Secure Trust Bank Share Discussion Threads

[muffster] 01/11/2024 12:56

On the 15th of August, David McCreadie bought around 12k shares on-market at roughly UK£8.41 per share. This transaction amounted to 20% of their direct individual holding at the time of the trade.This was the largest purchase by an insider in the last 3 months.David has been a buyer over the last 12 months, purchasing a net total of UK£181k worth in shares.

[nchanning] 01/11/2024 12:54

Thanks so on a 230 million loan book the commissions can't have been that huge ?

[nchanning] 01/11/2024 12:52

Feel free to shoot me down just hoping to provoke a discussion

[buffett4] 01/11/2024 12:52

My understanding is that the ruling relates to all car finance commission, not just discretionary commission (ie where a higher commission is paid based on a higher interest rate to the commission) and that the compensation to the customer has been set out as the commission amount plus interest.

[nchanning] 01/11/2024 12:52

I don't know this company at all but I'll make some assumptions in the hope that somebody more knowledgeable will correct me .From the 2016 annual results the motor finance book was £230 million . Let's assume conservatively that £20 million was lent out on discretionary commish . Let's say on an average 15k loan the cost to the customer of these dodgy lending practices was 1k from not getting the right loan . Whack some penalties and interest on there and let's say average fine is 5k . So about a 3rd of the discretionary commission loan book or roughly 7 million in fines for 1 year . Loans could be multi year but conservatively let's multiply by 3 , and we get 21 million in fines

[nchanning] 01/11/2024 12:31

Anybody care to guess as to the size of the fine ? Surely if a bank that only did mid single digits of its vehicle finance lending with discretionary commission , and vehicle finance was only one part of its lending book and it only did it for 3 years it's not going to be a material part of book value ?

[buffett4] 01/11/2024 12:08

Hi John, Moneyway and V12 paused lending for a few days (in common with other car finance lenders) while they amended their documentation so that the commission amount paid to the broker/dealer was disclosed to the customer and the customer could give their consent.

[johnhemming] 01/11/2024 12:02

What I found interesting in the statement was this:

Legal and Regulatory Matters

Following the recent Court of Appeal's decisions, the Group paused new consumer lending in Vehicle Finance to consider the implications of the ruling and we are now commencing new business once again.

[red ninja] 01/11/2024 11:50

Did the defaults happen also because with all the publicity of vehicle finance mis selling, people simply thought they would get away without paying it back ?

[martinmc123] 01/11/2024 11:44

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

[cfro] 01/11/2024 11:29

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?

[deanowls] 01/11/2024 09:25

Anyone of those directors feel like buying yet?

[digger18] 01/11/2024 09:01

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.

[tvh123] 01/11/2024 08:49

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!

[davebowler] 01/11/2024 08:46

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".

[onwego] 01/11/2024 08:34

Profit warning issued
hxxps://www.cityam.com/secure-trust-bank-slashes-profit-expectations-amid-motor-finance-ruling/

[imnotspartacus] 01/11/2024 08:33

You would think at the very least the divi is a gonna.

[miti 1000] 01/11/2024 07:46

You need to take those rose tinted glasses off !!

[cfro] 01/11/2024 07:35

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..

[pvb] 31/10/2024 11:13

Is this the 'bottom'?

Damn! Went too soon and added at significantly higher price. Oh well. :-(

[johnhemming] 31/10/2024 10:04

Best read the judgment in the round. The consumer credit act is part of this.

[cfro] 31/10/2024 09:28

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..

[johnhemming] 31/10/2024 09:00

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.

[mwj1959] 30/10/2024 21:07

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...

[pvb] 30/10/2024 17:37

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