Key facts
- Lloyds Banking Group and private equity firm CVC Capital Partners are reportedly considering bids for Aldermore.
- Aldermore is being sold by its South African owner, FirstRand, due to the FCA's £9.1 billion motor finance mis-selling compensation scheme.
- Aldermore has increased its provisions for the scandal to £750 million.
- Shawbrook Bank is also reportedly exploring a combination with Aldermore.
- FirstRand views the FCA's proposed redress scheme as disproportionate and unfair.
The race to acquire UK challenger bank Aldermore is intensifying, with private equity giant CVC Capital Partners reportedly preparing to enter an auction for the lender. Lloyds Banking Group is also said to be examining a potential takeover, according to reports citing City sources.
Aldermore has been placed on the market by its South African owner, FirstRand, following the Financial Conduct Authority's (FCA) proposed £9.1 billion compensation scheme for victims of motor finance mis-selling. FirstRand has expressed strong objections to the scheme, deeming it disproportionate and unfair, and has increased Aldermore's provisions for the scandal to £750 million.
Sources indicate that Lloyds is interested in Aldermore due to its capabilities in small business lending and project finance. However, it remains uncertain whether Lloyds will proceed with a formal bid. Shawbrook Bank, another UK challenger bank, is also reportedly considering a combination with Aldermore, which could spur further consolidation in the sector.
Any potential buyer of Aldermore will likely require an indemnity against further compensation liabilities, given the ongoing uncertainty surrounding the FCA's redress program. The FCA has been notified of legal challenges to its scheme from the finance arms of BMW and Volkswagen, among others. FirstRand has stated its commitment to working with Aldermore's board and regulators to facilitate an orderly ownership transition while protecting shareholder value.