Secure Trust Bank — Solid interim results

Secure Trust Bank (LSE: STB)

Last close As at 22/05/2024

GBP7.84

−24.00 (−2.97%)

Market capitalisation

GBP150m

More on this equity

Research: Financials

Secure Trust Bank — Solid interim results

Secure Trust Bank (STB) reported H122 PBT of £24.7m, including an £8.1m gain on the disposal of its Debt Managers Services (DMS) unit. Reported return on equity (ROE) was 12.5%, and the underlying ROE was 8.3%. Pre-provision operating profit was up 22% y o y driven by a 23% increase in core loans. Underlying earnings were down 52% y-o-y as impairments returned to a normal level (annualised 1.4% of loans in H122) after the unusually large COVID-19 related loan reversals in H121. STB’s capital position remains strong (CET1 14.0%), but we expect the deteriorating UK economic outlook to lead STB to pare down its balance sheet expansion. We are reducing our forecasts to reflect this slowdown: we have cut EPS in FY22e by 6% and FY23e by 12%. Despite the cut, momentum is still good; we forecast a 13% increase in loans in FY23 with a 29% increase in underlying earnings and 11.6% ROE. We have reduced our fair value (FV) from 2,491p to 2,407p, as we have cut our sustainable ROE assumption from 13.5% to 13% due to macro concerns.

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Financials

Secure Trust Bank

Solid interim results

2022 interims

Banks

16 August 2022

Price

1,155p

Market cap

£216m

Net debt/cash (£m)

N/M

Shares in issue

18.7m

Free float

84.5%

Code

STB

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.5)

(2.1)

(24.3)

Rel (local)

(8.5)

(3.5)

(24.5)

52-week high/low

1,383p

1,028p

Business description

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

Next events

Q3 trading update

October 2022

Analysts

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

Secure Trust Bank (STB) reported H122 PBT of £24.7m, including an £8.1m gain on the disposal of its Debt Managers Services (DMS) unit. Reported return on equity (ROE) was 12.5%, and the underlying ROE was 8.3%. Pre-provision operating profit was up 22% yoy driven by a 23% increase in core loans. Underlying earnings were down 52% y-o-y as impairments returned to a normal level (annualised 1.4% of loans in H122) after the unusually large COVID-19 related loan reversals in H121. STB’s capital position remains strong (CET1 14.0%), but we expect the deteriorating UK economic outlook to lead STB to pare down its balance sheet expansion. We are reducing our forecasts to reflect this slowdown: we have cut EPS in FY22e by 6% and FY23e by 12%. Despite the cut, momentum is still good; we forecast a 13% increase in loans in FY23 with a 29% increase in underlying earnings and 11.6% ROE. We have reduced our fair value (FV) from 2,491p to 2,407p, as we have cut our sustainable ROE assumption from 13.5% to 13% due to macro concerns.

Year end

Operating income (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

166.1

19.1

81.0

44.0

13.9

3.9

12/21

164.5

58.8

254.0

61.1

4.4

5.4

12/22e

173.6

39.6

157.3

36.4

7.2

3.2

12/23e

193.6

50.8

203.2

50.8

5.5

4.5

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

Momentum maintained

The strong loan growth was expected as STB seeks to seize lending opportunities in its niches; one of management’s medium-term targets is a loan CAGR of 15%. Retail finance, vehicle finance and commercial finance all posted year-on-year growth above 30% and asset quality held up. Real estate, which was affected by challenging sector conditions only grew 8%. Interest margin fell from 6.0% in H121 to 5.7%, mostly from retail finance where the loan mix quality improved.

Confidence and caution

Although management is still confident about growth opportunities, it is mindful of the deteriorating economic environment. It has already made some lending adjustments, including tightening criteria in vehicle finance and further raising the weight of investment loans (as opposed to higher-yielding but riskier development loans) of the real estate portfolio. We expect the short duration of its loan book and proven management nimbleness should enable the bank to make further adjustments if lending conditions change, as in proven in the past.

