By Pablo Mayo Cerqueiro and Lawrence White
LONDON (Reuters) - OakNorth is leaning towards the United States for a prospective stock market listing, as the British bank considers ways to grow in the world's largest economy, including securing a local U.S. financial licence, chief executive Rishi Khosla told Reuters.
The prospect of a U.S. listing for one of Britain's biggest and most successful financial technology companies would come as a blow to London, after chipmaker Arm said it would float in New York despite government efforts to keep it at home.
Sources with knowledge of the matter told Reuters that OakNorth, whose UK banking arm has been profitable since 2017, could be in a position to go public as soon as in the next 12 months.
Khosla downplayed that timeline for an initial public offering (IPO), saying instead that the company will look to float "sometime in the future" but is in no rush to do so.
Japanese conglomerate SoftBank Group, which holds an undisclosed stake in OakNorth and controls Arm, declined to comment.
Khosla said the lack of a domestic investor base focused on high-growth technology made London unappealing as a listing venue for OakNorth.
The comments mark a significant shift from previous interviews, in which Khosla had indicated a preference for London as a listing venue.
OakNorth runs a business bank in Britain with more than 4 billion pounds ($4.73 billion) in assets, and supplies its technology to lenders elsewhere, including U.S. credit institutions such as PNC Financial Services Group (NYSE:PNC) and Modern Bank.
It is looking to win further technology clients in the U.S. and is keeping an "open mind" about seeking a banking licence there, suggesting this could be achieved through an acquisition, Khosla said.
OakNorth declined to comment on the type of licence it could seek. Foreign banks can operate in the U.S. through either state or federal banking charters, which they can apply for or obtain by acquiring a local credit institution.
OakNorth, which is due to file its 2022 accounts in the next few weeks, has so far seen almost no credit defaults despite Britain's slowing economy and sharply rising inflation.
The lender reported a loan default rate of 0.07% against a sector average of 0.32% in 2021. Khosla said the figure would rise, "but not materially", in the 2022 figures to be reported soon.
That leaves it in a strong position to buy another bank in Britain, possibly snapping up one of its digital-only neobanks, Khosla said, without being more specific.
"We feel good about our business, we are in a robust place... it would be easy for us to make a nine-figure acquisition in cash," he said, adding the group could also use its own shares to help finance a deal.
OakNorth was most recently valued at $2.8 billion in 2019 when SoftBank led a $440 million cash injection into the "fintech" group.
Since then, technology valuations soared before plunging last year on the back of rising interest rates and slowing economic prospects. European banking stocks have rallied nearly 40% in the last year on the back of rising interest rates, whereas the Dow Jones US Banks Index has dropped 8% over the last 12 months.
OakNorth declined to comment on its valuation but said it sees New York-listed Nubank as its closest peer.
($1 = 0.8448 pounds)