OakNorth profits rise 23 per cent as digital bank surpasses £10bn in business lending

OakNorth, the digital bank for entrepreneurs, has reported a 23 per cent rise in its pre-tax profits for the 2023 fiscal.

Profits stood at 187.3 million, as the bank provided over £1.7 billion of gross new lending facilities in 2023, with businesses in the US receiving around $200m of this.

OakNorth, which began lending to businesses in the US in the latter half of last year, said it has applied for a US representative office and is actively exploring M&A opportunities there.

OakNorth focuses on supporting scale-ups: businesses with £1m-£100m turnover that it regards as the drivers of productivity, job creation, innovation, and GDP growth. Research it commissioned with the Social Market Foundation last year revealed that whilst these businesses represent just 1 per cent of all SMEs in the UK, they account for 22 per cent of all SME turnover and 8 per cent of all SME employment.

Since its launch in September 2015, OakNorth has lent over £10bn which has supported the creation of over 47,000 jobs and over 29,000 new homes, the majority of which are social and affordable housing.

“Joel and I founded OakNorth to transform how entrepreneurs grow their businesses, by providing them access to much-needed credit and personalised banking services. The last 12 months have been no exception, with £1.7bn lent to businesses across the UK and the US,” Rishi Khosla, chief executive and co-founder of OakNorth, said.

“We continued developing our credit approach and expanded our support for SMEs with our business banking offering, starting with business current and savings accounts; and we welcomed a new chair, Lord Adair Turner, who will support us in our next phase of growth.”

OakNorth said its unique approach to lending, based on building a granular, forward-looking view of performance and risk, enables it to better understand its customers’ trajectories and provide them with the insights they need to succeed and scale.

The 2023 Annual Report provides numerous examples of businesses across the UK and across different sectors that it has supported, enabling them to pursue their growth ambitions through economic cycles. By the end of 2023, its facilities stood at £5.3bn, up from £4.6bn in 2022, and it has an industry-leading cost-to-income/efficiency ratio of 28 per cent as well as an RORE (return on retained earnings) of 22 per cent.

“Despite numerous ongoing economic challenges, this has been another strong year for OakNorth, showing consistent profitability and high growth. In the year ahead, we’ll maintain our firm commitment to supporting ambitious scaling businesses, whose contribution to growth is more important than ever in the current macroeconomic climate,” Khosla added.