Valuation: Fair value of 2,407p per share

We obtain an FV of 2,407p per share using a net asset value (NAV) approach. We have reduced the sustainable ROE from 13.5% to 13.0%, but maintain a 10% cost of equity (COE) and 2% annual growth. The FV is the present value of the (ROE-g)/(COE-g) formula at end 2022 discounted to FY22. The 2,407p value implies an FY22e P/BV of 1.4x; STB is currently trading on a 0.6x P/BV ratio.

H122: Strong growth while impairments normalise

Core loans grew 23% y-o-y

STB’s reported loan balances grew 15% y-o-y during H122, with the figure being 23% if we include only the core lending niches excluding the businesses sold or exited (DMS, consumer mortgages and asset finance). This fast pace of growth reflects management’s medium-term target of a compound annual growth rate (CAGR) of 15% in its core lending niches and the investments made to position the bank to take advantage of the lending opportunities.

Retail finance and vehicle finance loan balances grew 32% and 37% y-o-y. Commercial finance (invoice discounting) grew 50% y-o-y. In contrast, real estate finance grew less at 8%, affected by the more delicate situation in the real estate sector.

As a small bank, it is easier for STB to gain market share in its niches than larger banks and post such strong growth numbers. Management expects a modest slowdown of growth as the economic downturn gathers pace but notes that the retail lending pipeline remains strong for Q322. STB has already made lending adjustments, including tightening lending criteria in its vehicle finance, while changing its real estate finance mix towards investment (now 88% of all loans) at the expense of the higher-yielding but riskier development loans.

Impairments now normalising

Impairments in H122 came in at an annualised 1.4% of loans and this represents a return to a normal level of impairments. The unusual loan reversions in H121 were large enough to make provisioning expenses negligible in H121 (specifically, there was a net 0.1% of loans). These reversions, which were an industry-wide phenomenon, occurred because asset quality turned out to be much better than initially feared (and provisioned) by the banks in FY20 during the beginning of the pandemic.

STB’s impairments were centred in vehicle finance (annualised 8.0% of loans) and retail finance (1.4% of loans). We note that the vehicle finance provisioning was above average and reflects the fact that the business was paused and restarted; management believes that the cruising speed impairments level will be closer to 5.5% of loans.

DMS and AppToPay deals completed in May

STB completed the sale of DMS to Intrum UK Finance in May 2022 after announcing the deal in April 2022 (see our note from April 2022). This resulted in a pre-tax capital gain of £8.1m, although the company expects there to be some winding down costs relating to the sale in second half of FY22. STB received £81.9m for a loan book of £71.8m (2.6% of the loan book). Direct and indirect costs relating to the sale were £2m.

STB also completed in May the acquisition of AppToPay (announced in November 2021, see our note from November 2021) for £1m. AppToPay will provide the proprietary technology platform to allow STB through its Retail Finance business to enter the regulated buy now, pay later (BNPL) market.

Profit before impairments +22% y-o-y

STB reported an operating profit before impairments on its continuing business of £34.3m, +22% yoy. This was driven by balance sheet expansion and resilient margins. The cost to income dropped from 60% a year ago to 57% (underlying was 55.7% due to a one-off charge in H122 relating to corporate activities), as operating expenses rose by 8% while operating income grew 14%.

The normalisation of impairments resulted in a 42% decline year-on-year in PBT on a continuing basis to £17.1m. The EPS of the continuing operations fell 48% to 67p in H122. This EPS excludes the operations that have been sold and exited – DMS, consumer mortgages and asset finance.

Our underlying EPS only removes the actual capital gain on DMS sale (but keeps the operating contribution). On this basis the underlying EPS fell 52% to 67p (by coincidence the same as the continuing operations EPS).

Reported EPS was 102.4p, down 27% y-o-y and boosted by DMS capital gain. The normalised ROE was 8.3% for H122 and the reported ROE was 12.5%.

