Financial Services

DF Capital Holdings plc

Analysts

Company Description

DF Capital (DFC) is a specialist SME (Small and Medium sized Enterprise) lender and personal savings bank operating in the UK. It secured permission to commence deposit taking at the end of September 2020 which allowed it to successfully replace more costly wholesale funding with retail deposits. DFC has a highly experienced management team which is focused on delivering swift growth from its existing inventory finance product to run-rate profitability in Q4 2021. Thereafter, it also holds the promise of supporting a poorly served market with the addition of new, longer term loan products in adjacent segments in the future. Its capital raise in early 2021 effectively doubled its lending capacity from a regulatory capital perspective to around £550m.

Investment Summary

DFC has a highly experienced management team which is focused on delivering swift growth from its existing inventory finance product to run-rate profitability in Q4 2021. Importantly, it received full authorisation for deposit taking with no restrictions. We expect its deposit base and digital processes to provide further impetus by supporting the addition of new products. Credit quality has remained well controlled and the Group was able to start 2021 with no COVID related legacy in its loan book. We believe that DFC has an excellent opportunity to grow its loan book swiftly, combining its low-cost funding with a robust business model in what is a poorly served SME lending market.