Secure Trust Bank Share Discussion Threads

[retsius] 03/4/2023 13:00

I think a lot of selling is due to end of tax year balancing.

Cityfunds this AM gives a glowing appraisal and said could be a bid target.

The price has conveniently dropped down so it can go into next year’s ISA.
Dyor
R.

[cfro] 03/4/2023 08:57

A lot of additional info in that article thanks..
They've obviously been very proactive on the commercial lending front (a massive growth area despite the current SME subdued activity) and better than just simply concentrating on the boring old mortgage lending which is a highly competitive market.

[p1nkfish] 03/4/2023 08:30

From the Business desk today.

"The commercial finance arm of the listed specialist bank Secure Trust Bank has seen lending balances rise to £376.4m in 2022, up 20.1 per cent from 2021 (£313.3m).

Revenues at the Solihull firm have also seen a considerable 68.4 per cent increase, rising to £29.3m in the calendar year (2021: £17.4m).

The majority of the increase was driven by new business, as the firm delivered £157.3m in new facilities, up 63.6 per cent on the previous year (2021: £93.7m).

Facilities provided by the bank’s Commercial Finance arm include the support of a multi-million asset-based lending facility to Staffordshire-headquartered International Decorative Surfaces (IDS), the UK’s largest distributor of decorative services, as it completed a management buyout in partnership with private equity investor Chiltern Capital.

Secure Trust Bank Commercial Finance also provided a combined £12m facility to UK hobby and toy specialist Hornby Hobbies, made up from a £6m accounts facility and £6m inventory facility. It also enabled the UK’s largest woollen yarn spinner, Lawton Yarns, to return to private ownership with the delivery of a £13.4m total facility.

In partnership with Blazehill Capital, the bank delivered a £43m package for Northamptonshire pet food brand, Butcher’s Pet Care, consisting of a £25m revolving credit facility and an £18m non-amortising bullet repayment term loan.

David Parsons, regional managing director for Midlands at Secure Trust Bank Commercial Finance, said: “It’s a pleasure to share our latest results that showcase positive growth in new business, lending balances, revenue and clients. We are especially proud of our low client attrition rates, reflective of our ability to provide tailored funding solutions that genuinely aid the management teams we work with.

“In what has been another challenging year for SMEs across the UK due to a decline in economic activity, rising inflation and cost pressures, our focus remains on building relationships that allow us to thoroughly understand the opportunities and challenges ahead of each business, and react accordingly.”"

[retsius] 01/4/2023 21:55

Pinkfish

Many thanks

That’s what I kinda thought.
R.

[p1nkfish] 01/4/2023 20:29

My understanding, please correct if others know more.

Reversing an impairment needs proper justification to avoid non-compliance with UK banking regulations and can't usually be added back as they are adjustments to reflect an asset value reduction, recognised as a loss on the income statement.

[retsius] 01/4/2023 19:23

Can someone tell me if the impairments can be added back into the accounts if they are not actually needed?

[p1nkfish] 01/4/2023 17:50

I'm often wrong but do strongly believe STB is in a sweet spot.

They can become more Conservative quickly if need be and still out grow the wider economy imho.
Totally agree that a carefully run STB hitting problems = tin hats on everywhere.

[topvest] 01/4/2023 16:45

This bank continues to perform pretty well and is conservatively financed. I've held for a few years and well and truly underwater. The share price just continues to go down. At some point it will start going the other way, and strongly. If STB and ARBB get into trouble then we have bigger problems, as they are or certainly were cautiously run. Anyway, despite the ridiculously low price and good dividend, I haven't got the balls to buy more as I am not convinced in the merits of owning banking shares. At least its only a small position.

[catabrit] 31/3/2023 15:32

Hard to resist at this sort of price so after being flukey with top ticking the sales, I’m not going to ride my luck with trying to second guess the bottom. I bought some this afternoon. Really happy to own these down here.

[brad_k] 31/3/2023 15:09

Once again there are far more buys than sells (all those around 672p are buys) and the share price is very slow to respond. Good tight spread at the moment though, less than 2p, which may be encouraging some of the buyers.
So what is holding it down right now, it came down very quickly from 790p?

[p1nkfish] 30/3/2023 18:03

App to Pay can add a bit of growth.
Decent results. No fighting this market, just have to go with it.
Price will reflect results one day, paid to wait until then.

[brucie5] 30/3/2023 13:15

Thanks, apple. All understood.

[apple53] 30/3/2023 13:13

Thank you Brucie. Yes I am/was a specialist, though as I previously mentioned I pre-date the most complex capital calculation methodologies, and also the newish provisioning approaches (though the latter follow the method UBS used in 2000ish when I worked there, ie they are sensibly ex-ante and smooth profits). STB were silly in 2021 - I don't understand why they allowed their provisions to fall to zero.

I have no view on HSBC. STB I can vaguely assess in half an hour; HSBC would take a week to scratch the surface. I covered it a VERY long time ago.

Correct me if I'm wrong, but is the first time STB have led the statement clearly with pre-provision profit data bullet? A good idea.

Quite right cfro. Probably the cheapest healthy bank in developed world? And a growth stock?

Tricky thing is that they can get a better return ploughing capital into buybacks than marginal loan book growth....

