I’ve got cash to burn in my Stocks and Shares ISA right now and I’ve just seen that there’s an Initial Public Offering (IPO) coming up shortly. It’s the IPO of Shawbrook Bank, a UK challenger bank, and it could be the biggest UK listing of 2025.
Should I apply to buy some shares in the IPO? Let’s discuss.
What is Shawbrook?
Founded in 2011, Shawbrook is a ‘specialist’ bank that provides savings accounts, personal loans, business solutions, and property finance for professional investors (such as buy-to-let). It currently has around 540,000 customers.
This company has been listed on the London Stock Exchange before. Back in 2015, it came to the market via an IPO at a valuation of around £725m, however, in 2017, it was acquired by a consortium for around £868m.
In this IPO, the valuation is going to be around £1.8bn to £2bn. That will put it on a trailing price-to-earnings (P/E) ratio of between eight and nine.
Recent performance
Looking at recent financials, the bank appears to be performing well. For the first half of 2025, it generated:
- 14% annualised loan book growth
- 4.4% net interest margin
- £168.6m underlying profit before tax versus £124.5m a year earlier
One metric that stands out to me is the company’s Trustpilot score. This is currently 4.6/5 – much higher than the scores most other UK banks sport (Lloyds has a score of 1.6).
Should I buy shares?
IPOs are always a little hard to gauge. Sometimes the stocks explode higher and other times they slump.
In this case, my gut feeling is that the stock will do ok immediately after the IPO. However, I don’t expect it to soar. Ultimately, the company is just not that exciting. It’s not a Revolut, for example.
Long-term prospects
In the long run, Shawbrook could potentially be a solid investment. But there are risks around buy-to-let.
I calculate that at the end of June, commercial property loans represented about 42% of the total loan book. This makes the bank vulnerable to regulation that negatively impacts UK property investment (which has been a major trend over the last decade).
My other concern, from a long-term perspective, is scalability (the number one thing I look for in financial stocks). As a UK-focused lender, it’s likely to have limited scalability.
By contrast, if I look at a bank like HSBC (LSE: HSBA), it’s very scalable. For a start, it operates in a vast number of high-growth countries such as China, India, and Taiwan (where demand for savings products is growing rapidly).
Additionally, it’s focusing more on wealth management these days. This is a very scalable area of financial services as rising stock markets tend to continually push assets under management up, increasing income levels for wealth managers.
Of course, big banks like HSBC have their own risks. These companies tend to have complex balance sheets and it’s never really possible to fully understand the risk levels.
But taking a long-term view, I see quite a bit of potential in HSBC (I think the stock is worth considering after its recent pullback).
My call on the IPO
Going back to the Shawbrook IPO though, I think I’m going to sit this one out. The bank does look like a solid entity, however right now, I think there are better opportunities in the market for my money.
