Secure Trust Bank Share Discussion Threads

[p1nkfish] 14/10/2023 08:57

Possible Q3 trading update towards end of Oct.

[checkers2] 14/10/2023 08:23

Secure Trust featured in Ennismore September Newsletter:

Secure Trust Bank – UK specialist lender (1.8% NAV)
Secure Trust Bank is a GBP 120m market capitalised UK specialist lender. We wrote about the company back in January
2019 and since then it has generated GBP 145m in net profit and paid out GBP 45m in dividends. Yet the market
capitalisation has fallen by circa GBP 140m in this time, with the share price more than halving. This does leave however
a situation where the stock could double or triple and still not look overvalued. On our expectations it is now trading on
a ridiculously low 3.5 times earnings multiple and 67% discount to tangible book.
Since we last wrote there has been a change of both CEO and CFO in 2021 and 2020 respectively and a strategic move to
scale up the business via growth in some new markets as well as gaining from some competitors leaving the market. This
has led to an increase in the loan book to GBP 3,200m at an annualised growth rate of circa 15% over the last 18 months
to June 2023.
The loan book proportions by segment haven’t changed so much. Retail Finance and Real Estate are now even more
important being 75% of the total book, each amounting to around GBP 1.2bn. As a reminder the Retail segment lends across various consumer products including furniture, electronics and sports season tickets growing at almost 30% in the
first half of the year with over 85% in interest-free lending with much of the income paid by the retailer. Obviously growing at this rate, we are very cognisant of credit risk so it has been very positive to see provision rates not move substantially in a period of increasing economic difficulties for the consumer. Secure Trust via its V12 brand has been assisted in its growth due to some banks pulling out of the market, perhaps due to its fairly niche size and increased technology requirements. We believe their market share now to be in the low to mid-teens for new lending. The Real Estate segment’s loan book is now mainly lending to residential investment and development, and due to the interest rate environment, is growing much slower than Retail Finance at around 7% but continues to show very low impairments which is testament
to its conservative lending with an average Loan-to-Value of around 56%.

One negative has been the Vehicle finance segment (circa 15% of the book) which has not grown as much as the company
would have hoped as the prime/Personal Consumer Plan offering on their new platform has taken longer to scale via
dealers than they expected. We believe they do have some mitigating factors though, with the recent historically unusual
behaviour in used car values due to new car supply issues as well as different dynamics in car values for electric versus
traditional engine making it harder to price correctly in a new lending subsegment. The plan is to put all of their lending
propositions on one platform by the end of year which should help them to gain more traction with their dealer channel
to market. The Commercial Finance segment, circa 10% of the loan book, is mainly factored receivables helping smaller
companies working capital situation and very short duration lending with typically very low write offs. Similar to Real
Estate there has been limited loan book growth currently.
Optically overall the revenue margin on its loan book has decreased in the last five years by around 230bp to around 5.8%.
However, the company has continued to move up the credit quality scale in its market positioning which is not being fully
shown in its results due to accounting standards requiring premeditative provisioning for the loan book leading to only
40bp of improvement to 1.4% in that time. Overall, this has led their return on average equity to fall from 13.1% in 2018
to, we expect, a not disastrous but unimpressive just over 10% for 2023. They target a substantially higher figure, around
15%, in the medium term. We expect the return to be close to 12% next year as we see the increasing benefit of scale
pushing the cost to income ratio to close to 50%, the low end of its 50-55% target.
Given the growth strategy, management are aware that the returns need to step up to fund this strategy and we would
much prefer that its 25% dividend payout policy was changed until their returns are shown to sustainably finance the
greater than 15% loan book growth targets, given their Core Equity Tier 1 capital ratio currently sits around 13%, close to
their internal 12% minimum target, the regulatory minimum is lower at 9.6%. As it stands the company sits on a historic
7% dividend yield which we would expect to increase this year given the dividend policy.
Secure Trust Bank continues to be a fairly niche lender which is underappreciated by the market. Over the last few years,
it has become more prudent on its lending book which we believe will lead to more consistent profitability in the future.
They have also invested in technology which should enable good quality lending growth in Retail and Vehicle Finance with
increasing scale leading to higher group returns. It was also positive to see the CEO David McCreadie buying GBP 176k of shares in August at current levels. Putting the business on 9 times earnings and around tangible book for 2024 leads to upside of over 200% over the next 15 months.

