure ON Credit Intelligence A unique and new way of operating that gives commercial lenders a 360-degree view of the borrower

Blog CNBC: Successful Lending to the 'Missing Middle' OakNorth co-founder, Rishi Khosla, on how lenders need to take a bottoms-up, granular, forward-looking view of their loan book Read More

Solution Brief Reinventing credit analysis and monitoring with machine learning Grab your copy of the Celent overview of the OakNorth Credit Intelligence Suite