GoSeigen wrote:Old thread but wanted to update with latest news, and also offer an apology to Mel and the MCB for my ultra-skeptical view: I think my caution may have been misplaced, because Castle Trust appear to be a serious business that is going places. I hope I didn't give them sleepless nights unnecessarily:
https://www.fintechfutures.com/2019/11/ ... nger-bank/GS
Article here which tries to unravel whether their bonds are inside or outside of the scheme which concludes with Castle Trust can assert whatever they want but the test will be determined by FSCS at the time of default:
https://bondreview.co.uk/2018/01/26/cas ... -the-fscs/Now, Castle Trust say they will get their banking licence in Spring 2020 if all goes well. The costs of obtaining and maintaining such a licence are not small and will eat up most or all or more of that £1.2 half year profit. Reference to PCF Bank who recently went through this process gives some estimate of this figure. Of course it will allow them to lower their cost of borrowing which I haven't calculated.
To my mind the money going into this sort of sector (P2P, minibonds etc.) is drying up and I wonder whether Castle Trust are trying to become a bank to overcome this problem.
Because Castle Trust have an underlying problem in that their loan profile does not meet their savers profile and need to continue issuing bonds to repay the expiring ones. Becoming a bank to offer instant access accounts (thus improving their NIM) makes the issue worse not better.
On balance they hold £163m of cash and cash equivalents against a loan book of £656m. I'm not exactly sure what the Tier1/2 capital requirements will be for them as a bank but they seem well capitalised. I note JC Flowers are they major shareholder and would I'm sure stump up any extra capital required. If I look at this and ignore the history it looks like a success story. They won't get my money though. Not until they get the banking licence. I can't quite put my finger on why.