Secure Trust Bank (STB) was already a prudent lender - with one of the lowest leverage ratios in the sector - but it is reducing risk even further. In January, the challenger bank decided to stop writing unsecured personal loans. A more cautious approach to personal lending saw lending balances drop, pushing related revenue down by a third to £11.2m.
However, some areas of consumer finance retain good growth prospects, in particular motor finance. Chief executive Paul Lynam says the bank is considering launching a new motor lending brand, separate from its existing Moneyway brand, to cater to the prime end of the market and attract more business from motor dealers. This business increased lending balances by 43 per cent to £236m in the period. The bank also launched a residential mortgage product after the year-end.
Real estate finance remained the core revenue driver, up from £20.3m to £28.4m. Following an increase in regulatory capital requirements for lending to developers, Secure Trust's book has shifted towards residential investment - financing or refinancing professional landlords' real estate assets.
The asset finance business had a strong start to 2016, but reduced credit appetite from businesses, particularly in the construction market, slowed demand. Still, overall balances grew by two-thirds to £117m.
Analysts at Shore Capital expect adjusted net tangible assets of 1,324p a share at the December 2017 year-end (1,229p in 2016).
SECURE TRUST BANK (STB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,099p | MARKET VALUE: | £388m | |
| TOUCH: | 2,065-2,147p | 12-MONTH HIGH: | 2,685p | LOW: 1,550p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 1,276p | LEVERAGE: | 6.6 | |
| Year to 31 Dec | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 47 | 17.2 | 109 | 57 |
| 2013 | 79 | 17.1 | 78 | 62 |
| 2014 | 64 | 17.5 | 83 | 68 |
| 2015 | 92 | 24.8 | 106 | 72 |
| 2016 | 118 | 25.0 | 103 | 75* |
| % change | +28 | +1 | -3 | +4 |
Ex-div: 13 Apr Payment: 12 May *Excludes special dividend of 165p, paid in July | ||||