The CET1 ratio was 14.0%, helped by the sale of DMS; the balance sheet remains well capitalised.

Exhibit 1: H122 interims – selected numbers

Year end 31 December (£m)

H121

H122

% y-o-y

Net interest income

65.2

73.1

12

Net fees & commissions

5.8

7.9

36

Total operating income

71.0

81.0

14

Total operating expenses

(42.8)

(46.2)

8

Loss on derivatives

0.0

(0.5)

Operating profit pre impairments

28.2

34.3

22

Impairment charges on loans

0.4

(17.9)

Gains on modification of financial assets

0.7

0.7

PBT continuing operations

29.3

17.1

(42)

Tax

(4.5)

(4.2)

(7)

PBT - discontinued operations

1.4

7.6

PBT - total reported

30.7

24.7

(20)

Tax on discontinued operations

(0.2)

(1.4)

Net attributable income

26.0

19.1

(27)

 

 

 

Reported diluted EPS (p)

136.8

99.1

(28)

Reported diluted EPS (p) of continuing operations

130.5

67.0

(48)

Underlying diluted EPS (p)

136.8

67.0

(52)

Key ratios and balance sheet

Cost income ratio (%)

60.3

57.0*

NIM (NII/average loans) (%)

6.0

5.7

Impairment charge % average loans

0.0

1.4

Impairment charge (incl. loan modification losses) % avg loans

(0.1)

1.3

Loan/deposit ratio (%)

120.0

120.1

CET1 ratio (%)

14.1

14.0

ROE% reported (%)

19.0

12.5

ROE% underlying (%)

19.0

8.3

Source: Secure Trust Bank. Note: *The underlying cost to income ratio was 55.7% adjusting for a £1.1m one-off charge.

Exhibit 2: H122 loan balances and impairments

Year end 31 December (£m)

H121

H122

% y-o-y

Real estate finance

1,056.6

1,142.6

8

Asset finance

5.8

0.0

Commercial finance

239.4

359.8

50

Business finance

1,301.8

1,502.4

15

Vehicle finance

244.3

332.6

36

Retail finance

694.3

916.2

32

Debt management services (DMS)

90.4

0.0

Consumer mortgages

56.6

0.0

Consumer finance

1,085.6

1,248.8

15

Other

2.5

0.0

Total

2,389.9

2,751.2

15

Total core (ex-DMS, consumer mortgages and asset finance)

2,237.1

2,751.2

23

Impairments % of average loans

H121

H122

Real estate finance

(0.2)

0.0

Asset finance

(2.5)

Commercial finance

0.0

(0.1)

Business finance

(0.2)

0.0

Vehicle finance

2.8

(8.3)

Retail finance

(0.7)

(1.4)

Consumer mortgages

0.0

Consumer finance

0.3

(3.2)

Other

30.3

Total

0.1

(1.4)

Source: Secure Trust Bank

Adjustments to loan forecasts

We have made changes to our loan growth forecasts, but we still expect double-digit growth for FY22 and FY23. We have adjusted for the sale of DMS, reduced growth in real estate finance and increased our forecasts for the other three core segments.

The net impact of our changes is a reduction in loan growth by 1% and 4% for FY22e and FY23e. Our current forecasts are 16% and 13% y-o-y growth in total loans for FY22e and FY23e. If we exclude DMS in the year-on-year comparison, the loan balance growth would be 20% in FY22e.