[cfro] 30/3/2023 10:54

With earnings per share slightly over 180p, that make the historic PE just 3.8. With a dividend yield of nearly 7% not only is the company conservatively managed but also conservatively valued.

Of course, if the business then grows from here and profits increase then, as apple53 quite rightly points out about the payout ratio, the dividend will increase making the metrics around that even more attractive.

But who's mad enough and stupid enough to risk investing in a bank right now (I am Lol)...

[brucie5] 30/3/2023 09:07

Excellent post apple. You appear to be a bank specialist. Do you have views on HSBC at current levels?

[apple53] 30/3/2023 08:46

Great results at first and second glance (but need to read properly). Unsurprisingly so, perhaps. Analysts will have to upgrade. Probably quite a lot.

Guys, remember dividend is arithmetically determined at 25% of stated eps.

19% loan growth, a) not actually that conservative optically; however as a small bank there is scope to grow quickly while still keeping standards and margins high by cherry-picking in a large forest, b) they need capital to fund growth which was the whole point in changing the dividend policy.

Underlying eps was around 90p in the second half, so well up on H1 as expected.

Now to the important stuff: the underlying profitability jumped c. 20%!
Operating income from 81m in H1 to 88m.
Costs pretty flat hence operating profit (pre-provision) up from 34.8m in H1 to £41.6m in H2.
This meant they had scope to make quite a lot of (anticipatory) provisions and still grow eps (from a low base) rapidly.

I think this will be a slowburn since the headline figures don't appear outstanding on a year-on-year basis.

[brucie5] 30/3/2023 07:41

I make that total dividend for year of 6.8%? Certainly above average, but hardly steep. I guess in current climate this is a sensible and solid income proposition. Upside? Let's see.

[cfro] 30/3/2023 07:32

Great Tomps2, thanks..

Proving itself to be a very conservative run bank with low levels of arrears and well capitalised. (very different from the likes of SVB, Credit Suisse Lol..)

Dividend at 29.1p, i was hoping they would keep the divi above 30p.

[tomps2] 30/3/2023 07:16

Secure Trust Bank #STB FY22 results overview by David McCreadie, CEO
hxxps://www.piworld.co.uk/company-videos/secure-trust-bank-stb-full-year-2022-overview-march-2023/

PTP +28.1% (pre impairments) £76.1m
Total PTP £44m (cf £36.6m)
19.1% growth in lending balances to £2.9bn
500bps improvement in cost income ratio to 55%
Tot divi for yr 45.1p
Outlook in line

[apple53] 29/3/2023 22:51

I put some lengthy posts up a month or so ago about fundamental reasons for share price performance (magnified by institutional sellers etc.), and I repeat here the conclusion that I think H2's eps ought to significantly beat the underlying 69p of H1 (I suggested closer to 100p). The biggest impact should be the choices they make around cautionary bad debt provisions (rather than driven by actual impairments).

We really ought to look beyond eps to underlying profitability (and then pick a cross-cycle bad debt charge to get to eps). Underlying means pre-provision, which they don't easily provide, but in H1 it was 35m up from 28m in H1 2021 (and 31-32m in H2). NII will definitely be higher in H2 than H1, while expenses might grow a bit and fees and other income could be a bit volatile.
I will be looking at the underlying profitability to get a sense of the scale of eps upgrades into 24-25.

[apple53] 29/3/2023 19:36

I don't mind a muted response tomorrow. I haven't been able to buy back what I sold at £8, as I put it in things that are flat or down!
This probably means it'll pop tomorrow as the analysts all realise they downgraded too much.....

[retsius] 29/3/2023 17:32

Results tomorrow but don’t hold your breath, seems to disappoint its shareholders no matter the results.
R.

[catabrit] 29/3/2023 13:00

Didn't those guys pay quite a big premium to TBV though? I bought Arbuthnot in 2016 actually because its look through equity exposure to STB put a negative EV on the rest of the business.

[1tx] 29/3/2023 12:03

Whilst recent market sentiment to banks & consumer lenders has not helped matters.The major reason for the fall in STB share price was the dismal results for the first half of the 22 financial year announced in early August.The decision to have a four times covered dividend did not help matters either.

Virtually everybody who has held STB for any period longer than a few months has lost money and those institutions who bought shares when it was floated out of Arbuthnot ARBB & in subsequent placings of ARBB's remaining holdings have made a massive loss.Most still hold the stock they bought,it is not easy to sell in large amounts unless there is a willing buyer.STB may be a bit undervalued but there is in my opinion a problem with the company.STB is not "connected" to its shareholders with smallcap companies you need directors who have a meaningful interest in the company & are interested in maintaining & improving value for shareholders.STB is run by managers for managers.

[catabrit] 28/3/2023 16:14

Yeah this is a classic case of suffering from the wider fears that are so prevalent elsewhere. I literally top-ticked (seldom happens) this and sold at 780 bid or whatever it was. Nothing to do with valuation and prospects and more to do with opportunity cost and wanting to be prepared for anything that followed the banking collapse in the US. I think you just need to be patient. It’s a really frustrating market. So much of what I’m following has trended back down again. My selling has been amazing but my buying this year has been patchy at best. I’m underwater on a lot of new purchases.

STB will come good. I’m tempted to buy it again on continued weakness as it’s a great little company with a great risk reward.