OakNorth's head of debt finance spoke to me about his decision to leave a traditional bank for a challenger, and how OakNorth's continued growth is coming along

Ben Barbanel on joining a startup, culture shock, and US expansion

Ben Barbanel is head of debt finance at OakNorth, the digital bank for entrepreneurs, by entrepreneurs and one of Britain’s fastest growing companies.

I caught up with Ben to discuss his career so far, get an update on OakNorth’s US expansion, and to find out how OakNorth is changing banking by looking to the past.

Hi Ben, thanks again for your time. To kick off, please could you give me a little background of your career.

I joined OakNorth back in 2015 at the turn of the year. I spent the prior years in too many of the large institutional banks; when I first met Rishi and Joel (co-founders of OakNorth) initially I thought it was a little bit of a game, a couple of non-bankers starting up a UK bank in a market where there’d been one new banking licence granted in the previous 150 years.

It was all a bit of an odd scenario to be walking into, but what I realised very quickly was that not only were they super smart, not only were they really focused, not only were they super successful, but they were definitely the real deal.

And the rest is history. We’ve lent over£10bn; the team has scaled – we’ve now got offices in London, Birmingham, Leeds, Manchester, Bristol, Newcastle, Glasgow, Manhattan, Gurgaon and Bengaluru – we’re creating jobs with the debt that we provide businesses; we’re creating affordable houses. It’s a great success story and it’s great to be part of.

Those first few weeks at OakNorth must have been quite a culture shock. Having come from a very senior role at Santander, it must have been a contrast?

It’s funny you should ask that! There’s a famous story that Rishi usually references at our annual festive party: I’d probably been in the business three months; I’d left a company where there were 3,000 employees in the UK and joined a little startup cost centre in the industry that didn’t even have the requirement to do what it needed, a banking licence.

I remember coming into the office one day and clearly I looked like crap. Rishi asked me if I was ok, and I said I didn’t really know, I wasn’t feeling good. He looked over my shoulder and gave an odd hand signal to Joel, who immediately came up to me. He put his arm around me and swept me out of the office to a coffee shop down the road without any words exchanged between them. Joel basically said, “Don’t worry, you’re an entrepreneur now! I know what you’re thinking and what you’re going through, you’ve left this huge cruise liner and you’re now working for a lilo with a hole in it. It’s going to take a while, but we’re all in this together. Hold your nerve, it’s going to work, we’re going to smash it.” From that day on, I’ve never looked back.

And £10bn lent later, you must be feeling a bit more comfortable now!

A bit more comfortable, but never, never overconfident or arrogant; we’re only ever one economic cycle away from tough times. And even during that £10bn growth trajectory we’ve had some pretty interesting tests. There’s still some people that say we haven’t been through a full cycle yet; they’re probably right, but the reality is we had the Brexit referendum, then we had Brexit itself. We had COVID, Ukraine, the Middle East. Interest rates have gone from an all-time consistent low to a high.

There are obviously doubters out there and there’ll always be doubters; we don’t mock them, they make us more focused on doing the right thing.

When you sit around the table with people, do you have to convince them of what you’re doing or do you find that OakNorth’s track record convinces on its own?

One thing I’ve found really interesting is that I’ve never actually sat in front of an entrepreneur, articulated what we do, and heard them say they’ll never have a need for our sort of capital at our sort of price point.

We’ve got many, many examples of where we’ve met incredible businesses, incredible management teams, and I’ve left the meeting feeling hopeful that in the future we might be able to work with them. Some of our biggest and best relationships have had exactly those scenarios built into them. There’s a great story from one of our larger clients, a very large hotel and real estate group backed by a billionaire. He’s been extremely vocal publicly around how incredible he finds dealing with us, that he understands what we do differently from traditional lenders and recognises why he pays a premium to us for what we do.

We don’t need to lend to every single business or every single proposition we see; we’ve successfully lent over £10b doing what we do at the rates we charge in the way we do it. It clearly works; at £10bn+, there’s no coincidence involved. When we were moving through the early millions, the hundreds of millions, even a billion, we had a whiteboard behind my desk where we would tick off every single penny we lent. In those days, being a new entrant with a new proposition, we were wondering how our business model would be welcomed; now we know it works. I’m never going to want, I’m never going to need 100% market share.

