money-2696219

Secure Trust Bank

LN: STB

£116.8m market cap

627p last close

Secure Trust Bank is a well-established specialist bank addressing niche markets within consumer and commercial banking. It is launching a non-standard mortgage business. Former parent Arbuthnot Banking Group’s shareholding is now less than 20%.

Investment summary

Secure Trust Bank’s (STB) FY19 figures were good, as already flagged in its trading update. Underlying ROE was 14.0% (FY18: 12.8%), EPS was up 10% y-o-y and capital remained comfortable (CET1 12.7%). However, the COVID-19 pandemic has led to a significant drop in business activity and impairments are expected to increase. STB has suspended forward guidance since March due to uncertainty. Its relatively short duration loan book, already cautious lending stance and good capital position should help. Financial markets turmoil has the bank trading on a 2019 P/BV of 0.6x despite a track record of delivering value creating ROE above its COE.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 151.6 N/A 36.7 161.0 3.9 N/A
2019A 165.5 N/A 41.1 177.3 3.5 N/A
2020E 168.1 N/A 6.5 26.9 23.3 N/A
2021E 176.0 N/A 31.4 133.7 4.7 N/A
Industry outlook

STB’s relatively short loan book duration allows it to de-risk quicker and protect capital and maintain liquidity. But impairments will inevitably rise and loan book shrinkage also adversely affects results. The bank now is focused on managing the risks and supporting clients. Management believes merger and acquisition opportunities may exist as the economy emerges from the crisis. Operationally speaking, the bank can increase lending fairly quickly as the economy improves. The key challenge will be assessing the new lending conditions and risk parameters in the recovery phase.

Last updated on 17/09/2020
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Share price graph
Balance sheet
Forecast net debt (£m) N/A
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (2.8) (21.1) (52.1)
Relative* (1.8) (19.2) (43.0)
52-week high/low 1675.0p/562.0p
*% relative to local index
Key management
Paul Lynam CEO
Neeraj Kapur FD

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