Secure Trust Bank Share Discussion Threads

[buffett4] 16/8/2024 14:45

I think the key question is where STB are going to be in 5 to 10 years time. Judging by the various broker forecasts, assuming tight cost control (in particular the cost of bad debts) a 4 billion loan book should provide c£80 million profits before tax. This size of loan book seems readily achievable over the next few years, personally I would prefer them to put risk ahead of growth by keeping tight underwriting standards and growing the portfolio in a slow, controlled way. STB now have shareholders funds of £355 million at the half year in yet their market cap is only £166 million. It is unsurprising that the CEO has just bought another £100k worth of shares at what appears to be a low price. The bank is stable and growing with a clear plan as to how to achieve significant profit growth over the next few years. This is my largest position and although there have been and will no doubt continue to be bumps along the way, I think they are doing a stellar job of progressing towards their goals.

[petersinthemarket] 16/8/2024 12:06

Thanks 34......

[34adsaddsa] 16/8/2024 11:12

They said they were thinking 1/3 of the FY dividend paid as an interim dividend and 2/3 paid as a final dividend. If that's what happens then the total dividend paid would be slighly higher than last year.

[petersinthemarket] 16/8/2024 10:50

I must have missed something. Can someone put some real figure to the expected annual Div for me.
Their so-called ''progressive dividend policy'' just looks like a massive cut to me.
What's the plan?
pete

[cfro] 16/8/2024 09:50

Growing the loan book by 5% every six months is certainly achievable but don't forget that they only grew the loan book by 3.2% for this H1, but let's hope your scenario pans out..

[tvh123] 16/8/2024 08:40

@cfro - increasing the loan book by 5% every 6 months would get them to the £4bn figure by the end of FY25. Doesn't sound all that optimistic to me and should be achievable especially given the outlook statement that "The second half of 2024 saw the first Bank of England Base Rate cut for four years and the inflation outlook appears more benign, both of which we expect to boost demand in our business areas"

[davebowler] 16/8/2024 08:35

Citywire -‘Buy’ Secure Trust, says Berenberg
Secure Trust (STB) is growing its loan book and profitability is expected to improve in the second half, says Berenberg.

Analyst Alexander Bowers retained his ‘buy’ recommendation and target price of £14.20 on the challenger bank, which climbed 1.2% to 830p on Thursday.

First-half results sent the shares 4% lower on the day but Bowers said the group continues to grow its loan book as it tracks towards its £4bn net loan book ambition.

‘First half adjusted profit before tax was broadly flat compared to first half 2023, with higher interest income offset by higher impairment and slightly higher costs,’ Bowers said.

He explained that the group ‘should be able to improve its cost to income ratio’ in the second half as it pushes towards cost efficiencies as part of its ‘Project Fusion cost programme’ that will deliver an additional £3m of cost savings by the end of 2025.

[cfro] 16/8/2024 08:24

Yes, but LL wanted to see more Non-execs purchase shares (not just this company but all small-caps in general).

Nevertheless it is a great vote of confidence from our CEO..

[34adsaddsa] 16/8/2024 02:40

Good for Lord Lee!

[casholaa] 15/8/2024 10:58

@cfro, yeah. I can't help thinking that they didn't spin the profit they had hoped for and also want to have some money to hand just in case more is needed than anticipated for one-off's?

[casholaa] 15/8/2024 10:53

Thanks, although, I can definitely tell you that there's nobody slower than I.

[cfro] 15/8/2024 10:52

Made me smile Lord Lee's questions did which were coming from a ordinary shareholder point of view. He is thinking just what i'm thinking too and keeping management on their toe's..

Sounds like this might be the low-point for dividend reductions and whith luck we might see over 20p+ for the full-year which is two-thirds.

[jaknife] 15/8/2024 10:03

Casholaa,

That was Lord Lee, he's a regular at Mello:



and wrote the book:

How to Make a Million – Slowly


JakNife

[casholaa] 15/8/2024 09:23

43:40 in the q&a. I know how the chap asking the questions feels. I hope that management don't misunderstand how shareholders feel and start awarding themselves bucket loads of shares.

