Could the Shawbrook Bank IPO light up my Stocks and Shares ISA?
Iâve got cash to burn in my Stocks and Shares ISA right now and Iâve just seen that thereâs an Initial Public Offering (IPO) coming up shortly. Itâs 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? Letâs discuss.
What is Shawbrook?
Founded in 2011, Shawbrook is a âspecialistâ 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 companyâs Trustpilot score. This is currently 4.6/5 â 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 donât expect it to soar. Ultimately, the company is just not that exciting. Itâs 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, itâs likely to have limited scalability.
By contrast, if I look at a bank like HSBC (LSE: HSBA), itâs 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, itâs 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 itâs 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 Iâm 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.
The post Could the Shawbrook Bank IPO light up my Stocks and Shares ISA? appeared first on The Motley Fool UK.
Should you invest £1,000 in HSBC Holdings right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if HSBC Holdings made the list?
More reading
- £5,000 invested in HSBC shares 1 year ago is now worthâ¦
- Seeking a passive income? 3 low-risk dividend shares to consider
- £3,000 to invest? Here are 3 UK shares to buy in a Stocks and Shares ISA, according to experts
- See how fast the HSBC share price is forecast to grow this year, and the FTSE 100 bank that will beat it
- FTSE 100 shares pay £1.5bn a week in dividends! Meet 3 top income stocks to consider
Edward Sheldon has positions in London Stock Exchange Group. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group Plc. HSBC Holdings is an advertising partner of Motley Fool Money. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
