Attracting more deposits from small businesses has helped FTSE 250 bank Aldermore (ALD) report a 109% underlying pre-tax profit rise in the six months to 30 June.

Shares in the bank advance 8.2% to 300.8p on beating expectations to make a taxable £40 million profit in its maiden results since listing in March. Net lending improved by £635 million, or 13%, to £5.4 billion and management expect to reach its £1.4 billion net lending target by the end of the year.

This comes despite the impending 8% tax on bank profits above £25 million that was unveiled during the summer budget. Management say they are looking into ways to mitigate that charge.

Deposits from small businesses were 20% higher at £1.2 billion compared the end of December. This is a market Aldermore has targeted believing it to be poorly served by the larger players.

To win new business it lets businesses open accounts online within 15 minutes, check the rates offered by more than 90 providers and choose how long they wish to deposit their cash.

Web - Aldermore - 27 August 2015

Diversifying its funding base away from mainly individual deposits has lowered the bank’s cost of capital. Costs fell to 53.4% of income, down from 63.7% a year earlier, which led to net interest margin rising 9% to 3.6%.

Analysts at Numis believe the bank will continue to deliver growth in the coming years. ‘The key driver is expected to be the improvement in operating efficiency. Aldermore has built its UK infrastructure and as its balance sheet scale increases we forecast the Cost:Income ratio will decline to 41.4% by December 2017.’

Issue Date: 27 Aug 2015