Do you think that helps your business relationships, the idea of quality over quantity?

I think it helps our business relationships, it helps consumers, and it helps entrepreneurs. For me, the most important thing for entrepreneurs is that they have a choice, they have availability of options. It’s almost like a matrix: at different risk parameters there are different options; at different price parameters there are different options; at different points of the economic cycle, there are different options. Unfortunately, for many entrepreneurs—possibly fortunately for us—we see in certain parts of the cycle the larger institutional banks pulling out of the lending space.

We’re now seeing frustrations with simple things like day-to-day business banking. Being able to open a bank account for a new company can sometimes take the big banks months and months. So we’ve now launched our business banking proposition, and as part of that specifically our transaction banking platform. We’re opening accounts within days, and the feedback from customers has been incredible.

You touched on the future; one of the big things that OakNorth are doing at the moment is expanding into the US. How’s that going?

So again, it’s great, we’ve had some decent early success. We’ve probably got close to double the numbers from our year end accounts, nearly half a billion dollars of lending. The American market is incredibly deep given the sheer scale of it, and the US is an important part of our future growth trajectory as a business.

We know in the UK that we’re a small island, and so we get a lot of churn on the book. Growing the actual core loan book by 20-something percent year on year is going to be a challenge. We look at the rest of Europe and we don’t feel there are big enough opportunities in individual countries. It’s also very fragmented with different legal systems and different languages; we come back to the US every time.

There are also particular nuances of the American market that give us opportunities. We’re already capitalising on these and we’re going to continue to build a business in the US and grow a team.

Do you find it in some ways easier in the US because banking is quite different to the UK? In the US they have scores of small, local banks; do you think the existence of those helps you, as Americans are used to smaller players?

In some ways, you’re right. However, the perception of smaller players is that they’re a little bit sleepy, they’re not very adventurous; they do what they do, it’s very typical what they do, it’s safe. Whereas for us we’re a new-to-the-market, nimble challenger that does things in its own way, that wants to be different. Hopefully we can shake that space up and build a name for being small, nimble, and providing a different offering.

We’re often asked what the real differences are in what we do. Every bank in the world has been conditioned to believe that credit people are prevented from meeting customers due to conflicts of interest, which is actually total nonsense. The people that are conflicted are the originators, because they sit in front of a credit committee representing a borrower telling the credit committee exactly what they want to hear to get a deal done.

One of the things that Rishi and Joel said that they were going to implement right at the beginning was a credit committee that involved borrowers directly. We know that entrepreneurs love meeting decision makers, they love talking about their business, and decision makers love meeting entrepreneurs and really asking the right questions. What the credit committee has enabled us to do is underwrite and execute deals that, based on paper, we would have otherwise walked away from.

The uniqueness of what we do and the forward-looking scenarios we have on hundreds of sub-sectors of the economy enable us to come up with a very strong internal view of how things will play out in those sectors. They enable us to underwrite on a forward-looking basis, as well as a backward-looking basis, as opposed to most financial institutions that will be very focused on a backward-looking position.

What I find really interesting is that it’s almost banking but 50 years ago; before credit scores came in, and it was a case of actually meeting people and hearing straight from the horse’s mouth.

Absolutely. We’ve taken the best of both worlds. We never want to get to a position where we put a load of data into a machine and press a button. That’s easy, but it’s dangerous.

We want to be able to augment our decisions with very rich data and detailed data analysis, with a huge human touch. We have an unbelievable team that works around the clock to facilitate speedy execution, to execute deals within days and weeks, as opposed to the multiple months that some of the larger institutions will take, which can be make or break for a new businesses.

Related: OakNorth’s Matt Bullivant on the importance of ESG.

Image:OakNorth

Robert Welbourn
Robert Welbourn is an experienced financial writer. He has worked for a number of high street banks and trading platforms. He's also a published author and freelance writer and editor.