Bank on Secure Trust's growth

Critically for a business so dependent on the trajectory of the UK economy, Secure Trust is nimbler, and arguably more defensively positioned, than the likes of Lloyds or RBS. Its lending is typically for shorter duration, and split evenly between business and consumer finance, across seven product lines. The largest of these, in terms of first-half income generation, was retail finance, where a small dip in the net revenue margin to 9.6 per cent was offset by a 32 per cent year-on-year rise in the loan book. Lending in the lower-margin real estate finance segment, alongside commercial and motor lines, also rose.

A decline in rates in the latter was the primary cause of the contraction in the group’s net interest margin to 6.7 per cent at June 2019, 70 basis points lower than in 2018. Shifts in the lending mix also boosted the proportion of risky assets, leading to a first-half drop in Secure Trust’s chief capital ratio – common equity tier one (CET1) – from 13.6 per cent to 12.8 per cent. To analysts at broker Peel Hunt, this trend cannot be sustained at the current rate of lending growth, although chief executive Paul Lynam is confident that generation of surplus capital equivalent to an extra 150 basis points a year will be enough to stay above the regulatory threshold and fund a 5 per cent annual increase in the dividend.

Of course, investors will be looking for caution, too. Expectations that momentum will continue “assuming an orderly Brexit” might not therefore provide much comfort. But should the opposite occur, Mr Lynam thinks the bank will “emerge faster” than rivals. Not only does the bank have zero exposure to sub-prime lending and to credit cards, but the residual life of its average loan is less than two years, meaning it can rapidly reposition its balance sheet if need be.