Seven months after
"It's still of interest to us, either through the acquisition route or the de novo route," CEO Rishi Khosla told American Banker on Friday.
To that end, the $9.8 billion-asset OakNorth is conducting "active discussions on both sides," said Khosla, who was in New York meeting clients. He declined to disclose specific details.
"Let's see what comes through," Khosla said.
In the meantime, OakNorth continues to fund its broadening U.S. expansion project with its U.K. balance sheet. The setup is "imperfect, but not significantly so," Khosla said.
OakNorth reported a 15% increase in annual profits Thursday, powered partly by strong growth in its nascent U.S. lending business. A sizable portion of the $2.6 billion in total loans OakNorth made in 2024 were booked in the U.S. According to the 10-year-old bank, its U.S. portfolio totaled $685 million at Dec 31, up from $180 million at the end of 2023.
The growth trend has continued into 2025, Khosla said.
"Things are continuing to accelerate," Khosla said. "We're already multiple times ahead of what our plan was when we started the U.S. expansion. We're seeing continued interest in terms of the spot which OakNorth occupies, focusing on the lower-middle-market segment."
OakNorth reported 2024 pretax net income of $271.6 million.
Concentrating in narrow specialties can attract both relatively low-cost deposits and low-risk loans in an era of high interest rates and economic uncertainty, lenders say.
Animal spirits
A "stark contrast" exists between the business climates in the U.S. and the U.K, Khosla said.
"In the U.K., you have an environment which is still relatively muted," he said. "In the U.S., the new administration, obviously the approaches that it's taken, have been very pro-business, very pro-domestic U.S. business, which has caused a certain level of animal spirits within the market here."
OakNorth began lending in the U.S. in July 2023. It applied to open a representative office in New York in May 2024. The Federal Reserve approved the application in August. In October, OakNorth raised about $190 million in subordinated debt in an oversubscribed public issuance.
According to Khosla, about half of OakNorth's loan book, both in the U.S. and the U.K., is made up of commercial and industrial loans, the other half commercial real estate. "In the U.S., I would say our focus on [CRE] has been a little bit heavier, just because there's been a bigger void here," Khosla said. "The whole dislocation which has been created in the CRE space has meant … certain institutions have had to deal with pretty material issues in their books."
U.S. banks have been
OakNorth has also experienced success lending to U.K. companies that do business in the U.S. Indeed, Khosla said he was surprised at just how many there are. "There are more than we thought, for sure, [and] the size of the ambition of some of them is again larger than we expected, which are both great things," he said.
Finding the right niches
OakNorth has made loans across the U.S. but focuses on an area stretching across New York, Connecticut and New Jersey, Khosla said.
"The way we look at it is, this is a $4 trillion market and we're actually a very small speck within that," he said. "Focusing in on niches, getting known in those niches, both geographic and sectional, then building out from there. That's the best way to build a business in our view."
Before starting OakNorth Bank in September 2015, OakNorth developed a suite of risk analysis and portfolio modeling software under the OakNorth Credit Intelligence brand, which it continues to market to banks in Europe and the U.S.
