Shawbrook Group H1 Earnings Call Highlights

Key Points

• Strong first-half performance: Underlying profit before tax rose 16% to £195.5 million, while net operating income increased 15% to £387.2 million. The loan book grew 18% year over year to £20.1 billion, led by SME lending and retail mortgages.
• Capital strengthened despite higher credit costs: CET1 capital improved to 13.0%, with £410 million of surplus above regulatory requirements. Impairment losses increased to £50.7 million, including charges tied to the ThinCats acquisition and older development-finance loans.
• Guidance and strategic investments maintained: Shawbrook reaffirmed its 2026 targets, including approximately £21 billion of loans, a cost-to-income ratio below 38% and roughly 17% return on tangible equity. The bank is investing in automation and AI, which has reduced customer-service contacts and boosted software-development productivity.

Shawbrook Group LON: SHAW reported higher first-half profit and loan growth for 2026, while maintaining its full-year outlook as it continued to invest in technology, automation and artificial intelligence.

Underlying profit before tax rose 16% year-over-year to £195.5 million in the six months ended June, while net operating income increased 15% to £387.2 million. Net interest income grew 14% to £354.6 million, supported by originations that rose 13% and continued margin discipline, Chief Financial Officer Dylan Minto said during the company’s half-year results presentation.

Underlying basic earnings per share increased 15% to £0.265. The company’s underlying return on tangible equity was 18.1%, while its cost-to-income ratio improved to 36.4% from the prior period. Administrative expenses increased 5%, substantially below the growth rate in operating income.

Loan Growth and Segment Performance

Shawbrook’s total loan book reached £20.1 billion, including originate-to-distribute activity, representing 10% annualized growth over the first six months and an 18% increase from a year earlier. Minto said the bank remains focused on deploying capital based on risk-adjusted returns rather than pursuing volume alone.

• Real estate lending grew 8%, reflecting demand in Shawbrook’s target segments.
• SME lending increased 17%, supported by the follow-on ThinCats portfolio acquisition.
• Retail mortgage brands, including The Mortgage Lender and Bluestone Mortgages, expanded by £0.3 billion.
• In consumer finance, growth at JBR Motor Finance offset run-off portfolios as the group reallocated capital within the segment.

At the group level, risk-adjusted net operating income relative to risk-weighted asset density was unchanged at 5.5%. Consumer finance improved to 6.3%, SME remained at 4.8%, and retail mortgage brands rose to 8.6%, aided by gains from originate-to-distribute transactions. Real estate declined to 4.7% because of a limited number of specific provisions.

Other income included a £25.8 million gain from two originate-to-distribute transactions completed during the half. Minto said the transactions were brought forward because conditions in debt capital markets were attractive. Excluding the gain on sale, underlying profit before tax increased 17%, according to the company.

Credit Costs and Capital Position

Impairment losses on financial assets increased to £50.7 million, producing a cost of risk of 57 basis points. That figure included approximately £2.6 million of day-one expected credit loss associated with the ThinCats portfolio and a £15.6 million charge related to a ring-fenced portfolio of pre-2022 development finance loans.

The development finance portfolio consists of a handful of loans totaling £148 million. Minto said a majority of the portfolio had reached practical completion and was expected to reduce over time. Coverage on the portfolio increased to 35% at June 2026. Excluding both the ThinCats expected credit loss and the development finance charge, first-half cost of risk would have been 37 basis points.

Stage 1 balances represented 88.4% of the loan book, while Stage 3 loans accounted for 3.7%. The company said the pre-2022 development finance vintage represented about one-quarter of total Stage 3 balances. Net write-offs were 13 basis points, below Shawbrook’s historical median of 29 basis points, while arrears were flat at 1.7%.

Common equity tier 1 capital increased to 13.0% at the end of June from 12.4% at the end of 2025. The company generated 0.9 percentage points of organic capital during the half, including approximately 57 basis points from originate-to-distribute activity. Total capital rose to 16.4% from 14.8%, following a £250 million additional tier 1 issuance in May and an early tender to redeem an existing £124 million instrument.

Shawbrook said it had £410 million of CET1 surplus, equal to 3.3 percentage points above its 9.7% fully loaded regulatory CET1 requirement. It also said the planned sale of its £0.3 billion Blue Motor Finance loan book, agreed after the half-year end, would release a similar amount of CET1 capital.

Funding, Technology and AI

Customer deposits rose to £18.8 billion, a 4.9% annualized increase, while the loan-to-deposit ratio declined to 93.9% from 96.8% at year-end. Retail deposits represented about 91% of the group’s funding base, and approximately 96% of those balances were covered by the Financial Services Compensation Scheme, Minto said.

The cost of deposits declined to 3.80% from 3.92%. Chief Executive Officer Marcelino Castrillo said the company’s digital savings offering, broad product range and distribution partnerships gave it flexibility in a deposit market that he described as deep but diverse.

Castrillo also highlighted initiatives intended to improve efficiency, including combining retail mortgage brands and real estate operations, migrating customers to a common core banking platform, consolidating the physical footprint into three hubs, and completing the Playter integration within SME lending.

The company said AI-enabled service enhancements had reduced inbound savings messages and calls by 35%, while customer satisfaction remained at 92%. Castrillo said Shawbrook was deploying agentic AI systems across lending operations, including tools to prioritize SME inquiries, prepare real estate valuation-review documents and automate annual portfolio reviews.

Within software development, the company said it had seen productivity gains of approximately nine times on AI-assisted work. It added that up to 85% of code was now written by AI agents and largely reviewed by AI agents.

Outlook Reaffirmed

Shawbrook reiterated its full-year 2026 guidance, including a loan book of approximately £21 billion, a cost-to-income ratio below 38%, a pre-Basel 3.1 CET1 ratio above 13.2%, and underlying return on tangible equity of approximately 17%.

The group also reaffirmed its intention to pay a maiden ordinary dividend in respect of 2026 results, payable in 2027. Minto said the company remained confident it could absorb the expected impact of Basel 3.1, which takes effect on Jan. 1, 2027, while continuing to support growth and the planned dividend.

About Shawbrook Group (LON:SHAW)

Shawbrook Group plc is a lending and savings bank. The Company operates through four segments: Property Finance, Business Finance, Consumer Lending and Central. The Property Finance segment provides mortgages for investors, businesses and personal customers. It serves professional landlords and property traders in residential and commercial asset classes across long-term and shorter-term finance. The Business Finance segment includes propositions, such as the Regional Business Centers that provide finance solutions; Structured Finance proposition, which consists of lending to small and medium enterprise (SME) finance companies, and Specialist Sectors proposition, which consists of leasing and hire purchase finance solutions.

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