TPG’s Bonderman Joins U.S. Financiers Taking on Big U.K. Banks

  • TPG founder, Falcon Edge chief investing in Redwood Bank
  • Lender started by David Rowland applied for U.K. bank license

Yet more U.S. finance tycoons are lining up to give big U.K. banks a run for their money.

TPG Capital founder David Bonderman and Falcon Edge Capital Chairman Rick Gerson are among several American financiers backing Redwood Bank a lender to small British firms, the bank said in a statement Monday. Redwood also said it applied to U.K. regulators for a license to operate in the country.

The investors join the ranks of billionaire Steven A. Cohen and other U.S. financiers from Chris Shumway to Richard LeFrak backing the growth of small British lenders that seek to crack the dominance of the nation’s biggest banks. More than a dozen new firms known in the U.K. as challenger banks have sprung up in the past few years, from former Commerce Bancorp Inc. Chairman Vernon Hill’s Metro Bank Plc to Richard Branson’s Virgin Money Holdings UK Plc.

“This is an ideal time to apply for a full banking license,” Jonathan Rowland, the proposed chairman of Redwood Bank, said in the statement. Brexit will make it harder for major U.K. banks, while the country’s small-and medium-sized businesses “have shown a strong appetite for new market entrants offering competitive rates and superior customer service.”

Awaiting License

Redwood Bank, started by Rowland and his father, British property investor and Conservative Party donor David Rowland, said it expects to receive its license early next year and open to customers during 2017. They control the company’s majority shareholder, Acorn Global Investments, which is backed by Gerson as well as Wildcat Capital Management, Bonderman’s family office fund.

Redwood can target small business owners frustrated by bureaucracy at bigger U.K. lenders, Lee Robinson, a Monaco-based hedge fund executive who joined Acorn’s board last year, said in a phone interview. The head of Altana Wealth Ltd., an investment firm that trades corporate debt, also said Redwood’s focus on counties surrounding the capital should be seen as positive by the government.

“It’s not just hard to get finance, it’s hard for business owners to get decisions made quickly,” said Robinson, 47. “What challenger banks should be offering is not just access to capital but access to quicker decision-making processes.”

While challenger banks have gained share in some lending areas, none has emerged as a large-scale competitor. None has more than 40 billion pounds in total assets, a fraction of Lloyds Banking Group Plc’s 848 billion pounds ($1.03 billion).

Competition Encouraged

British lawmakers leaned on regulators to encourage more competition after the near-collapse of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, two of the country’s biggest lenders. It’s now easier and faster to get a banking license, with 15 granted since 2013. Another 20 firms are in talks to apply, people with knowledge of the matter have said. It can take a long time for them to become profitable, with Metro Bank yet to make a penny of profit in the past six years. The bank has said it expects to record a profit in the second half of 2016.

For more on Britain’s start-up firms seeking banking licenses, click here

Current and new shareholders in Acorn are planning to invest about 50 million pounds in the bank over the next five years, according to the statement. Other senior financiers backing the company include hedge fund manager David “Tiger” Williams, founder of Williams Trading.

Before it's here, it's on the Bloomberg Terminal.