Secure Trust Bank (STB) CMD 2024 summary

Strategic direction and financial targets

• Net lending grew by £1.1bn since 2020, with a target of £4bn to support mid-teens return on equity and robust financial performance.

• Five medium-term financial targets include lending growth, net interest margin above 5.5%, cost-income ratio between 44%-46%, and CET1 ratio above 12%.

• Project Fusion aims for £5m annualized cost savings by year-end, supporting operational efficiency.

• Identifies operational efficiencies and scalable growth opportunities in large addressable markets.

• Focuses on profitable lending growth underpinned by strong risk management.

Real estate finance business model and market position

• Real estate finance net lending balances reached £1.24bn at end-2023, up 18% since 2020, representing 37.5% of group net lending.

• Portfolio repositioned towards residential investment, with 84% of 2023 lending in residential sectors and over 80% of the loan book in residential investment.

• Lending is relationship-driven, targeting professional landlords and developers, with loans secured on UK assets and terms up to 5 years.

• Build-to-rent and purpose-built student accommodation are key growth areas, with tailored, relationship-led lending.

• The business avoids high street retail, city offices, and speculative development, focusing on stable sectors.

Risk management and underwriting approach

• Underwriting is based on first legal mortgages, in-person asset visits, and cash flow-based structuring, with maximum loan-to-value of 70% for investment and 60% for development.

• Maintains stable loan-to-value ratios (around 56%-59%) and low cost of risk, demonstrating robust risk controls.

• ESG factors are integrated, with a Green Loan product supporting low-carbon and EPC-improving projects.

• Portfolio is 72% fixed rate, and interest cover has improved despite rate rises.

• Proactive management of stressed loans, with a preference for consensual workouts and no loan sales.