Exhibit 3: Loan book balance estimates

£m unless stated

2019

2020

2021

2022e

2023e

Real estate finance

962

1,052

1,110

1,160

1,250

Asset finance

28

10

0

0

0

Commercial finance

252

231

313

390

450

Business finance

1,242

1,293

1,423

1,550

1,700

Motor finance

324

244

263

370

450

Retail finance

689

658

765

1,010

1,150

Debt management service (DMS)

82

82

80

0

0

Retail mortgages

106

78

0

0

0

Consumer finance

1,201

1,062

1,108

1,380

1,600

Other

8

4

0

0

0

Total lending

2,450

2,359

2,531

2,930

3,300

Year-on-year (%)

Real estate finance

25

9

5

5

8

Commercial finance

29

(8)

36

24

15

Motor finance

17

(25)

8

41

22

Retail finance

15

(4)

16

32

14

Total lending growth

21

(4)

7

16

13

Total core lending growth

21

(2)

12

20

13

Source: Secure Trust Bank accounts, Edison Investment Research

Forecasts

The sale of DMS is largely earnings neutral in FY22 and FY23, but resulted in a reduction in revenue and costs. The more defensive loan mix in the real estate finance division and the lower margins in retail finance also contributed to a reduction in net interest forecasts. We are now forecasting 3% and 13% increases in net interest income on a continuing business (ex-DMS) for FY22e and FY23e. We forecast the net interest margin as a percentage of average loans to decline from 6.2% in FY21 to 5.7% in FY22 and remain at this level in FY23.

Exhibit 4: FY22 and FY23 forecasts changes

Operating income (£m)

Normalised PBT (£m)

Normalised EPS (p)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2022e

186.5

173.6

(6.9)

40.8

37.5

(9.9)

167.2

157.3

(5.9)

2023e

215.2

193.6

(10.0)

56.4

50.8

(11.5)

232.0

203.2

(12.4)

Source: Edison Investment Research

Most of the STB’s lending (outside real estate finance) is fixed rate and therefore less interest rate sensitive. However, we would expect STB to pass a good portion of the increase in the funding rate to borrowers.

After the investments made in FY21, which caused the cost to income ratio to increase to 63%, we forecast the cost to income ratio to decline to 58% in FY22e (it was 57% at H122) and then to 52.5% in FY23. This is similar to our previous forecasts of 58% and 53% for FY22e and FY23e. Management maintains its medium-term goal of a cost to income ratio of below 55%.

We have kept the level of impairments about the same (1.3% of loans in FY22e and FY23e) with an increase in our vehicle loan impairments assumption being offset by lower retail finance forecasts. STB’s relatively short loan duration and proven management nimbleness mean that we expect the bank to make changes relatively quickly should lending conditions change. The key risk to earnings is in vehicle loans and retail finance, where the lending risk (and margins) is concentrated.

All of this adds up to 6% and 12% reductions in the normalised EPS for FY22e and FY23e. This represents a 38% EPS decline on FY21 (earnings boosted by COVID-19 related loan reversals) followed by a 29% increase in FY23e. We have stripped from our figures the capital gain from the sale of DMS (£8.1m before tax, £6m after tax). We are forecasting normalised ROEs of 8.9% and 11.6% for FY22e and FY23e. The forecast reported ROE is 10.9% for FY22e.

We expect STB’s balance sheet to remain well capitalised. We estimate a CET1 ratio of 13.7% and 12.9% for FY22e and FY23e; management’s target is to keep the ratio above 12%.

Valuation

We continue to value STB on an NAV approach using the (ROE-g)/(COE-g) formula. We have reduced our assumptions of a sustainable ROE from 13.5% to 13.0% to consider the likely more challenging macro environment in the next couple of years. We maintain our assumptions of a 10% COE and a 2% increase in long-term earnings. The FV of 2,407p is equivalent to a P/BV multiple of 1.38x, compared to the trading FY22e P/BV of 0.64x, suggesting significant upside in our FV.

STB is still trading below its book value despite its track record of value-creating ROEs (ie above its 10% COE) and this in part reflects the market heavily penalising cyclical stocks like financials at a time of heightened economic concerns and uncertainty. We do not envisage any losses at STB that could possibly eat into its book value and capital base.

