Secure Trust Bank Share Discussion Threads

[kenmitch] 21/3/2024 09:01

Yes. Disappointing Results and a dividend cut. So sold just now on my “sell on a disappointing update or other bad news” tactic. It’s ruthless but avoids too many losers in the portfolio.

Good luck to those continuing to hold.

[kenmitch] 21/3/2024 09:00

Yes. Disappointing Results and a dividend cut. So sold just now on my “sell on a disappointing update or other bad news” tactic. It’s ruthless but avoids too many losers in the portfolio.

Good luck to those continuing to hold.

[kenmitch] 21/3/2024 09:00

Yes. Disappointing Results and a dividend cut. So sold just now on my “sell on a disappointing update or other bad news” tactic. It’s ruthless but avoids too many losers in the portfolio.

Good luck to those continuing to hold.

[xamf] 21/3/2024 08:05

EPS fell to 1.296 (1.805 in 2022) - PE over 5. Sold first thing. Poor results in my opinion after a promising H1 statement.

[lord gnome] 21/3/2024 07:58

A big miss on profits and dividends according to market expectations on Stockopedia.

[brucie5] 21/3/2024 07:25

Results. 😊

[red ninja] 19/3/2024 22:32

The funding was provided by STB and Modella Capital. Thus asset backed risk was shared.

[p1nkfish] 19/3/2024 17:01

STB towards first in line to get paid, secured asset-based facility.
Should be pretty solid.

We don't know how much of any borrowing was drawn down (possibly not the whole amount) nor the conditions written into it.

Not too worrisome imho.

[jeff h] 19/3/2024 16:14

...alas a STB client

[xamf] 15/3/2024 10:41

I've taken the plunge again here. Results next Thursday. Happily traded this when it was twice the price. Previous trading updates would suggest they're on track to meet market expectations.

Price to book 0.4 (book value/share over 1700), a forward PE of 3.2 and 7%+ dividend (with over 3x cover).

[popit] 05/3/2024 20:38

apple53

I agree that OSB and STB look very good value

Have you looked at Halyk Bank?

It also looks very cheap with a forecast PE of about 3 and a 15% yield

[p1nkfish] 03/3/2024 19:10

The TA on TBC looks very interersting and healthy on the weekly. Broke through 52 week high after consolidation. The monthly put a really useful looking candle in for February. All trend lines are heading in the right direction.

Just an observation.

[mrscruff] 03/3/2024 19:02

Free float is low due to all net selling be done some time ago. I too am attract to that low free float as negativity was factored in months ago.

@Apple, As for momentum you don't need a paid for tool to tell you that, you only need to draw trend lines on a zoomed out chart usually 1 year. I may never get to your level of bottom-up and top down analysis but you could easily learn Trend Lines, RSI and MACD. Don't bother with the candlesticks nonsense.

I too sell too early take a look at Bank of Georgia (BGEO) where I thought I sold at a lovely profit but it kept spiking up last week.

I do think financials should be in a good place and some quality companies can be had as they have a period of net selling that is overdone... I quite like Alpha Group!

[p1nkfish] 03/3/2024 16:57

MrScruff, it was a comment in response to apple53 suggesting the banks should buy back their stock. The free float is quite low so if no large holder sells into a buyback the price could respond quickly and positively.

[mrscruff] 03/3/2024 16:35

@apple53 thank you for your considered and detailed post. I will look to diversify my exposure to these bank stocks and will look at OSB. I clearly have much more to learn in this area and have been over excited as I sell down my holding in BGEO and looking for new home to place the cash.

@Pinkfish I don't see any buybacks, presume this was some time ago?

[apple53] 02/3/2024 19:56

MrScruff,

I agree this is a great opportunity for investors. I don't agree with your view on rates or growth etc., and I wrote the following to remind myself of history and the investment case for these banks.

Higher rates tend to benefit earnings, though much higher rates are typically thought likely to increase bad debt charges. Materially higher rates and a high recession risk is normally enough to hit multiples. [it is important you don't have silly regulators that require you to buy reams of government bonds at low interest rates - this is what killed SVB and, arguably, First Republic].
Overall, though, there isn't really any correlation between rates and multiples.
'Any growth' doesn't tend to drive the share price violently up. Balance sheet growth requires capital, and more than it used to under Basel 1/2. In the case of STB the drive for rapid growth probably hit the share price, as it required a dividend cut, and also because some shareholders are rightly scared of rapid growth in bank balance sheets. One of the clearest correlations (with causation) in banking is rapid growth and subsequent high (sometimes disastrous) bad debts.
Bank investors 'normally' like modest balance sheet growth, faster growth in fee income, a low level of dealing income and an expectation of a falling cost income ratio.

