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Kensington waves its troubles goodbye

So troubled lender Kensington Group has finally been sold. After months of speculation – heightened last week after it confirmed it was in advanced takeover talks – the group announced on Wednesday that its surprise suitor is South African investment bank Investec.

Surprised? Well yes, most brokers I have had the delight to speak to since the announcement have indeed expressed this emotion.

Many names had been bandied around such as Morgan Stanley, Merrill Lynch, Lehman Brothers and Bradford and Bingley. But of all the names suggested, Investec had been nowhere to be seen.

Brokers I have spoken to say the deal is great news.

Mortgage Force managing director Rob Clifford says it would have been a shame if Kensington had become subordinated as a brand.

He says: “It is great news that a business wants to invest and grow Kensington. We’re talking about a company that pioneered the sub-prime market; it was the original innovator.”

Personal Touch Financial Services sales director Dev Malle says that Kensington can now get on and implement strategies that were previously on hold until they had been sold.

The firm has clearly had some hard times of late. In March, Kensington saw its group chief executive John Maltby quit in a shock departure with Kensington Mortgages managing director Alison Hutchinson taking his place.

The following month saw Kensington’s mortgage book fall and its margins cut as it announced its first quarter trading statement.

On Wednesday, the group confirmed that it remained cautious about the short-term prospects and expects 2007 total revenue to be significantly below 2006. Its mortgage book was £7.1bn at the end of April 2007, compared to £7.2bn at the end of November 2006.

Clifford notes that sub-prime is now a tricky market place and has never been so over-supplied. “Kensington used to have a monopoly of the market but now virtually every traditional lender is encroaching on that space.”

But following investment from its new owners Kensington is aiming to turn its business around. It has announced a cost reduction programme targeting annualised savings of around £8m to be delivered by the end of two years, which will include removing duplicated functions.

This will ultimately mean people losing their jobs as Hutchinson confirms the group will be closing its London office and moving staff to its Reading office instead.

In addition, Kensington will now be looking to enter new market segments one of which has already been confirmed as commercial mortgages.

How quickly Kensington improves its performance under its new owner will have to be seen but it is clear that it now has the capital to achieve a positive outcome.

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