Secure Trust Bank Share Discussion Threads

[caughster12] 27/4/2023 08:55

Why would it fall today lower than the dividend?

[p1nkfish] 26/4/2023 17:18

Part of the valuation, imho, is the market can't totally fathom out what STB is. This is an off-tilter small bank. It has elements of different bits all mixed in. UK focus goes down like a Pb balloon too.

Let's see what ApptoPay can do when applied to their customer base and retail network. > 1500 retailers, > 560 dealers, brokers or internet introducers in the Vehicle Finance business, >1M customers.

So long as they have appropriate risk assessment in place I see this as a really neat place to park some cash and when the market turns (when?) It should get a decent re-rating imho. May be a while but the dividend is pleasant in the meantime and it's not like there isn't risk anywhere else at the moment except cash.

How much lower can it go?

Dyor etc. I'm often wrong but really interested in STB at this price.

Your capital, your responsibility.

[brucie5] 26/4/2023 16:15

But better dividend here than SUS, right?

[pvb] 26/4/2023 16:15

...Interesting.

A p/e ratio of 2.75 does seem ridiculous.

[1tx] 26/4/2023 15:51

Perhaps in the longer term if performance of STB & the general economy improves we could see takeover/merger prospects if the share price continues to remain at a low level both on PE & against book value of assets.There is concern generally at the moment re bad debt on consumer loans however this may be overdone.Certainly S&U where I am also a shareholder & is perhaps somewhat less "upmarket" than STB seems confident.

[brucie5] 26/4/2023 12:08

That's a good analogy. It may not matter, though surely, if the underlying business return continues to be good and cash generative? One thinks, among others, of Cookson?

[1tx] 26/4/2023 12:03

As far as I can see STB is turning itself into a mini Close Bros concentrating on Car & Vehicle finance,private & business & larger item consumer credit eg ebikes & furniture via its V12 Finance Company and secured business lending.The businesses being sold or run off are the mortgage and loan books which if memory is correct were acquired cheaply post the banking crisis when STB was owned by Arbuthnot Banking ARBB.

On reflection I suspect STB had little alternative but to increase dividend cover due to the requirement to have additional capital cover.I note that its former owner Arbuthnot raised additional capital the other day unlike STB it has a controlling shareholder,Sir Henry Angest,who was able to put in nearly 60% of the new capital.


The problem for STB is that when it was spun out of what is now Arbuthnot & in subsequent share sales by them the shares were all bought by institutional buyers mainly at prices between £15 & £20+.All these buyers are out of pocket and it has not attracted private investors to any degree partly because the sector is out of favour but partly also because STB has a management who don't really have a major shareholding in the business & perhaps do not consider the interests of shareholders.But presently at around £120m or so market value it is too small to attract further institutional interest & does not attract private investors either.Hence its ever falling share price....

[retsius] 26/4/2023 07:49

Last day before divvy... go on treat yourself!

DYOR
R.

[apple53] 25/4/2023 08:57

So the issue here is the 'growth strategy'. If they had made smaller changes to the business mix and ambition they could have continued with the previous dividend.

The sort of formula one should be thinking about (ex-analyst talking) is the marginal RoE on growth. That assumes deposit growth at a certain price, lending rates, bad debt assumption and marginal Cost to income ratio. If the marginal RoE is above the cross-cycle RoE of the group it is generally worth pursuing. If above cost of equity but below RoE then management can justify doing it, but should consider alternative uses for capital - divvy, buybacks, increasing T1 ratio. If below CoE then they should steer clear, obviously. Given the range of assumptions this is an inexact science so I prefer to see marginal investments to be above cross-cycle RoE (assuming it is materially above CoE).

Assuming capital ratios are more than sufficient then the hoary chestnut of buybacks vs dividends come into play. I like a lowish sustainable dividend (investors HATE dividend cuts even if for positive reasons otherwise the dividend ought to bounce around depending on growth opportunities) and use excess cash for buybacks. Good discipline all round.

I have a lot of sympathy with people that are concerned when banks 'go for growth' - I want to hear about marginal profitability with conservative assumptions.

Clearly if deposits get more expensive, eg as interest rates fall competitors don't cut their deposit rates enough, then the equations change and STB should reduce its growth rate.

[catabrit] 24/4/2023 14:42

I think River's second from last point is spot on.

[riverman77] 24/4/2023 14:27

To be honest I'd like the dividend to be a bit higher - if they paid 50% of earnings (which I think is the minimum I'd want from a well capitalised bank) then this would be on a 12-13% yield. They seem to be only paying out around 25% which is a bit on the low side for me.

[brucie5] 24/4/2023 11:11

Yes, I was interested to see this newsletter and to read further about his portfolio approach. For time being though I'm content to let the dividend do the talking, while keeping an eye on the chart, which suggests a solid base at just over 600 level.

[riverman77] 23/4/2023 22:01

His main concern seems to be that the bank has set up lots of new lending businesses over the past decade to meet its rapid deposit growth. Some of these have since been closed down, while those that remain are still fairly new. So it doesn't meet his requirement of having a long, established track record and seems to be trying out lots of different things but without quite hitting the sweet spot yet. That's fair enough, and I can see he tends to invest in very well established, blue chips (Unilever, Next, etc.}. However, on a 0.4x book I'd say this is more than reflected in the price so I'm happy to hold at these levels,although probably not one of my highest conviction positions.

[apple53] 23/4/2023 19:46

gosh I thought he was positive - I didn't get to the end when I saw the above issues

[p1nkfish] 23/4/2023 18:41

STB just won't meet his requirements but neither do other companies that make good investments.
It's called a market. Dyor etc. If his article helps push the price down I won't be complaining but will be buying.

[apple53] 23/4/2023 18:25

although well meaning a slightly depressing article from ukdividendstocks.
I haven't read every word but from the div comments I've seen it seems he missed the change in dividend policy (to formulaic) to allow for higher growth, so there will be further 'cuts' and rises as eps varies. And that the NIM has fallen due to closure of some higher margin business. And that return on capital is a function of changing regulatory requirements (ie a doubling of required capital) making it hard for a bank to achieve a double digit RoE while being very safely capitalised. The interesting point there is that much higher capital should mean safer bank and lower cost of equity, so a higher PE, but a) in my dreams! and b) SVB and CS scare people into thinking banks are not safer after all.

The thrust of the piece looked bang on, and I really am not trying to be critical, just helpful.

[mundungus] 23/4/2023 17:51

FYI
hxxps://www.ukdividendstocks.com/blog/secure-trust-bank-dividends

[brucie5] 19/4/2023 18:18

Value spotting: glad to see you hold this. But do you really run a three share portfolio, given other positions are closed? What relation to your bond holdings?

[value_spotting] 19/4/2023 17:58

Check out my latest post on STB! hxxps://open.substack.com/pub/eddielloyd/p/model-update-free-download-secure?utm_source=direct&r=267k4u&utm_campaign=post&utm_medium=web

[caughster12] 16/4/2023 12:06

Hey mate, do you have a link to the Canacord note?

[apple53] 14/4/2023 11:40

Good point catabrit. It's the "short marble" trade.

[catabrit] 14/4/2023 10:50

The most encouraging thing I’ve seen from STB is on LinkedIn; they have the most unassuming “new HQ” I think I’ve ever seen.

[riverman77] 14/4/2023 08:57

Good detailed broker note out from Canacord. On 0.4x book value and PE under 5 this looks absurdly cheap, especially given its good growth prospects and prudent approach.

[linton5] 03/4/2023 17:12

My trade never even showed up that’s a first