How lender took to the lifeboats and survived

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The Independent Online
First National Finance Corporation is famous for surviving two near fatal crashes, writes John Willcock.

Founded by Pat Matthews in 1963, it had two aims: to provide consumer credit and loans to property developers.

Both sides did well until 1973, the year that still sends a shudder through the bankers who lived through it. Chancellor of the Exchequer Anthony Barber had announced a credit expansion to "go for growth" but instead of investing in manufacturing the City embarked on an unprecedented speculative commercial property boom. Many secondary banks were so exposed that when the surge in oil prices came they were left looking down a black hole. The Bank of England was forced to launch a "lifeboat" to replace commercial deposits which were pouring out. FNFC was one of the first to accept help and needed over pounds 300m to survive.

It clambered out of the lifeboat in 1985, just in time for the of the Lawson boom. In 1986 it bought a small commercial lending bank in Brighton, TCB, to help rebuild its property lending business, and then rode the boom for all it was worth. By the end of the 1980s FNFC's debts had spiralled to pounds 1.6bn and with interests rates rising it looked doomed. A total of 120 banks kept it going until two years ago when it unexpectedly breached a number of bank covenants. The breaches were "technical" but the banks took FNFC to the wire on refinancing the debt.

George Cracknell, a veteran problem loan manager, took over as executive vice-chairman, managing down the commercial lending and growing the consumer credit business. The strategy has worked well: lending is down to pounds 660m and consumer credit growing fast.