JC Flowers’ 49% stake in the newlycreated Kent Reliance bank could result in it writing twice as much mortgage business than the society did.
Kent Reliance is to become an industrial and providential society known as Kent Reliance Provident Society, with a banking subsidiary through which it will funnel mortgage lending.
JC Flowers will have a 49% stake in the bank and double the society’s tier one capital to £100m.
Mike Lazenby, chief executive of Kent Reliance, will not specify how much extra mortgage lending the bank is expecting to do.
But he says: “We are looking to build on the strength we have in the shared ownership and social lending markets, and also in mainstream residential lending.”
The deal has yet to be approved by the society’s 180,000 members and ratified by the Financial Services Authority.
Details of the agreement will be revealed in information packs sent to members when they vote on it in the autumn.
David Morgan, head of JC Flowers Europe and Asia, says: “We had to find a way of getting capital into this capital-starved sector.
“There was a big prize available for working with a partner prepared to innovate, persevere and deal with the complexities of finding a structure that would make the best of private equity capital while retaining the benefits of a mutual.”
JC Flowers recently invested £380m in Spanish savings bank Banca Civa that failed its recent European banking sector stress test, and is also in talks with Ireland’s Educational Building Society.
But Morgan claims his priority is to make the partnership with Kent Reliance work.
He adds: “I’d be surprised if several other societies aren’t interested in similar partnerships.”