The boards of Cuscal and 86 400 are being clinical. They have to be, and sad to say 86 400 is sliding down the guts of NAB.
Two neobank industry exits in as many weeks fouls up all the hoopla around fintech in Australia and closes the case that fintech funding flows are scarce, even for the better stories.
And 86 400 was one of the best Neobank stories by miles, second-best after the Ferocia/Bendigo Up Bank story.
As the chart shows, 86 400 were lending for mortgages from early on and developing a NIM story they could surely sell to the fintech faddists with money to manage.
National Australia Bank has entered into a scheme implementation agreement to
acquire 100 per cent of the shares in 86 400 Holdings Ltd, the holding company of 86 400.
Founded by Cuscal Ltd and led by CEO Robert Bell, 86 400 has built and launched a mobile-led digital bank and was granted an ADI licence in July 2019.
As at 15 January 2021, NAB said “86 400 had more than 85,000 customers, $375 million of deposits, $270 million in approved mortgages and 2500 accredited brokers.”
NAB is buying the technology platform more than they are buying a fintech franchise or even rescuing 86 400, which it does not seem to presently need.
86 400 lands in NAB’s lap as a ready-made banking as a service platform, increasing its competitiveness in the wholesale market, especially against Westpac and neobank Volt Bank.
In April 2020, NAB announced plans to prioritise UBank to deliver a market-leading digital experience and new product propositions and the bank said “the acquisition of 86 400 will accelerate UBank’s growth by combining its established customer base, brand and colleagues with 86 400’s experience and technology platform.
“Bringing together UBank and 86 400 is consistent with NAB’s long-term strategy and growth plans and will enable us to develop a leading digital bank that can attract and retain customers at scale and pace,” NAB Chief Operating Officer, Les Matheson said in the ASX announcement on Friday.
“The combined business will deliver accelerated innovation and an enhanced customer experience to create a stronger and more competitive banking alternative for Australian customers.”
But will 86 400 live on in any meaningful manner within the NAB banking empire? History says no; think of RAMS, think of Trust Bank.
NAB subscribed for a minority stake in 86 400 in late 2020 and holds an 18.3 per cent stake in the neobank.
Cuscal, 86 400 and NAB did will to keep this funding under the radar but by that stage, more than a year after opening their doors, APRA will have been breathing down the neck of Cuscal and 86 400 to be clear about the fate of 86 400 in their resolution plans. This means naming names.
With the fintech capital market so feeble and the pandemic rattling risk settings all round, it is no surprise the Elizabeth Proust-chaired board of Cuscal pivoted toward dealing with the one big name in banking with which the credit unions and mutual banks have most history.
NAB looked after cheque clearing for credit unions and Cuscal long before mutual banks came on the scene.
A wary, even reluctant, mutual member base supported the Cuscal 86400 venture, with an eye on two outcomes: making money and learning from the neobank investment.
Not much or zero is what 86 400 have so far passed onto credit unions, but on the financial front Cuscal will book a nice gain on selling to NAB.
At an enterprise valuation around A$270 million - will it mostly be Cuscal’s mutual ADI members or Rod Sims’ ACCC standing in the way of this agreed sale to NAB?
Other bids considered but not encouraged by the Cuscal board.
Discussions on the integration of 86 400 with NAB are well-developed and NAB really may be crossing its fingers it doesn’t mess this one up.