Capital markets day optimism

Secure Trust Bank 9 November 2021 Flash note
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Secure Trust Bank

Capital markets day optimism

Capital markets day


9 November 2021



Market cap


Net debt/cash (£m)


Shares in issue


Free float




Primary exchange


Secondary exchange


Share price performance

Business description

Secure Trust Bank is a well-established specialist bank addressing niche markets within consumer and commercial banking.


Pedro Fonseca

+44 (0)20 3077 5700

Andrew Mitchell

+44 (0)20 3681 2500

Secure Trust Bank is a research client of Edison Investment Research Limited

After Secure Trust Bank’s (STB) upbeat trading update in October, we feel there was a bullish tone to its capital markets day presentations on 3 November. This was underlined by the announcement of a new medium-term target for loan book CAGR of 15%+. Areas highlighted for greater focus and opportunity included: 1) growth of digital ‘buy now pay later’ (BNPL) and interest-free products in retail finance, 2) the growing presence of corporate landlords in the UK residential market and 3) new upcoming products in vehicle finance including in personal contract purchase (PCP). STB is seeing good loan demand in its key segments and appears well positioned to take advantage of this to grow its balance sheet and profitability.

Year end

Operating income (£m)


































Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The new loan growth target of 15%+ CAGR reflects the optimism across the various lending segments and STB’s healthy balance sheet. STB’s other medium-term targets remain the same: a net interest margin of 6%+, a CET1 of 12%+, a return on equity of 14–16% and a cost of income ratio of 50–55%.

STB sees digital BNPL as a disruptor in retail finance and sees growing demand for this product along with interest rate free (retailer subsidised) lending. STB intends to develop its own four-month interest free product.

Management stressed the opportunity created by expanding from the near-prime market to also include the prime market in the used car market. It also highlighted how STB’s competitive position is boosted by its open application operating interface (API) architecture and system agnostic technology, which allows seamless integration with car dealers’ processes and platforms. Following the success of its 100% instant stock funding product, STB is planning new products for 2022, including in the PCP segment.

In real estate finance segment, STB sees opportunity in the expected trend of the entry of corporate landlords into the residential property market and the retreat of small landlords. It also sees international investors returning to UK and expects that environmental considerations will become increasingly important in the sector.

STB’s funding costs have been falling and the management highlighted the benefit of its more diversified funding strategy. This has included the introduction of ISA savings products and increased use of <90 days’ notice deposits.

We maintain our estimates for now and our fair value remains unchanged at 2,234p per share using a net asset value approach. The details of our valuation are set out in our update note Good news as flagged, published on 11 August 2021. The 2,234p value implies an FY21e P/BV of 1.4x. STB is currently trading on a P/BV ratio of 0.8x.

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