Alba: Ambitious Scottish bank gears up to open its doors

It is a key staging post in the development of bank which will be dedicated to supporting small and medium-sized enterprises (SMEs) in Scotland.

The bank hopes to exit mobilisation and officially begin trading by the end of the year.

READ MORE: Scotland's best firms show there is more to life than profits

The roots of Alba go back to 2017 when the historic Airdrie Savings Bank, led by chief executive Rod Ashley, began to be wound down, after battling to meet the cost of complying with modern banking regulations.

Scottish industrialist Jim McColl, founder and chief executive of Clyde Blowers Capital, approached the board of the Airdrie bank to see if the licence could be retained with its focus changing to supporting SMEs.

Ultimately, the Bank of England ruled it would not be possible to retain the original banking authorisation. But undeterred and encouraged by the response received from the Bank of England, funding was assembled to establish Alba in April 2018.

The new bank was spearheaded by Mr Ashley and other senior figures from the Airdrie Savings Bank, including chief financial officer Wendy Morrison, who had excelled in SME banking at Airdrie.

Speaking to The Herald this week, Mr Ashley said Alba has a “DNA connection” with the ethos of “thrift” embodied by the old trustee savings bank. He said: “Our real raison d’etre for being set up was to support the SME community specifically.

READ MORE: Glasgow: Scottish hotel veteran to chair new coffee venture

“We’re coming to the market on the lending side, looking to lend into SMEs – not to be their day-to-day banker necessarily, but to fund lending opportunities for them in terms of working capital. It might be business expansion, it might be scaling up, or a new product line. That kind of core business SME focus.

“And we define SME quite broadly, we’re probably thinking more of the Ms in SMEs. In due course we will be lending quite considerable sums of money. At the start we are probably kicking off with offerings that will be up to £1m, maybe just over a £1m – probably UK property-backed with UK cash flow. But we will certainly do smaller than that and indeed in due course we will do bigger deals than that as well.”

With the bank still in the start-up phase, Mr Ashley said Alba is “fairly sector agnostic”. But he noted that it was “fairly closely aligned to the economic growth aspirations that the likes of Scottish Enterprise is pushing out there”.

He said: “Indeed, we will no doubt work with them as part of what we do, [and potentially] with the [Scottish National] Investment Bank as well. But not solely – we will operate as a UK-wide bank from as soon as we start. We are Scottish in nature, we are based here, but we will be operating throughout the UK.”

Asked how Alba will differ from other lenders in the market, Mr Ashley said that its bankers will talk to customers face-to-face, rather than through remote contact centres favoured by major banks.

READ MORE: Rare Macallan revealed as debut release from Halcyon Spirits

“In some way it can be viewed as traditional, but we are actually looking to have bankers who go out to customers’ premises and meet them,” Mr Ashley said. “And talk to them about their business and get an understanding of that.

“To us that is absolutely critical in the decision-making process. We will do the back-office checks and the data and everything else, but it is really about the SME being the people as much what the actual business is about and what the numbers tell you. It is the passion that they have for what they do that means they will be successful.”

Alba, which is named after the word meaning white, bright, or new, is in the midst of growing its team quite rapidly. While Mr Ashley had assembled a small team of just six banking specialists and general business experts to get to the mobilisation stage, he said the bank will now “quite quickly” scale to 35 or 36, as investment comes in and it prepares to exit mobilisation.

“We are well on that journey now,” he said. “We’re probably about 19, 20 at the moment, so we are getting to up to where [we need to be]. As usual in these circumstances you have mix of project contractors as well as your full-time team. The final mix will settle over the next four or five months.”

Mr Ashley did not respond directly when asked how much capital Alba has raised to date. He said the bank has secured an unnamed “anchor” investor, a family office, who has backed the bank for the long term and has previously backed a challenger bank.

The most recent confirmation statement for Alba Bank at Companies House, filed on January 17, shows that shareholders include Sir Brian Souter’s Highland and Universal Securities, Optical Express owner David Moulsdale’s Lorena Investments, and former formula one racing driver David Coulthard.

Mr McColl remains closely involved in the venture.

In general terms he said any new bank requires capital of £20 million to £25m to get into and out of mobilisation. That sum would include its first 12 to 18 months of capital after exiting mobilisation.

“We’ve got very ambitious plans that over a very quick period will see us going up towards £100m worth of capital required,” Mr Ashley said. “Then in the longer term we estimate that if we can get the bank to where we think it has its true potential to be, ultimately it could be about £200m of capital invested over a longer period of time.”

Q&A

What countries have you most enjoyed travelling to, for business or leisure, and why?

For business, the USA and Canada. Social banking and community-based finance are embedded in their culture. For leisure, Southern Spain. I enjoy the mix of history and relaxation… and the weather.

When you were a child, what was your ideal job? Why did it appeal?

I wanted to write a hit song or show. The idea that you could create something which could give enjoyment to others and you could make a living from was appealing.

What was your biggest break in business?

Meeting Jim McColl and discussing our vision of setting up a new bank in Scotland.

What was your worst moment in business?

Probably the day I had to tell my colleagues at the Savings Bank in Airdrie that we had to conduct an orderly wind down of the bank's affairs. The weight of history was heavy in the air and my colleagues had worked tirelessly delivering community finance to people of North Lanarkshire over many years. It was a difficult message to a great group of people.

Who do you most admire and why?

Malala Yousafzai, who wants to be remembered as the girl who stood up. Her actions encompass much about the rights of education, freedom and equality today.

What book are you reading and what music are you listening to?

The Genome Odyssey: Medical Mysteries and the Incredible Quest to Solve Them. The advances and understanding in gene medicine in recent years are incredible.

My Spotify playlists are dominated by songs from shows, so anything from a musical is good for me.

Once the board is satisfied everything in place, a bank can then apply for the removal of a deposit-taking restriction on authorisation to take deposits, paving the way for it begin taking deposits and issuing loans.

Speaking to The Herald last week, Alba chief executive Rod Ashley said in general terms any new bank requires capital of £20 million to £25m in order to get into and out of mobilisation, adding that it requires to hold its first 12 to 18 months of capital after exiting mobilisation.

“We’ve got very ambitious plans that over a very quick period will see us going up towards £100m worth of capital required. Then in the longer term we estimate that if we can get the bank to where we think it has its true potential to be, ultimately it could be about £200m o capital invested over a longer period of time.”