Wyelands Bank of Sanjeev Gupta falters under the weight of bad debts
Wyelands Bank, owned by British industrialist Sanjeev Gupta, is due to be sold or liquidated after its accounts revealed that repayments of 80% of its loan portfolio were past due.
The scale of bad debts at the bank raises new questions for Gupta, whose entire business empire is under pressure, and for regulators, who ultimately forced the Wyelands to return depositors’ money.
The lender said on Thursday that £ 191million from its £ 234million loan portfolio had been classified as non-performing as it had reported losses of £ 69.5million for the year through April 2020.
In a statement to coincide with the release of its accounts, which have been overdue since the end of last month, the bank said it was seeking new investors after Gupta, its largest shareholder, refused to inject more funds into the bank. the troubled lender.
Wyelands was ordered by the Bank of England in March to repay customer deposits amid growing concerns over its financial situation. The central bank declined to comment on Thursday when asked if it should have acted sooner.
The lender said it had almost completed this process and had paid back £ 194million in customer deposits in March this year, leaving balances of around £ 600,000 still on its books. Its remaining borrowers have been urged to find new lenders to refinance their loans within months, the bank said.
Wyelands also admitted that he had become concerned that certain customer loans introduced by members of GFG Alliance, Gupta’s loose collection of family businesses, were not performing as intended and that it “put the bank at risk. by creating direct exhibitions on GFG. Alliance Entities ”.
A Financial Times survey Last year revealed that Wyelands had helped fund Gupta’s larger business empire through a network of partner-controlled companies.
“Control weaknesses with respect to the identification of related party transactions have been communicated through our audit completion report,” said Mazars, the bank’s auditors, who approved them. accounts Wednesday.
Gupta loaned Wyelands £ 75million in May 2020, more than half of which has since been converted to equity, the bank said. After declining to provide additional funding, the bank’s board tasked chief executive Stephen Rose to speak to potential new investors. Wyleands said he had received “several inquiries from third parties.” Any transaction could lead to the sale of the bank or its operating assets, subject to regulatory approval.
Gupta championed Wyelands’ role as a provider of capital to small and medium-sized manufacturers after acquiring it in 2016.
The challenger bank came under scrutiny in 2019 after spent £ 64million on a Mayfair property in London where the main tenants included the GFG Alliance.
The performance revealed in the Wyelands’ latest accounts stands in stark contrast to most traditional banks and specialty lenders, which have suffered relatively few defaults, even at the height of the coronavirus pandemic. Large commercial lenders such as NatWest and Lloyds set aside billions of pounds to protect against possible future losses at the start of the pandemic, but less than 4% of their commercial loans in value were non-performing by the end of the pandemic. 2020.
Wyelands provided £ 65.8million for expected credit losses at the end of April 2020, but said this had ‘largely doubled’ since then due to ‘news and events that have developed since April 30, 2020 and which were unforeseen at the end of the year ”.
Mazars auditors said the accounts could not be prepared on the basis of the usual continuity, as the bank managers had no other realistic alternative but to dissolve the group.
The development comes amid serious financial strains at GFG following the collapse in March of the group’s largest funder, Greensill Capital.
Wyelands launched an independent review last year in its lending practices after regulators raised concerns about the close ties between its borrowers and Gupta, which were first reported by the FT.
The bank was facing tens of millions of pounds in potential losses after providing more than $ 100 million in funding to Dubai-based rice trader which collapsed in April 2020.
GFG declined to comment on Thursday.
Additional reporting by Michael Pooler