Aldermore Reports Resilient H1 2026 Profit and Strong Capital Amid Margin Pressures

Balance sheet growth: lending and deposits both up

Customer lending balances rose 3% since June 2025 to £17,179m (up 9% versus December 2024). Growth was led by the Property division, with momentum in specialist buy-to-let and better affordability criteria in owner-occupied mortgages. Motor Finance advances also increased, helped by improved auto-decisioning.

Customer deposits were up 4% to £17,671m since June 2025 (6% year-on-year), supported by solid performance in Corporate Deposits and Personal Savings and a broader product range. This growth comes at a price: deposit competition is pressuring margins – a theme to watch if rates continue to drift down.

Capital and liquidity: CET1 15.5% and ample total capital

The Core Equity Tier 1 (CET1) ratio rose to 15.5% from 14.9% in June 2025, comfortably above the 13%-14% medium-term target. The new £300m Tier 2 drove the total capital ratio to 19.6% (June 2025: 17.3%). Liquidity remains strong with an average Liquidity Coverage Ratio (LCR) of 185%, although that is lower than June 2025 (203%) and December 2024 (228%) after the final £465m TFSME repayments and funding optimisation.

In plain English: Aldermore is well capitalised and liquid. The LCR decline is intentional rather than a stress signal, and the bank still sits well above regulatory minima.

FCA motor finance commissions: £73.1m provision unchanged

The provision for historical motor finance commissions remains at £73.1m. Aldermore has responded to the FCA’s October 2025 consultation on an industry-wide approach and will reassess the provision only once the final outcome is published – expected by the end of March 2026.

Management acknowledges outcomes could be higher than the provision in some scenarios. The good news is that capital is currently in excess of the 13%-14% CET1 target, providing a buffer for uncertainty.

CEO’s stance and strategic pulse

CEO Raj Makanjee highlights “targeted balance sheet growth” despite margin pressure from falling rates and competition. Income held up, asset quality met expectations, and the bank kept investing while keeping costs broadly flat. That balance of growth, prudence, and efficiency is evident in the numbers.

Why this update matters for investors

• Resilience with caveats: Profit before tax of £102.8m and a 56.4% cost/income ratio show a disciplined core. The net interest margin decline to 3.51% is the key negative, reflecting tougher deposit pricing and rate dynamics.
• Credit quality supportive: Cost of risk at 30bps and falling arrears to 3.73% suggest customers are coping better as cost-of-living pressures ease, helped by stronger collections.
• Capital strength buys time: A 15.5% CET1 and 19.6% total capital ratio give management optionality – to absorb shocks, grow selectively, and navigate the FCA outcome.
• Liquidity deliberately moderated: LCR at 185% after TFSME repayment looks comfortable and more “right-sized” for the funding mix.
• Regulatory overhang remains: The motor commission provision is unchanged at £73.1m, but the consultation outcome could move that number. Clarity by end-March 2026 is the next big milestone.

Key figures at a glance

Metric	H1 2026 / Dec 2025	Comparatives
Profit before tax	£102.8m	H2 2025: £74.1m; H1 2025: £119.4m
Net interest income	£299.1m	H2 2025: £300.8m; H1 2025: £297.1m
Net interest margin	3.51%	H2 2025: 3.76%; H1 2025: 3.81%
Operating expenses	£166.1m	H2 2025: £225.9m; H1 2025: £165.2m
Impairment losses	£25.7m	H2 2025: £5.4m; H1 2025: £11.2m
Cost of risk	30bps	H2 2025: 7bps; H1 2025: 14bps
Return on equity	9.2%	H2 2025: 5.5%; H1 2025: 10.0%
Customer lending	£17,179m	Jun 2025: £16,600m; Dec 2024: £15,711m
Customer deposits	£17,671m	Jun 2025: £17,048m; Dec 2024: £16,618m
CET1 ratio	15.5%	Jun 2025: 14.9%; Dec 2024: 16.2%
Total capital ratio	19.6%	Jun 2025: 17.3%; Dec 2024: 18.8%
Average LCR	185%	Jun 2025: 203%; Dec 2024: 228%
Total arrears	3.73%	Dec 2024: 4.44%

My take: balanced progress, with three things to watch

1. Margin trajectory: Deposit competition and lower rates are biting, as seen in the 30bp year-on-year NIM drop. Further compression would dull earnings momentum unless offset by mix shift or fee income recovery (the latter was dragged by Tier 2 breakage costs this half).
2. Impairments vs. arrears: Cost of risk at 30bps is acceptable and arrears have fallen. If the macro backdrop worsens, forward-looking provisions could stay elevated even with stable underlying behaviour.
3. FCA outcome: The £73.1m provision could be revised once the consultation concludes. The timing signals we’ll get clarity soon; until then, expect some uncertainty priced into expectations.

Bottom line: steady operational delivery with capital-led resilience

Aldermore is doing the basics well: grow prudently, price competitively, keep costs tight, and maintain strong capital and liquidity. Profit is respectable and the balance sheet is stronger after the £300m Tier 2 issuance, even factoring in the LCR step-down post-TFSME.

The negatives are manageable but real – lower margin, higher impairment, and the motor commission overhang. If management can sustain growth in Property and Motor while holding credit quality where it is, the franchise looks set to generate “improving, sustainable, and attractive risk-adjusted returns” just as the CEO suggests.

For now, I’d call this a solid, slightly cautious print with the big regulatory reveal still to come.