Redwood Bank remains on track with its original business case and is operating successfully. Investment in shares can go up as well as down, and this is something we are observing across the entire banking sector, so is not unique to Warrington.
The core purpose for investing in Redwood Bank was to promote economic regeneration in Warrington. This follows a consultation with our business community in 2013, which found that banks were not lending to small medium sized enterprises in the town and nationally, due to the failure of the banking system in 2008. This meant business growth and economic regeneration were being held back. It was also government policy, at this time, to promote the development of Challenger Banks.
Why we’re pleased with Redwood Bank
The bank is doing what it was set up to do - to promote economic regeneration in Warrington and the wider North West region.
It has generated 90 jobs, lent more than £130 million to Warrington and the north west region, lent more than £400 million nationally (with deposits of over £400 million) and attracted more than 5,000 customers, which is a remarkable position for a bank which has only been trading for little over four years.
The bank is also multi-award winning and is recognised as a high performer in the industry and in its forth year of operation made its first profit.
What the latest valuation of Redwood Bank means
We invested in a 33% stake in Redwood Bank in 2017, as a result of policy decisions both locally and nationally. Critically, our involvement in the bank was primarily to support regeneration in Warrington and the region, and to provide funding to SMEs in need, stimulating business and creating employment opportunities. Our sole objective was never about making an immediate financial return from the bank, though longer-term and in line with our current business plan, we expect the bank to be profitable and offer tangible returns to the council.
For audit purposes, the bank needs a formal valuation, which has recently been impaired (reduced in value) by around £16 million.
Although this appears disappointing, the bank is valued in the context of the pandemic, which has created vast economic challenges that has affected the entire banking sector, which has resulted in the value of all the major worldwide banks falling in value.
We continue to hold a stake in Redwood Bank and are committed to its long-term future. While we have seen a decrease in the book value of the bank, our investment in the bank is still paying off because it continues to add real value to businesses in Warrington and the wider region. The bank is expected to keep growing – profitably – and has the potential to keep growing in value while delivering on the policy objectives that the bank was initially set up to address.