[34adsaddsa] 03/10/2023 10:47

I've just read them. I'm not surprised that a growth strategy during a pretty grim economic environment is unloved by the market.

I wonder if a private equity outfit might be interested. Perhaps Pollen Street.

[apple53] 29/9/2023 05:31

34ad please see my posts 532 and 539 (and some earlier) re switch to growth strategy which obviously needs more capital to maintain capital ratios as the balance sheet grows

personally I also want to see some buybacks

[34adsaddsa] 28/9/2023 23:42

Why do they pay out so little of the profit? What's happening to the rest of the cash?

[red ninja] 09/9/2023 10:43

Secure Bank Trust in the 5/9/23 FT



My dividends strategy continues to deliver
Highly depressed markets have thrown up very attractive yields

"A balanced portfolio — without overdiversifying — is something to aim for. I selected 16 stocks with a weighting to large caps, all offering a dividend yield of 5 per cent or more. As a “core” there was a three-unit holding in each of Aviva, Legal & General and M&G, all on yields of at least 8 per cent. Then five two-unit holdings — British American Tobacco, Phoenix, Primary Health Properties, Secure Trust and Taylor Wimpey — again juicy yields averaging about 7 per cent. 

This portfolio should deliver a near 8 per cent dividend yield overall. Even if a couple of holdings were to disappoint, the projected income should still be very satisfying.

The first two need little introduction; PHP, despite its debt, should be well capable of at least maintaining dividend payments given its rent flow, effectively underwritten by the government. Niche lender Secure Trust has to be outstandingly cheap — I note that the chief executive has just made a notable purchase — and land banked and cash-rich Taylor Wimpey presents an excellent buying opportunity when we must be at, or near, the bottom of the housebuilding cycle."

[p1nkfish] 09/9/2023 09:56

Nice one b4.

A company that is not out to impress in the short term but ploughs ahead and executes.

The metrics speak for themselves, markets cycle irrespective.

A long hold for me.

[buffett4] 09/9/2023 09:33

I try to focus on the long term business progress of my investments. This is a minimum 10 year hold for me so the fluctuations in price in between I see as irrelevant. So, if we go back to their 2013 report and compare it with the most recent 2022 full year accounts, the progress is solid. The portfolio has increased by a multiple of 7 from £391 million to £2.9 billion (and now stands at £3.2 billion), revenue has increased 2.7 times from £73 million to £203 million, customer numbers are up from 350,000 to over 1 million, shareholders funds have increased over 5 times from £61 million to £327 million and finally PBT has increased 2.5 times from £17.1 million to £44 million. In yet the share price is down by 60% from £17.15 on 4.1.2013 to today's price. So my view (and I could be wrong) is that this is a solid business making good, steady progress selling at a bargain price.

[catabrit] 07/9/2023 08:54

Ameriprise seem to be dumping shares.

[brad_k] 06/9/2023 18:00

My concern would be that over the last two weeks the majority of the trades have been buys, today is a case in point, and yet the price has been walked down from 690p to 650p today. Ultimately if the share price does not rise when most of the transactions are buys there is little point owning the shares.

[p1nkfish] 06/9/2023 14:06

Not just STB, theres a Debbie Downer on a lot of the UK and doesn't make sense in all cases.
Patience and forebearance are absolute necessities.
Our time will come.

[catabrit] 06/9/2023 13:47

This is so unloved that it didn’t even get a bounce after being mentioned by Lord Lee in the FT!

[indalo] 18/8/2023 17:04

It’s a bargain. Director buying is reassuring.

[red ninja] 18/8/2023 11:33

In Shares Magazine this week :-

Secure Trust Bank is cashing in helping consumers get what they want
Despite its strengths this specialist lender remains deeply unloved and undervalued
Thursday 17 Aug 2023 Author: Ian Conway Great Ideas


Investors who are risk-averse and prefer to avoid small-cap stocks may want to stop reading here, but for those with a nose for value and an appetite for contrarianism we think there is a lot to like about specialist lender Secure Trust Bank (STB).

To say the stock is unloved is an understatement, as one look at the share price performance over the last five years demonstrates.

Secure Trust Bank provides retail finance and vehicle finance for consumers as well as property and commercial finance.

