Photograph of Graham Donald, HMLHML, the
portfolio management subsidiary of Skipton Building Society, is
entering the UK motor finance market.

The company is on the lookout
for new portfolios to manage, while hoping to remove barriers to
entry for foreign investors looking to lend by providing an
end-to-end outsourcing service.

Commercial manager Graham
Donald admits the motor finance market has been “a bit more
circumspect in the past year” but is confident HML is in a position
to diversify into secured and unsecured lending.

However, “anything without a
property asset” counts as unsecured to a company blooded in the
mortgage industry.

Begun in 1988, more than 20
years of asset management for non-regulated lenders and, later,
regulated firms has seen HML target new markets such as motor
finance, while new mortgage lending has slowed.


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By GlobalData


Box showing a case study of the HML modelNow the company
is a 1,300-strong organisation based across three sites in Skipton,
Glasgow and Londonderry.

Feeling ready to break into
new markets like motor finance, HML hired Virgin Money’s former
director of banking Ian Cornelius in January and Donald (with 18
years’ experience at Black Horse, the motor finance arm of Lloyds
Banking Group) in September, to manage its

“We are making people aware
of what HML does,” says Donald of the company’s drive to make more
business connections. “We have mortgage experience, but people
don’t know we are here in motor finance.”

Now in a partnership with IT
and business processing specialist Nostrum Group to manage
portfolios won in the personal lending market, HML is also open to
new lending proposals in a bid to develop its portfolio and would
use Nostrum’s front-end technology to support this.

Donald adds that the legacy
books of existing motor finance players are targets for the

As part of this, HML is
providing a platform, online and through dealerships, as a
non-external facing, ‘white label’ partner which will handle all
aspects of financing a car except the sale itself.

“The sale is handled in the
showroom, but everything after that, from the welcome call to the
direct debit payments, is handled by HML,” says Donald.

Applying lessons learned from
other industries, “everything”, for HML, includes repossessions, a
service Donald expects to grow “as people get stretched” and
defaults rise.

“Other sectors may look at
outsourcing with collections work,” he adds. “They have a similar
strategy in the motor market but they’re going to need some


Other fields of

As well as taking on business
within the motor trade, HML is researching taking captive funders
with banking licenses into other fields of lending, such as the
mortgage market.

And HML is well placed to
impress any potential clients, with a residential mortgage primary
servicer 2+ rating from Fitch and above average ratings as both a
primary and special servicer from Standard & Poor’s.

Donald says: “As long as a
bank has the funding, HML can provide a speedy and resolute
back-end solution, which is so often a hurdle too far for potential
new entrants.”


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HML is keen to extend the
‘white label’ model to potential overseas lenders, offering them a
chance to invest in UK motor finance.

The company will operate a
totally outsourced model whereby a funder would provide capital but
HML would supply people, infrastructure and portfolio management
for a market entry.

Again, the company is still
investigating potential sources of capital at present.

“We are talking to investors,
but there are no bites just yet,” says Donald, adding that once
licensed by the Financial Services Authority and registered at the
Office of Fair Trading, a supplier of capital would be free to go
direct to the public or partner with dealer groups.

Donald explains that HML
would provide the platform to cover any form of motor finance, and
was open to work with any proposal.

“The funder would have to set up their own risk criteria
and HML would implement those, as we have done for many years in
the UK and Irish mortgage industry,” he says.