Exhibit 5: STB valuation (net asset value approach*)

ROE (%)

13.0

COE (%)

10.0

Long-term growth (%)

2.0

Book value/share in FY22e (p)

1,751

Indicated fair value for FY22 per share (p)

2,407

Fair value of P/BV FY22 (x)

1.38

P/BV FY22 (x)

0.64

Source: Edison Investment Research. Note: *(ROE-g)/(COE-g).

Exhibit 6 compares STB’s market multiples with some of its peers. STB is trading at an 11% premium in terms of FY22e P/E to its peers (7.2x vs 6.5x); we remove Metrobank from the average because it is loss making). However, we feel the size of this premium is almost inconsequential as the whole sector is trading at very depressed ratings. STB’s dividend yield is 42% higher than its peers. Its FY22e ROE is 24% below its peers (8.9% vs 11.8%) but it is trading at a wider FY21 P/BV discount of 32%, which is attractive from a valuation point of view.

We continue to see STB as a well-capitalised bank with a good business model that is still intact, and the FY21 results have shown that management seems to have kept a good control on asset quality. We therefore believe that market multiples suggest room for the share price to recover strongly as it starts to move back to a growth stage and earnings growth is boosted as impairments come down.

Exhibit 6: Challenger/specialist lender comparative table

Price
(p)

Market cap
(£m)

P/E (x)
FY21

P/E (x)
FY22e

Dividend yield (%)

ROE (%)
FY21

ROE (%)
FY22e

P/BV (x) last reported

Secure Trust Bank

1,125

238.8

4.4

7.2

5.4

16.5

8.9

0.71

Close Brothers

1,134

1,706.2

9.2

9.5

5.3

13.9

11.4

1.09

CYBG

154

2,207.8

4.4

4.7

0.0

15.0

9.1

0.40

Metrobank

91

158.7

N/A

N/A

0.0

(15.0)

(9.6)

0.15

OneSavings Bank

528

2,327.1

6.8

6.3

4.9

18.7

19.5

1.17

Paragon

554

1,335.1

9.9

8.2

4.7

10.3

0.0

1.12

S&U

2,140

261.9

9.3

3.6

4.2

8.1

18.9

1.44

Average ex-Metrobank

7.9

6.5

3.8

13.2

11.8

1.0

STB versus average ex-Metrobank (%)

(44)

11

42

25

(24)

(32)

Source: Refinitiv, Edison Investment Research. Note: Priced at 5 August 2022.

Exhibit 7: Recent share price performance in a peer group context, %

1 month

3 months

1 year

YTD

From 12m high

Secure Trust Bank

(1.5)

(3.8)

6.7

(3.8)

(9.9)

Close Brothers

14.9

7.3

(28.0)

(19.2)

(30.6)

Virgin Money

16.9

(3.7)

(23.4)

(13.5)

(29.7

Metrobank

20.7

7.4

(7.5)

(4.9)

(38.2)

OneSavings Bank

14.1

(3.6)

8.4

(4.8)

(13.2)

Paragon

14.7

12.2

(0.8)

(2.2)

(10.5)

S&U

4.4

(8.9)

(23.3)

(20.7)

(27.5)

Average

14.3

1.8

(12.4)

(10.9)

(24.9)

STB versus average

(16)

(6)

19

7

15

Source: Refinitiv, Edison Investment Research. Note: Priced at 5 August 2022

Exhibit 8: Financial summary

Year end 31 December

2020

2021

2022e

2023e

£m except where stated

Profit and loss

Net interest income

150.9

150.8

155.6

176.5

Net commission income

15.2

13.7

17.9

17.1

Total operating income

166.1

164.5

173.6

193.6

Total G&A expenses (exc non-recurring items below)

(92.6)

(104.0)

(100.8)

(101.6)

Operating profit pre impairments & exceptionals

73.5

60.5

72.8

92.0

Impairment charges on loans

(51.3)

(4.5)

(36.1)

(41.2)

Losses on modification of financial assets

(3.1)

1.5

0.7

0.0

Other income

0.0

(0.1)

