STB – Secure Trust Bank
2*
Secure Trust Bank issued a profit warning this morning triggered completely by weakness in the Group’s Vehicle Finance business. As indicated in the Group's interim results announcement on 14 August 2024, the pausing of collections activity following the FCA's Borrowers in Financial Difficulty review led to a higher volume of Vehicle Finance loans reaching default status...from WealthOracle
wealthoracle.co.uk/detailed-result-full/STB/936 |
I think we could do with more clarity on what exactly is going on in the vehicle finance division. Hopefully we will get more colour when things become more clearer in the next statement.
£10m - £15m is quite a lot of losses. It seems that they stopped doing business (i assume because of the previous review), then the defaults happened.
Some questions then: Why such a large amount of defaults? What was the real reason for this? Economic hardship or were some customers advised to pause paying their loans? |
Anyone of those directors feel like buying yet? |
Unfortunately the reaction is a reflection of the market in general. It’s a struggle to find a safe investment and any perceived issues are hammered. |
What a mess. And there is still £270m of TFSME funding to be repaid that matures at the end of FY25.
The capital markets day is going to be interesting - i doubt any viewers will give a toss about the commercial finance division when the shares have dropped 40% in a week! |
Extract from Cityam article...Analysts downgraded the bank's target price for the stock as a result, with Investec cutting it from 1821 pence to 1604 pence.Shore Capital also downgraded their target price, from 1750 pence to 1650 pence, but said the rating "does not current include any potential legacy redress impact from the ongoing issues in the motor finance industry, which are currently too uncertain to quantify with any degree of confidence but could be significant". |
Profit warning issued
hxxps://www.cityam.com/secure-trust-bank-slashes-profit-expectations-amid-motor-finance-ruling/ |
You would think at the very least the divi is a gonna. |
You need to take those rose tinted glasses off !! |
Doesn't look like the bottom yet - more problems in the vehicle finance division. I am assuming though that this has to be linked with the recent court ruling, so perhaps the management are acting prudent on this and kitchen sinking the probable upfront costs.
You could argue that most of this extra cost is now already built into the share price anyway.. |
Is this the 'bottom'?
Damn! Went too soon and added at significantly higher price. Oh well. :-( |
Best read the judgment in the round. The consumer credit act is part of this. |
Surely then in the third case where things were told that were not true, that responsibility lies with the motor dealer and not the bank.. |
 There are three cases in the court of appeal. One is where no mention of commission is made, the second is where the commission was linked to the interest charged, the third was one where some of the things told to the car purchaser were not true.
I would think these are all to some extent out of the ordinary. The institutions are FirstRand bank and Close Brothers.
What is exciting people is probably the Johnson case where there was mention of the commision, but other things were said which were not true and the commission was particularly high.
Quoting paragraph 154.
First, the hire purchase agreement which was being offered by the lender was certainly
not the most suitable for Mr Johnson’s requirements. It was inadequate to fund the
purchase because he was required to pay far more than the Glass’s Guide price for the
car. This transaction could only be achieved by an additional personal loan of
£1,595.31. The proceeds of that loan were, in effect, required in order to pay the dealer
the commission of £1,650.95. If that commission had not been payable, Mr Johnson
would have been able to fund the purchase at the actual Glass’s Guide price using the
hire purchase agreement which the lender offered. |
I guess the fear here, and why the share price has fallen as much as it has, is that they will have to raise capital at some point and/or cut the dividend... |
Article in the Guardian today about this. Likely nothing new, still...
Lloyds suspends commission payments after ‘seismic’ ruling on UK car finance
Industry and Treasury hold urgent talks after court of appeal rules consumers were mis-sold loans |
Just look at PPI for a precedent. It started out as a massive fraud by the banks against their borrowers. It ended up as an even greater fraud by the public (and their CMCs) against the banks - and the FCA/Government turned a blind eye to this as it was politically expedient to do so. So the fact that most of the banks are innocent in relation to this will not protect them from the tidal wave of claims driven largely by CMCs and their all too willing clients. |
The point, however, is that if when someone is entering into a contract they are told things that are not true then this is potentially a form of fraud. |
How did he find out it was a bad deal? He must have read the contract afterwards. Why not before then?
We all make mistakes but this reads as a problem with the customer if all parties applied the prevailing law at the time. |
This is the judgment
The unusual case on disclosure is that of Johnson and these clauses are relevant:
The Suitability Document and the Dealer Terms of Business
153. In the course of summarising the facts of the Johnson case earlier in this judgment, we
referred to the “Suitability Document…Proposed for Mr Marcus Johnson” which was
prepared by the dealer, the Trade Centre Wales. Its material terms are set out at [46].
As we observed at [47], the document is untruthful in a number of important ways.
154. First, the hire purchase agreement which was being offered by the lender was certainly
not the most suitable for Mr Johnson’s requirements. It was inadequate to fund the
purchase because he was required to pay far more than the Glass’s Guide price for the
car. This transaction could only be achieved by an additional personal loan of
£1,595.31. The proceeds of that loan were, in effect, required in order to pay the dealer
the commission of £1,650.95. If that commission had not been payable, Mr Johnson
would have been able to fund the purchase at the actual Glass’s Guide price using the
hire purchase agreement which the lender offered.
155. Secondly, as in Mr Wrench’s case, the Dealer Terms of Business with FirstRand
contained clause 2.1 (set out at [39] above) which tied the dealer in to giving it a right
of first refusal. It is probably no coincidence that the Trade Centre Wales did not refer
to clause 2.1 of these terms in the Suitability Document. It is notable that there is no
contractual obligation in the “Rates and Terms” agreed between the dealer and the
lender that the dealer was required to disclose this contractual tie between them. This
is an omission of a key fact which is a suppression of the truth.
Judgment Approved by the court for handing down. Johnson v Firstrand Bank Ltd (t/a Motonovo Finance)
40
156. A reasonable reader of the parts of the Suitability Document described at [46] above
would conclude that the dealer would canvass the “select panel of lenders” on behalf of
the applicant and then “advise on” the result and “provide an illustration of the
Consumer Finance product that best meets your individual needs”. Nothing of the sort
took place. In fact, what happened was that a single quote was obtained for an
arrangement which was very disadvantageous to Mr Johnson (who was paying far more
than the car was worth, as the DDJ found on the facts), and very beneficial to the dealer.
Mr Johnson, as the DDJ found and as the dealer must have known, did not read any of
the documents and did not understand what a very poor deal he was getting. That might
be his fault, but he is hardly alone in dealing with complex legal documentation in this
way, and the Consumer Credit Act protection exists in part for this reason. |
Link to FT article here: |
Give up - can't post the link. Some more background on moneysavingexpert.
All up in the air until May 2025 unless shot down sooner. |
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