Historically, banks have traded at 8-15x forward eps. It is only in the past few years that 5x earnings has been considered normal, and this in Europe, but not the US, where 9-12x is more typical.

What is doubly weird about the ridiculously low multiples is that UK banks are much much safer than they used to be. Equity capital ratios are 2.5-4x higher than in the noughties. [There is a downside to this - RoEs are lower, and incremental growth needs more incremental capital]. They are also encouraged to ex-ante provision (which is good as it helps to smooth provisioning across the cycle). Overall CoE should be lower.

None of this means that banks are immune to property market collapses. Some (US) banks are over-exposed to commercial property (NYCB). This has been the cause of most bad debt crises (as opposed to the liquidity crisis post-Lehman). Resi mortgages are also at risk from a big increase in unemployment, double digit interest rates, 40% falls in value (each in isolation) or a milder combination of the 3.
The other risk to banks is social media, which magnifies problems that used to swept under the carpet, such that issues which might have been manageable with a couple of year's retained earnings can now be enough to cause a run.

STB is probably the weirdest example (and could be the cheapest bank in the developed world), but OSB stands out even more. STB is tiny; OSB merely small. STB is building a growth track record; OSB already has one. STB is modestly profitable; OSB is very profitable (for a modern bank). STB is modestly at risk from an increase in bad debts; OSB is highly cushioned - it has SUCH a low cost income ratio that its leverage to an increase in bad debts is almost the lowest in the industry. If it was 10x the size and based in the US it would trade at twice the valuation or more.

I have no idea when this situation will 'normalise', but in the mean time these banks need to buy back their stock (and I would happily forgo some yield to fund this).

[mrscruff] 01/3/2024 13:41

Well the low multiple is because it has a high amount of debt meaning higher gearing as banks typically are. As rates rose that becomes a risk. The equity is tiny, meaning that any growth would drive the share-price violently upwards... and equally it is higher risk. The global economy is looking pretty good. A few rate cuts would really help. A great opportunity for investors.

[tole] 01/3/2024 12:52

As was recently noted on here. SharesMag yesterday confirms in its Ideas Updates that even after the recent rally these still trade on a very low multiple 3.5x earnings, 0.4 book value and 7.5% yield."We believe there is further upside as the shares still look cheap"FY results 21March

[p1nkfish] 29/2/2024 16:09

There's business to be made in helping UK SMEs adopt and integrate AI tools.

[p1nkfish] 29/2/2024 15:43

Before anyone says this is not a comparable situation, I agree.
Point is new tech and approaches can massively enhance productivity, customer perception/interaction and earnings.



Hope STB engage a forward looking brain as the extra earnings others make can be turned into products and services that will be hard to beat and moves onto their patch. No one is immune to being unseated.

[popit] 24/2/2024 19:42

Still very good value here and it is difficult to understand why they are both so lowly rated

Secure Trust Bank

Forecast PE is less than 3
Dividend yield is about 7%
Price to Book is about 0.4


Halyk Bank

Forecast PE is less than 3
Dividend yield is about 15%
Price to Book is about 0.8

[jeff h] 08/2/2024 14:08

Hi apple,

As regards previous changes to EPS forecasts the below link to Edison will explain when and why they changed their forecasts:-



Given how quick the economic, regulatory, interest rate etc picture can change I tend to give a lot less weight to future year forecasts than the current year one.

[apple53] 07/2/2024 10:45

Thanks very much for the updates Jeff. Given you very helpfully provided some forecasts, I thought I would provide a bit of context.
According to Market Screener, in March 2023 just before the full year 22's were published, the forecast eps's were 133p, 163p and 203p for 23/24/25. By 17th April, the 3-4 analysts covering had finished their sharp upgrades, and the forecasts were 171p, 200p and 251p respectively. Average upgrade about 26%! The 24-25 forecasts have dribbled up materially further to 215p and 261p respectively, while 23 has just recently slipped to 160p, perhaps reflecting Edison's small downgrade Jeff mentions. Shore's 248p for 25 looks a bit more sensible than the 261 consensus.

And to provide some analytical context see below my brief write-up on the full year figures last year. Note the point about slow-burn. Please note I would not be posting this if I had been horribly wrong!

Valuation remains stupid. Presumably it's too small for anyone to bother buying it? M&A was always my weakest point.

QUOTE
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.
UNQUOTE

I still haven't really absorbed the full year trading update. If I can, and have anything additional, I'll post again