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15 January 2020

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Secure Trust – Trading Statement 

Share Price 1610p

Mkt Cap £297m

Conflict Disclosure: No Holding

  • Update Both loan book and revenue have grown in H2 while lending discipline has not been compromised, nor pricing. The increase in the Bof E capital buffer from 1% to 2% from December 2020 may impact the balance sheet. Outlook is cautiously optimistic.
  • Estimates No change to 2020 guidance. A 16% PBT increase is expected to £47.8m
  • Culture Glassdoor score 3.3. Comments such as “good solid traditional bank” underline the conservatice nature of the company.
  • Valuation PE 10X Yield 5.3%
  • Conclusion The shares have a good yield and if we are in for an economic uptick will do well.

16 October 2019

Secure Trust Bank Plc- Q3 Update 

Share Price 1270p

Mkt Cap £234m

Conflict Disclosure: No Holding

  • Update Demand was health over the quarter but has slowed generally in September. The company remains comfortable with expectations and expects no negative impact from the FCA’s proposal to ban broker commission discretion in the motor finance market. It notes the short duration loan book means the company is well placed to respond to changing market conditions.
  • Estimates 18% PBT growth is anticipated in the current year and 18% the following year. The downbeat statement suggest the risks are on the downside although they are comfortable with expectations today.
  • Valuation NAV is £240m so the share trade around book value. ROE is 13.5%. PER 7.3X and yield 6.7%.
  • Conclusion The shares are very cheap but this statement is unlikely to change that.  

28 March 2019

Secure Trust Bank – FY Results

Share Price 1280p

Mkt Cap £236m

Disclosure : No holding

  • Results.PBT up 36% to £36.7m from operating income up 17% to £152m. EPS up 39% to 162p. Dividend is 83p an increase of 5%. As their cautious outlook has led them to withdraw from unsecured lending and motor finance the impairment charge has reduced accordingly. Outlook says they are well placed to achieve their strategic prioroties.
  • Estimates Results look in line with expectations. In 2019 15% EPS growth is expected from 14% revenue growth.
  • Valuation PER 7.2X yield 6.8%. The company has delivered a 13% ROE and it trades at 1.05 X book value
  • Conclusion The shares have fallen 38% over the last 12 months as the lending fear has reached a crescendo. 1.05X book value is simply the wrong price for a company delivering 13% ROE with a conservative balance sheet and 36% PBT growth. Opportunity knocks.

16 January 2019

Secure Trust Bank – Trading Statement 

Share Price 1182p

Mkt Cap £218m

  • Statement Results to December 18 are expected to be in line with expectations with loan book growth now taking the book above £2bn. Impairments have reduced as the sub prime motor loan book is run off. The competitive conditions for new business origination have today led the company to cease originating residential mortgages.
  • Estimates Statement says “in line” so unlikely to change. That’s 23% EPS growth to Dec 18. The 19% growth expectation may reduce a little on the ceasing origination of residential mortgages
  • Valuation PER 6.5, yield 7.4%.The company is achieving a 10% ROE on £225m of NAV which is supporting a £2bn book.  Note the market cap is lower than NAV
  • Conclusion  The ceasing of sub prime motor and cautious approach to underwriting appears wise given yesterday’s announcement from Provident that impairments are increasing at Vanquis, the sub prime credit card. These shares, at less than NAV and with a yield of 7.5% are an opportunity having declined 42% from their highs.  Poor sentiment can bring gifts.