Lloyds could pay £1.35bn for Aldermore, says RBC Proactive uses images sourced from Shutterstock
RBC Capital Markets has put a price tag of about £1.35 billion on Aldermore (Unlisted (UK):ALDR), the specialist lender whose owners are exploring a sale.
But the brokerage, part of Royal Bank of Canada, questions whether a takeover would make strategic sense for Lloyds Banking Group PLC (LSE:LLOY), one potential suitor named in press reports.
Sky News reported that Lloyds, the UK high street lender, had begun preparing a possible bid for Aldermore, which is owned by South Africa’s FirstRand Group.
In April, Aldermore said it was working with its owner and regulators on an “orderly ownership transition”.
To value the unlisted business, RBC built a valuation model implying a range of £1.1 billion to £1.6 billion, deriving the number by comparing the valuations and returns of listed peers, then applying that read-across to its own forecasts for Aldermore.
The estimate assumes a takeover premium of between 25% and 35%.
It also credits Aldermore with about £300 million of surplus capital, reflecting a core capital ratio of 15.5% at the end of 2025, above management’s target.
RBC analyst Benjamin Toms argued that, for Lloyds, the deal would add scale rather than new capabilities.
He said the main benefit would be cheaper funding, since Aldermore does not offer current accounts.
But the purchase would do little to reduce Lloyds’ heavy reliance on net interest income, the gap between what a bank earns on loans and pays on deposits.
RBC said it would rather see Lloyds pursue acquisitions in wealth management, an area where it considers the bank underrepresented.
Shawbrook Group PLC (LSE:SHAW), another specialist lender, has also been linked with a bid.
But RBC said Shawbrook would struggle to proceed without breaching MREL, a regulatory requirement for the loss-absorbing capital that larger banks must hold.
That obstacle would persist even if a deal excluded Aldermore’s motor finance book of about £4 billion, the bank said.
None of the companies has commented on the speculation.
RBC rates Lloyds ‘outperform’, with a price target of 120p against 109.45p currently.