MIDDLE PERIODS: Do you need to invest in the PCF Group – a bank that is also an expert in horse boxes?

High driving: PCF Group lends itself to niche customers, such as riders who buy a horse box

Challenger banks have appeared on the scene in recent years, as regulators tried to revitalize the industry and ensure that customers had more choice.

Some have already been swallowed up by larger players. Some have already failed – TSB is an example of this. And many of them are only digital, which disrupts more traditional bank customers.

PCF Group is quite different. The company has been a bank for more than a year, but it has been a successful company for almost a quarter of a century. The shares are worth viewing with 37p.

High driving: PCF Group lends itself to niche customers, such as riders who buy a horse box

High driving: PCF Group lends itself to niche customers, such as riders who buy a horse box

PCF was founded in 1994 by Scott Maybury, a down-to-earth Australian who is still at the helm. The company started as an asset finance house and lent money to small businesses, so they could buy trucks, vans, tools and the like. Over time, PCF expanded to the consumer market, mainly by helping customers buy used cars.

The loans were financed by loans from banks, a model that worked well until the financial crisis. Then lenders got their horns and Maybury was forced to shrink his business because he did not have the money to lend.

The climate had changed again in 2012, but Maybury was determined to reduce the dependence on PCF from bankers. PCF has applied for its own banking license, has been approved last year and has been taking deposits since August 2017.

The move has been widely approved by savers and borrowers. The bank has already received £ 140 million in deposits, attracting customers through the always attractive savings rates of PCF and the focus on service. Unlike many of its colleagues, PCF offers, for example, postal accounts that often appeal to older consumers or those who find internet banking hard to deal with.

PCF's success on the savings side has given considerably more flexibility in the way credit lends to borrowers, because the costs of paying depositors' deposits are considerably lower than the bank lending rates. Total lending to businesses and consumers has now risen to around £ 200 million, from £ 146 million in the year to September last year. And new loans have almost doubled, with loans to small companies that are growing particularly fast.

Maybury has also built a reputation for loans to owners of classic cars, motorhomes and horse trailers, from the most basic to luxurious models valued at over £ 100,000. Although this is a niche area, it is subordinated by other banks, so PCF is a leader in the field. Whether it concerns loans to a proud horse owner or a family business with a fleet of school buses, PCF is cautious and the standard rates are low.

As far as the future is concerned, Maybury believes that the company can grow rapidly while retaining its solid record. He has set a £ 350 million credit target in 2020, rising to £ 750 million by 2022. At the same time PCF rises the ladder, aimed at borrowers of better quality than in the past. And Maybury also wants to attract more savers, targeting £ 600 million in savings over the next four years.

City brokers believe that PCF can do it – and also increase profits. The group's financial year ends on September 30 and analysts expect profits of £ 5.2 million to rise to more than £ 8 million in 2019 and £ 10 million the following year. Maybury pays a small dividend – 0.3p is priced in this year and 0.4p thereafter – but he prefers to invest the majority of his surplus money in building the company for the future.

Midas pronunciation: PCF has had a promising first year as a bank, but there will be a lot more growth. The group attracts thousands of new savers and borrowers and Maybury is experienced enough to continue the business while keeping an eye on the economic climate. With 37p the shares are a buy.

Traded on: Target Ticker: PCF Contact: pcf.bank or 020 7222 2426