Morgan Stanley raises capital for 86 400

Aspiring bank 86 400 has announced it is opening its doors to new investors with a funding push, appointing Morgan Stanley to drive the capital raising.

86 400 chief executive Robert Bell said: "Bringing Morgan Stanley on is really important for us because they are a global tier one investment bank and they've got great reach in Australia and internationally."

86 400 is a neobank attempting to disrupt the Australian banking industry and claw market share from the big four.

The neobank is in its pilot stage and plans to launch with a transactions and savings account, followed by retail mortgages. It says it is well on the way to receiving its banking licence from APRA.

"We can't speculate on a date or time, it's really in APRA's hands, but we believe we've completed everything we need to complete and we're working through our application," Bell told Financial Standard.

He did, however, say that given that small and medium-sized business lender Judo Bank was recently approved for a full banking licence is very encouraging.

"Judo Bank getting the licence is encouraging for a couple of reasons. They're the first bank to go from no licence to a full licence as opposed to the licence process that others have gone through," Bell explained.

"They're a credible operation; they're experienced bankers like ourselves so it's encouraging to see that happen. I think it's good for the industry, it's good for competition."

Bell spent 15 years at ANZ working across Australia and worked overseas as country chief executive for Fiji and Japan.

Prior to taking on the role as inaugural chief executive at 86 400, he was chief executive of payment solutions provider Cuscal, which has been funding 86 400.

Bell noted that 86 400 isn't putting a number on the initial capital raise.

He said: "It's important to understand, we've been in a very advantageous position in that we've been 100% funded by Cuscal. Cuscal will continue to support us and partner with us, which means we can focus on building the bank."

However, he added: "Banking is a very capital intensive business - particularly when you've got a growing mortgage book. We need around $250 million of capital over the first three years of operation. We're going to marketplace with a view of bringing on the first shareholders in the next year or so."

Bell explained that the aspiring bank has an approved $300 million warehouse facility in place for mortgage funding and will be raising retail deposits from the transaction and savings account.

When asked whether 86 400 has plans for a broader offering, Bell said the aim is not to build a small, niche bank.

"We are genuinely excited about building an alternative to the big four banks but the reality is you have to start somewhere - and [that] for us is transaction accounts, savings accounts and retail mortgages."

86 400 has over 80 staff at the moment. Bell was clear that a majority of those staff members are involved in product testing, which means that if the aspiring bank gets its APRA licence it won't need a major hiring spree.

"We're effectively operating at the moment. Once we get the banking licence we'll move from testing and it will mean hiring some staff - especially for call centre and customer support - but our technology, risk, marketing resources are here."

Read more: BankingAPRAAustraliaCuscalJudo BankANZBringing Morgan StanleyFijiFinancial StandardJapanRobert Bell
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