Its retail finance arm arranges and administers finance and loans for well-known national brands and retail partners across the UK, helping shoppers buy the things they want.

In the first half of this year, the bank grew its retail loan book by 12% or £614 million and increased its market share to 12.9% from 11.4% six months earlier.

In vehicle finance its V12 ‘product hub’ allows dealers to buy, sell and finance used vehicles, while its Moneyway finance arm has hundreds of thousands of happy customers across the UK.

Lending increased by 18% or £250 million in the first half as the used car market soared and the bank grew its dealer and broker relationships.

The real estate finance business offers loans to experienced developers of residential and commercial schemes as well as professional landlords, and grew its loan book by 10% or £250 million in the first half, while commercial lending was flat as the bank made a strategic shift towards lower-yielding but lower-risk financing.

On the whole, therefore, the bank increased its loan book in three of four of its large addressable markets while staying disciplined in terms of risk, and reported a net interest margin of 5.4%, which the high-street giants would kill for given they are expecting to report an average margin of just over 3% this year.

Even though it took an impairment charge of £7.2 million for non-recoverable loans in the first half, which management says is unique and relates to a long-standing commercial debt, pre-tax profit of £16.5 million was almost flat implying underlying earnings grew by 15%.

With no write-offs in the second half, profits are expected to increase ‘significantly’ thanks to loan book growth and a low cost-to-income ratio.

So why does STB trade on 0.4 times 2023 book value, 3.6 times earnings and a dividend yield of 7.5% with the dividend four times covered?

‘The market is valuing the shares as though the company has serious balance sheet issues, which we do not agree with’, says Shore Capital. We can only concur.

[parttime] 17/8/2023 17:31

Another purchase by the CEO.


Secure Trust Bank PLC ("STB" or the "Company") announces that on 17 August 2023, David McCreadie, CEO has purchased 11,185 Ordinary Shares of 40p each ("Shares") in Secure Trust Bank PLC.

[p1nkfish] 13/8/2023 14:19

tv, took my post down as was a rant, doing more of that recently as the car crash unfolds.

Euripides:

"Nothing forces us to know what we do not want to know except pain."

Pain it will probably have to be.

[topvest] 13/8/2023 13:47

Yes, agreed. The US despite all the euphoria are in an even worse shape. Their July monthly deficit was $221 billion. With $276 billion in receipts, the US spent a massive $497 billion last month. Incredible really...nobody cares!

[topvest] 13/8/2023 10:50

Yes, well done. Seems to have bottomed out for now. £18 of NAV for £6 was, and is, very good value. No interest in real assets at the moment, just the Maginificent 7!
Unfortunately, my purchase price was c£18 so an unbelievably poor performance despite the business growing a little. Banks are so cheap. Worth topping up at some point, but I'm holding off until we get a global recession which is a c70% probability, despite markets hoping otherwise, based on the yield curve inversion.

[masurenguy] 12/8/2023 12:15

The Mail on Sunday

Shares have halved in a year, but that is a “poor reflection” of its prospects. The bank is well diversified, operating across professional property, motor and business-invoice financing. It also helps businesses to offer credit to consumers, notably supplying “all the Premier League clubs with finance so they can offer season ticket deals to fans”. Loans are funded via deposits, which grew by more than £2.5bn in the first quarter. The 7.5% yield is an added attraction. 556p

No position.

[t-trader] 11/8/2023 16:59

Nice surprise today, only bought in Monday at 5.73p

Nice to get my timing right for once.

[1tx] 11/8/2023 16:10

STB has been trading at a multiple of present price for most of the period since it was split from Arbuthnot Latham.

[p1nkfish] 11/8/2023 12:23

Lovely break though 600p that was the barrier to the daily trend change, a weekly close at > 646.5 looks like a trend change on the weekly too. Next is current 835.5 for the monthly.

The weekly change, if it sticks by end of today, has happened more quickly than I expected.

[indalo] 11/8/2023 12:15

Looks extremely cheap when compared with OSB and others. What I like here is that the divi while decent at ~8% is covered 3x allowing for reinvestment in the balance sheet to support growing scale. Furthermore the market opp is huge and STB is small leaving a lot of headroom to grow into. If they can double in size and grow the divi this could become a 20-25% yielded if bought at these levels, not to mention the share price upside when the market catches on - very low volumes traded suggesting it’s widely ignored.