0.0

0.0

PBT before non-recurring

19.1

57.4

37.3

50.8

Non-recurring items

0.0

(1.5)

(0.5)

0.0

PBT continuing operations

19.1

55.9

36.8

50.8

Corporation taxes

(3.7)

(10.4)

(8.7)

(11.7)

Tax rate

19.4%

18.6%

23.7%

23.0%

Profit after tax - continuing basis

15.4

45.5

28.1

39.1

PBT - discontinued businesses

0.0

1.4

7.6

0.0

Tax on discontinued businesses

0.0

0.0

(1.4)

0.0

Profit after tax - total reported

15.4

46.9

34.3

39.1

Minority interests

0.0

0.0

0.0

0.0

Net attributable income - reported

15.4

46.9

34.3

39.1

PBT - total reported underlying

19.1

58.8

39.6

50.8

Net attributable income underlying

15.4

48.4

30.3

39.1

Average basic number of shares in issue (m)

18.6

18.6

18.6

18.6

Average diluted number of shares in issue (m)

19.0

19.1

19.3

19.3

Reported diluted EPS (p)

81.0

239.4

145.8

203.2

Underlying diluted EPS (p)

81.0

254.0

157.3

203.2

Ordinary DPS (p)

44.0

61.1

36.4

50.8

Special DPS (p)

0.0

0.0

0.0

0.0

Net interest/average loans

6.32%

6.17%

5.70%

5.67%

Impairments incl losses on loan modifications /average loans

2.28%

0.12%

1.30%

1.32%

Cost income ratio

55.7%

63.2%

58.1%

52.5%

Balance sheet

Net customer loans

2,358.9

2,530.6

2,930.0

3,300.0

Other assets

302.3

355.3

399.5

428.8

Total assets

2,661.2

2,885.9

3,329.5

3,728.8

Total customer deposits

1,992.5

2,103.2

2,441.7

2,750.0

Other liabilities

401.1

480.3

561.4

628.5

Total liabilities

2,393.6

2,583.5

3,003.1

3,378.5

Net assets

267.6

302.4

326.5

350.3

Minorities

0.0

0.0

0.0

0.0

Shareholders' equity

267.6

302.4

326.5

350.3

Reconciliation of movement in equity

Opening shareholders' equity

252.0

267.6

302.4

320.7

Equity restatement adjustment

0.0

0.0

0.0

0.0

Profit in period

15.4

45.6

28.1

39.1

Other comprehensive income

(0.2)

0.1

0.0

0.0

Ordinary dividends

0.0

(11.9)

(10.8)

(9.5)

Special dividend

0.0

0.0

0.0

0.0

Share based payments

(0.7)

1.0

1.0

0.0

Issue of shares

1.1

0.0

0.0

0.0

Share issuance costs

0.0

0.0

0.0

0.0

Closing shareholders' equity

267.6

302.4

320.7

350.3

Other selected data and ratios

Period end shares in issue (m)

18.6

18.6

18.6

18.6

NAV per share (p)

1,436

1,622

1,751

1,879

Tangible NAV per share (p)

1,395

1,585

1,718

1,846

Return on average equity (normalised)

5.9%

16.0%

8.9%

11.6%

Return on average TNAV

6.4%

18.9%

10.8%

14.4%

Average loans

2,389.0

2,444.8

2,730.3

3,115.0

Average deposits

2,010.3

2,002.8

2,272.4

2,595.8

Loans/deposits

118.4%

120.3%

120.0%

120.0%

Risk exposure

1,999.7

2,087.4

2,313.5

2,605.3

Common equity tier 1 ratio

14.0%

14.5%

13.7%

12.9%

Source: Secure Trust Bank, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Secure Trust Bank and prepared and issued by Edison, in consideration of a fee payable by Secure Trust Bank. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Secure Trust Bank and prepared and issued by Edison, in consideration of a fee payable by Secure Trust Bank. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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