Slower UK economic growth, uncertainty over the Brexit negotiations and a squeeze on household income are vindication of Secure Trust’s (STB) decision to focus on lower-risk lending, argues chief executive Paul Lynam. The alternative lender stopped writing sub-prime motor finance at the start of the year, following its decision to halt unsecured personal lending. However, a shift away from higher-risk lending also meant a reduction in the net interest margin to 8.5 per cent, from 9.5 per cent in last year's first half.
Real estate finance is the lender’s core growth driver, with new loans more than double the previous year at £158m. The group focuses on professional landlords managing large estates. The retail finance division – which finances the purchase of items including sports equipment and furniture – also grew new business solidly, helping generate a 41 per cent increase in lending revenue to £23.4m.
The asset finance business wrote just a third of the £12m in new business management had anticipated each month. Mr Lynam attributed increased competition to aggressive pricing of risk by some of its rivals, offering lower yields. New motor finance business also declined, but this was due to a new focus on better quality credit. The proportion of new lending in this category increased by more than a third.
Analysts at Shore Capital expect adjusted net tangible assets of 1,297p at 31 December 2017, up from 1,229p at the same time in 2016.
| SECURE TRUST (STB) | ||||
| ORD PRICE: | 1,825p | MARKET VALUE: | £338m | |
| TOUCH: | 1,825-1,850p | 12-MONTH HIGH: | 2,500p | LOW: 1,815p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 1,294p | LEVERAGE: | 7.3 | |
| Half-year to 30 Jun | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2016 | 57.3 | 12.5 | 57.0 | 17 |
| 2017 | 65.8 | 13.9 | 60.6 | 18 |
| % change | +15 | +11 | +6 | +6 |
| Ex-div: | 31 Aug | |||
| Payment: | 29 Sep | |||
| *Excludes special dividend of 165p in July 2016 | ||||
