Sancus BMS Group The Future for Alternative Finance Andrew Whelan - PowerPoint PPT Presentation

Sancus BMS Group The Future for Alternative Finance Andrew Whelan May 2017

GLI Finance Investment Portfolio of SME Lending Platforms This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 2 | 11/05/2017

Bank lending to firms has collapsed over the last few years £10 Now finally billion stabilising Fall in lending to UK firms Source : Funding Options This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 3 | 11/05/2017

Online Technology and Disintermediation Future Travel Auctions Airlines Real Estate Accommodation Bank Lending Disintermediation “reduction in the use of intermediaries between producers and consumers” Structural and permanent change – bank lending is next 1995 2000 2015 2005 2010 4 This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 4 | 11/05/2017

Alternative Finance - Taxonomy Alternative Finance Model Definition Marketplace /P2P Consumer Lending Individuals or institutional funders provide a loan to a consumer borrower. Balance Sheet Consumer Lending The platform entity provides a loan directly to a consumer borrower. Marketplace/P2P Business Lending Individuals or institutional funders provide a loan to a business borrower. Balance Sheet Business Lending The platform entity provides a loan directly to a business borrower. Marketplace/P2P Real Estate Lending Individuals or institutional funders provide a loan secured against a property to a consumer or business borrower. Real Estate Crowdfunding Individuals or institutional funders provide equity or subordinated-debt financing for real estate. Invoice Trading/Supply Chain Finance Individuals or institutional funders purchase invoices or receivable notes from a business (at a discount). Equity-based Crowdfunding Individuals or institutional funders purchase equity issued by a company. Source : University of Cambridge Judge Business School This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 5 | 11/05/2017

Traditional Banking versus P2P Traditional Banks Borrower Sancus BMS Group Borrower  Government Endorsed • Cost Inefficiencies Lower Rates Margin Margin  Attractive Rates • & High Margins & Costs Costs Costs  Convenient • Costs Better Returns and Restrictive Lending Margins and Margins Lender Depositor Lenders and Borrowers share the margin that banks traditionally captured This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 6 | 11/05/2017

Alternative finance growth worldwide (US$ billion cumulative) Source : University of Cambridge Judge Business School / KPMG FinTech This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 7 | 11/05/2017

Alternative Finance Maturity by country (as at 2015) Adoption of alternative finance by country, adjusted for volume per capita. The maturity of each market shows USA ahead, followed by China and the UK Source : University of Cambridge Judge Business School / KPMG FinTech This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 8 | 11/05/2017

Total Quarterly P2P Cumulative Lending (UK estimate) Total amount lent to individuals/firms at the end of each period 10 9.18 9 8.13 8 7.25 6.42 7 5.5 6 £ billion 4.67 Total Cumulative Lending 5 3.91 Cumulative Business Lending 4 3.28 2.7 Cumulative Consumer Lending 3 2.27 2 1 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 Source : University of Cambridge Judge Business School This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 9 | 11/05/2017

BBB and ISIF – where do they come in? The British Business Bank Ireland Strategic Investment Fund  100% Government owned business development bank;  Managed and controlled by the National Treasury  “Making finance markets work better for smaller Management Agency; businesses”;  Policy of commercial investment to support economic  Aimed at start ups, high growth and viable but activity and employment in Ireland;  Strategy to co-invest with trusted partners; underfunded businesses;  Working with over 90 trusted partners;  Strong connections with both the public and private  Value of loans drawn 2016, £207m (2,015 loans). sectors across multiple industries;  Currently € 8 billion available to deploy. This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 10 | 11/05/2017

Evolution of the P2P Marketplace, moving to I2P and hybrid models. Consumer Debt Retail Capital Institutional Capital Real Estate Debt Balance Sheet Capital UK SME Loans SME Debt Online Peer-to-Peer Lenders Borrowers Marketplaces This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 11 | 11/05/2017

Poised for Institutional Capital as at June 2013 $2,500,000,000 2016 Prosper.com $2,000,000,000 Lending Club US$10bn Prosper.com $1,500,000,000 Prosper $1,000,000,000 SEC 2016 Registrati Lending on Club SEC Lending Registration $500,000,000 Club US$18bn $- Jun-07Oct-07Feb-08Jun-08Oct-08Feb-09Jun-09Oct-09Feb-10Jun-10Oct-10Feb-11Jun-11Oct-11Feb-12Jun-12Oct-12Feb-13Jun-13 HNW HNW Retail Retail Retail Family US P2P loan origination growth of 6% to 8%+ monthly Credit This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 12 | 11/05/2017

The Good, The Bad and The Ugly Our back yard Across the pond Not too far away A strong global economy, but uncertainty lies ahead. This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 13 | 11/05/2017

What about Brexit? Political and economic uncertainty What could happen What we have seen so far  Slow growth in UK;  £ weakened against $ and €;  Some real estate has declined in value;  Imported goods more expensive;  UK may create its own path in regulation of  UK downgraded by several credit agencies;  Disruption in the ability of UK banks to access funding. domestic financial services;  Significant uncertainty. What does it mean for Alternative Finance?  Banks still retreating from financing SMEs, more opportunities for borrowers;  Short term funding opportunities more attractively priced;  Lack of investment opportunities elsewhere makes alternative finance more attractive for funders. This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 14 | 11/05/2017

Brexit – Corporate sentiment in the market “What is the impact of Brexit on your plans for obtaining funding from alternative providers?” Puts plans on hold Limits opportunities Creates opportunities No impact Don't know 0 10 20 30 40 50 % Source Allen & Overy, Alternative Finance : A European Profile This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 15 | 11/05/2017

Brexit – Investor sentiment in the market “What is the impact of Brexit on your plans for providing alternative funding to large, medium and small businesses?” Creates opportunities Limits opportunities to fund businesses in UK I will look outside Europe No impact Don't know 0 10 20 30 40 50 % Source Allen & Overy, Alternative Finance : A European Profile This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 16 | 11/05/2017

Sancus Group Overview £162m £578m £274m Invoice Discounting Cumulative Loan Book Supply Chain Financing Asset Backed Loans £142m £30m £3m* Business Loans Proprietary Capital 2016 Profits British Business Bank Ireland Strategic Investment Fund Investments Ltd is an investor in is an investor in £152m BMS Finance (Ireland) SARL BMS Finance (UK) SARL Live Loan Book *Excluding Sancus Finance (estimate) Data source: Sancus Group as at 31/12/16 This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 17 | 11/05/2017

Our Funding Solutions Short Term/Ongoing Medium Term Long term (3 – 24 months) (24 – 60 months) (1 to 3 months)    Invoice Discounting Asset Backed Loans Intellectual Property    Supply Chain Finance Property Bridge Mergers & Acquisitions   Property Development Cash Flow  Mezzanine This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 18 | 11/05/2017

Corporate Structure A profitable niche lending business operating different funding solutions in multiple jurisdictions. Sancus BMS Group Ireland UK Jersey Guernsey Gibraltar Isle of Man* BMS Finance (Ireland) Sancus Finance Ltd Sancus (Jersey) Ltd Sancus (Guernsey) Ltd Sancus (Gibraltar) Ltd Sancus (IOM) Ltd SARL Company No. 7485900 Company No. 58612 Company No. 112755 Company No. 012528V Company No. 113391 Company No. 905187 BMS Finance (UK) SARL Company No. 06008835 Total staff 39 * Affiliate This document is confidential and should only be circulated with prior approval from Sancus BMS Group. 19 | 11/05/2017