Secure Trust Bank Share Discussion Threads

[cfro] 18/5/2023 07:33

That's not too shabby for a Q1 trading update.

[muffster] 10/5/2023 10:09

Crazy spread.

[buffett4] 04/5/2023 12:05

I have been watching STB over the years and from what I can see it appears to be a well run, stable bank. I have had dealings with them in my work life and the culture within the bank seems to be one of 'protect the bank.' The active businesses all seem to be in attractive sectors, prime and near prime car finance, prime retail credit, invoice discounting and property finance. Funding in the form of shareholders equity and customer deposits seems secure. I read the dividend investors blog and thought it was excellent. His main concerns are that the net interest margin has reduced from 15% to 6% over the last decade. Personally I'm not overly concerned by this since it just reflects the move to a more volume/prime business model, 6% remains healthy. The other primary concern is that although the bank has been trading 75 years, the current business units have only been trading 15 years and have experienced rapid expansion in that time. I think that is a fair concern, lending businesses can go wrong in a big way, very quickly. However, to counter that everything I see from them indicates caution in their lending approach. In car finance for example they completely stopped lending during covid until the outlook became clearer. Logically we are likely to see an increase in bad debts given the increased cost of living, nevertheless I have been buying recently at these prices. I do not understand the valuation- how can a stable bank making c£40-£50 million pre-tax profit per annum with shareholders funds of c£300 million be worth £120 million. My outlook is long term so I plan to hold for 10 year plus so be interesting to see how the bank develops over this time frame. Please note this is just my opinion, I could be wrong.

[caughster12] 02/5/2023 17:58

Anyone concerned about this with what happened at FRC in America?

[1tx] 27/4/2023 19:48

Ended up more or less even allowing for ex divi...

[p1nkfish] 27/4/2023 10:41

Some "sell in May and go away" might also start to show itself.
No rush for the door today, selling at low volume. Just few buyers.

[p1nkfish] 27/4/2023 10:34

It does and every chance some had a tight stop-loss around the dividend amount vs yesterday close and were taken out this morning.

Terry Smith (an example) and others are giving banks a wide berth across the board. It all adds up to being unloved. This has funds and people will still need credit for cars etc etc. So long as they are careful with credit scoring and risk this too will pass and in the meantime there's the dividend.

[cfro] 27/4/2023 09:36

Mustn't dismiss the news coming over from the US - First Republic bank next bank in trouble.

Combine that news with ex-div and that then goes some way to explaining the current price.

[retsius] 27/4/2023 09:12

It`s all very well from CEO telling us how well the bank is doing and all the new exciting strategies, if when you check the share price it is obvious the market is wholly unimpressed, and has been for at least three years.


Absolutely DIRE performance for shareholders for five years.


One wonders, does he ever check the price of STB on a daily basis?

He has to think of how to get the share price moving UP!

R.

[p1nkfish] 27/4/2023 09:09

Volume low so far today vs average.
May have taken out some stops as it dropped by dividend payout amount if some had a tight stop?

[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