Bank on growth from Secure Trust

The core strengths of the bank’s loan book are its focus on shorter-duration lending, split evenly between business and consumer finance, across seven product lines. Arguably, that makes it nimbler and more defensively positioned than mortgage behemoths such as Lloyds and RBS. This point was underlined in a third-quarter update, when the bank reassured investors that it “can react quickly to both market opportunities and threats”.

Given the behaviour of the high-street lenders, it’s tempting to assume that a preference for short-term loans means greater risk. But Secure Trust’s exposure to sub-prime lending and credit cards is non-existent, and loan originations remain selective.

Instead, the group concentrates on asset-backed lending lines such as bridge financing for real estate development, or finance for sofa or bicycle purchases by creditworthy consumers. The latter business – where the net revenue margin is just below 10 per cent – is booming. In the first half of 2019, the retail finance loan book grew 32 per cent to £672m, and is expected to rise to £782m by the end of this year. All of this has been supported by the introduction of individual savings accounts (Isas), which has driven down the cost of the deposit base.

Although demand dipped in September, full-year results are expected to reveal a pick-up in activity and profit growth after the October Brexit deadline was extended. In turn, this should support assurances by chief executive Paul Lynam 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 a5 per cent annual increase in the dividend.