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Kensington drops plans to diversify

Kensington Group has ditched plans to move into commercial lending, sparking speculation about its future strategy.

Last week Brian Pitt, who was widely known to be investigating Kensington’s possible expansion into the commercial lending arena, revealed he was leaving the group after his recommendations were rejected by the board.

He says the lender has decided to focus on its core activities within the UK and Europe.

Ian Giles, director of marketing at Kensington, says: “We have no plans to enter commercial lending but we have not ruled it out for the future.”

The decision to reject expansion into fresh markets has come as something of a surprise to the industry.

One source says: “Logic dictates that increasing competition and decreasing margins means lenders must find new streams of income.

“The fact that Kensington has de-cided not to take this route is strange. Perhaps it wants to protect its balance sheet for the next year or so.”

A source from the commercial sector adds: “This decision is a surprise and I can’t understand it. The commercial market is seeing huge growth.”

But Colin Bell, operations director at commercial lender InterBay, says he is more surprised that Kensington considered commercial lending in the first place, as it is a tough market to crack.

As well as having different risks from the residential market, he warns that investors buying securities from commercial lenders are likely to be put off inexperienced new entrants.

Kensington’s end of year results are due out on January 30 and investors are likely to be looking closely at how its businesses have performed.

Kensington Group consists of three partner companies – Kensington Mortgages, Kensington Personal Loans and The Mortgage Lender, which is a direct-to-consumer operation.

It also has two subsidiaries, Start Mortgages in the Republic of Ireland and Bluestep in Sweden, and a 57.5% stake in first and second charge lender Money Partners.

Its share price was 735p at close of play on Friday.

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