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STB Secure Trust Bank Plc

822.00
18.00 (2.24%)
11 Oct 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Secure Trust Bank Plc LSE:STB London Ordinary Share GB00B6TKHP66 ORD 40P
  Price Change % Change Share Price Shares Traded Last Trade
  18.00 2.24% 822.00 1,707 16:35:18
Bid Price Offer Price High Price Low Price Open Price
810.00 828.00 822.00 822.00 822.00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Commercial Banks, Nec 185.5M 24.3M 1.2742 6.45 153.33M
Last Trade Time Trade Type Trade Size Trade Price Currency
16:35:18 UT 60 822.00 GBX

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Date Time Title Posts
23/9/202409:17Secure Trust904
23/10/201908:34Secure Trust Bank-

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Posted at 12/10/2024 09:20 by Secure Trust Bank Daily Update
Secure Trust Bank Plc is listed in the Commercial Banks, Nec sector of the London Stock Exchange with ticker STB. The last closing price for Secure Trust Bank was 804p.
Secure Trust Bank currently has 19,071,408 shares in issue. The market capitalisation of Secure Trust Bank is £156,766,974.
Secure Trust Bank has a price to earnings ratio (PE ratio) of 6.45.
This morning STB shares opened at 822p
Posted at 19/8/2024 11:03 by red ninja
Good to see a buy today which is chairman related (confidence building) :-

Secure Trust Bank PLC ("STB" or the "Company") announces that Jim Brown, Chairman, has notified the Company that Kiripaka Capital Limited, a person closely associated to him, purchased a total of 17,000 Ordinary Shares of 40p each ("Shares") in the Company, at an average price of £8.2882 per share on 15 August 2024.
Posted at 17/8/2024 12:05 by apple53
34ad, I guess I am talking about our focus on things that will move earnings and share price. If they committed to a volume by a fixed date it would worry me. If pink is right about their discipline, then they are anyway doing what I mentioned as best practice, and the 4bn will come when it comes.
Another reason an absolute target is a bit pointless is that 3 years of, say, 7% inflation and 9% nominal growth would get us there much quicker (all else equal).
And another is the loan mix issue.
Posted at 17/8/2024 09:13 by buffett4
I think any decision on share buy backs should be driven by market price at the time. At the current price, at a point where excess cash is available, buy backs seem like a no brainer. I may be wrong but I suspect that by the time we get to the £4 billion loan book, c£80m PBT and the business is kicking off significant levels of excess cash, there will be an upward rerating of the shares anyway. So with a depressed share price I'd be in favour of buy backs, otherwise allocating cash between a sensible level of portfolio growth and a healthy dividend would be the way forward imho. Excess cash, if we get there, will be a very nice debate to have!
Posted at 16/8/2024 23:04 by apple53
Buffett's longer post has it right, in my view. Banks that 'go for growth', regret it more often than not. So I really wouldn't focus on the £4bn target. I don't think they should have such a target (though it is an improvement on the previous even more aggressive growth targets). At any point in time the bank can invest its marginal capital (assuming it is not bouncing off regulatory minima) in div, buyback or new loans. If we ignore divs (for a bunch of reasons) I want the bank to compare the realistic profitability of the other two options. This requires loan rate, matching deposit rate and realistic cross-cycle credit risk assumptions. If there is a massive market opportunity, which can certainly happen for a very small bank like STB where a sliver of the market could actually provide a rich seam, then great, and we might see a couple of years of 15%+ loan growth, absorbing net profits (and maybe even pressuring the div short term). On the other hand if competition has increased (with likely impact on both margin and credit risk), then I would prefer the bank to shrink (that part of) its balance sheet. Net profit can be retained for future growth, div smoothing or buybacks.
STB barely knows what the competitive environment is going to be like in 6-12 months' time let alone beyond, so loan growth targets are actually a bit silly.
What is true, however, is that very small companies in the UK (particularly post the Kay review) are ignored, so critical mass is perceived as important to get institutional investment, hence management trying to flag "we are going to get bigger, honestly". In reality of course what we want is bigger at the bottom line rather than the top.

Riverman mentions the 'too small to be profitable' argument, and that can certainly be true, particularly due to regulations that cause fixed sunk costs. I think OSB/Charter Court was partly about this issue. We should ask management about this angle, as it may be a key driver to merging/selling the business. Oaknorth may be the exception that proved the rule.....
Posted at 16/8/2024 15:45 by buffett4
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.
Posted at 14/8/2024 12:36 by apple53
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.
Posted at 14/8/2024 07:35 by tomps2
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.
Posted at 16/7/2024 07:46 by p1nkfish
Progressive initiate coverage.
Interims 14th August.

Progressive - "We initiate coverage on Secure Trust Bank (STB), a leading retail deposit-funded specialist bank operating in four core markets with substantial growth opportunities. STB’s ambitious and achievable medium-term targets aim to deliver significantly higher profitability combined with a lower-risk earnings stream. The key to much of this is STB’s grip on technology and the extent to which it has been embedded across all businesses and integrated with its business partners. STB has a 31 December financial year-end, and will announce 2024 interim results on 14 August."
Posted at 02/3/2024 19:56 by apple53
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).
Posted at 29/3/2023 12:03 by 1tx
Whilst recent market sentiment to banks & consumer lenders has not helped matters.The major reason for the fall in STB share price was the dismal results for the first half of the 22 financial year announced in early August.The decision to have a four times covered dividend did not help matters either.

Virtually everybody who has held STB for any period longer than a few months has lost money and those institutions who bought shares when it was floated out of Arbuthnot ARBB & in subsequent placings of ARBB's remaining holdings have made a massive loss.Most still hold the stock they bought,it is not easy to sell in large amounts unless there is a willing buyer.STB may be a bit undervalued but there is in my opinion a problem with the company.STB is not "connected" to its shareholders with smallcap companies you need directors who have a meaningful interest in the company & are interested in maintaining & improving value for shareholders.STB is run by managers for managers.
Secure Trust Bank share price data is direct from the London Stock Exchange

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