[tomps2] 15/8/2024 07:52

Secure Trust Bank (STB) Interim results presentation - August 2024

Secure Trust Bank CEO, David McCreadie and CFO, Rachel Lawrence present their results for the six months to 30 June 2024, followed by Q&A.

Watch the video here:

Or listen to the podcast here:

[riverman77] 14/8/2024 12:39

STB always feels a bit sub-scale, which probably explains the fairly low ROE, but would surely make a good target for one of the big banks. Their V12 finance unit is well regarded in the retail sector, so that in itself might be of interest to a potential bidder.

[cfro] 14/8/2024 12:23

tvh123, how sure are you that they will hit £4bn net lending targets by fy25? Seems a little optimistic to me..

Of course jump forward two or three years and you can easily see not only this target being met but surpassed possibly by some margin if you assume they will somehow benefit from the new Labour governments promise to kick-start house-building and infrastructure spending..

I just think though that this seems an obvious take-over for any one of the major banks given the hefty discount to NTAV with around £12 being a very fair price to someone to pay perhaps..

[apple53] 14/8/2024 11:36

STB's cost income ratio isn't that high, but it does run a relatively high margin and high cost-of-risk balance sheet, so its pre-tax margin is not that big (relative to revenues). It is therefore susceptible (much more so than OSB) to a relatively modest 'exceptional' variation (normally bad-debt-related) in any period.

In H1 last year, it was the commercial finance write-off. This half year, it's the vehicle finance loan re-classification. If you are happy to believe the company's statements, this is temporary, and automatically follows from the pause and review of repayments. Remarkably, STB says there has been no deterioration in the underlying book, ie that customers are not likely to take advantage of the FCA-created turmoil to default.

The hit is around £13m (ie the approx increase in stock of provisions vs December). Add this back and profit is c. 75% higher (nearly 120p) and RoE close to 13%. We don't need to worry about when the £13m will be written back, or perhaps even if it won't all be released (though there is a risk to management credibility if most of it isn't), as long as there is no on-going extra provisioning in this space. One small concern is the small number of ancient loans which may have involved discretionary commissions. Presumably this should cost less than £13m.

More importantly, looking at the underlying eps, the 2025 forecast on marketscreener, recently raised to 270p, doesn't look stupid, though I wouldn't look for upgrades. Even if we double underlying H1 eps and use a PE of 7 we're still looking at a share price of over £16, so we don't need eps upgrades to drive the story. NB Not that long ago banks traded at 10x forward earnings......

I haven't done a review of how much covid funding still impacts margins (anyone?) and you might point out that if there is an exceptional hit most half years then maybe they aren't THAT exceptional.

I've left a cheeky order on to buy more, hoping that the optically poor results take us down a bit more, but I am already up to my gills, having bought back, below £8, much of what I sold in the recent spike.

[tvh123] 14/8/2024 11:19

With rates expected to fall and a rosier UK outlook over the next 18 months, they should hit the £4bn target by the end of FY25

Good to see a chunk of the TFSME funding has been repaid (£315m outstanding)

Should also see a lower impairment charge in H2 and good chunk of the Vehicle Finance provision released as recoveries are made following the restart of collections.

Should really be trading conservatively at around £12 at the very least. With the switch to a more progressive dividend policy, a small share buyback might just do the trick to narrow the valuation gap

[cfro] 14/8/2024 08:41

Not sure just how long it will take them to reach the £4bn net lending goal, maybe another two or three years at least..

I'm coming round to thinking that this will make a nice little bolt-on for one of the major banks especially with NTAV over £18 a share.. They then will strip out a lot of the costs themselves.

[p1nkfish] 14/8/2024 06:45

They did previously mention move to progressive divi policy.
Wait to see market reaction.
A price dip may be an opportunity for some, hold enough already, a fan of STB.

[tomps2] 14/8/2024 06:35

STB H124 CEO overview.

In line for medium term targets Loan book is £3.4bn 3.2% just £600m away from £4bn target where STB achieve ROAE 14-16%. Cost saving target for project fusion to achieve £8m savings by end of 2025. PTP +14%. Net Interest Margin 5.3%. TBV +3.1% to £18.36 ps. Slightly below expectations for the FY.

[cfro] 14/8/2024 06:32

Bit disapointed with the cut in the dividend but overall steady results and nice to see another increase in the TNAV to over £18..