Weatherbys' bank loaps ahead of racing business

As punters gather at Doncaster for the St Leger, the last classic horse race of the flat season, one small statistic should give heart to those owners not in the winner's enclosure today.

Foal production - a key lead indicator for the health of the UK's racing industry - appears to have stabilised after four years of decline.

The person responsible for this bit of good news is Johnny Weatherby, chairman of the eponymous family-owned company that, since 1791, has kept records of every thoroughbred born in the UK and Ireland in its General Stud Book - a sort of equine Debrett's.

Horseracing, he says, is amazingly resilient to recession. In June, a report by Deloitte for the British Horseracing Authority said the total economic impact of the sport had risen slightly since 2009, to £3.45bn.

"You'll always lose the top 10 per cent of owners who will come in, splash the cash and then are gone," he explains over lunch at the company's Northamptonshire premises. "But there are quite a lot of fundamentally wealthy people involved in racing and that's always been the case."

Weatherbys headquarters are housed in a surprisingly nondescript building for a company that, over more than two centuries, has played the role of clearing house to British racing - taking entry fees, registering colours and distributing prize money.

Indeed, Mr Weatherby points out that the original meaning of the word "stakeholder" can be traced back to his ancestor - a lawyer from Durham - whose job it was to hold the stake, or prize money, for the aristocratic founders of today's Jockey Club, as they indulged their passion on the gallops at Newmarket.

Mr Weatherby is today the Queen's representative at Royal Ascot, and a framed letter from the monarch hangs in Weatherbys' reception area, in which she observes that "If Weatherbys can thrive, racing may be able to follow suit".

Today, however, the company is keen to stress that its efforts to thrive involve diversification into more mainstream financial services.

In 2006, Weatherbys started a private banking operation, building on its racing clients, but also taking advantage of the aftermath of the global financial crisis, in which well-off investors have sought out more conservative wealth managers.

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Helped by this pool of clients and assets, Weatherbys Bank has already grown bigger than the racing business, reporting profits before tax last year of £3.1m - a 12 per cent improvement on 2011 when it made £2.7m. It brands itself as "a modern bank, refreshingly traditional", in the sense that it only lends out half the amount it takes in as deposits, which this year are set to reach £400m.

"We hoped the racehorse owners might do more of their non-racing banking through us," says Roger Weatherby, the chairman's brother who serves as chief executive of the bank. "We were very pleasantly surprised how fast it grew."

Johnny Weatherby adds that the banking operation's origin in horseracing has enabled it to diversify risk, as its client base encompasses "hedge fund managers, scrap metal dealers, doctors and dentists, your Duke and your Prince - a cross-section of society."

Weatherbys declines to name any of its clients but suggests it has benefited from the fact that Coutts - a leading name in UK private banking - is now part of the bailed-out Royal Bank of Scotland.

"We're very small, and a small amount of attrition from Coutts is an avalanche of new business for us," says Adrian Crichton, a former a director of Barclays Private Banking who runs the Weatherbys Bank investment arm. "So we are winning new clients but also doing more and more with existing clients."

Weatherbys business model is arguably closest to that of Hoare & Co, a larger private bank with profits of £24m in 2013, but also steeped in history and now run by the 11th generation of the Hoare family.

All private banks have struggled in a continuing low interest rate environment, and Weatherbys estimates that half its profit in the past couple of years has come from its fixed-interest asset finance operation.

But, as Mr Crichton argues, patience is key in private banking.

"We know that if there are assets in the background, over time there will be a banking need," he says. "We'll wait perhaps as much as 10 years until they ring us up. That means we've got a few clients who don't make us any money - but at some stage we know they will."

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