Secure Trust Bank (STB) H1 2024 earnings summary

Executive summary

• Achieved 3.2% growth in lending balances to £3.4bn and 6.0% growth in customer deposits to £3.04bn since end of 2023.

• Profit before tax, pre-impairments, rose 12.4% year-over-year to £45.2m; statutory profit before tax up 3.6% to £17.1m, with operating income up 7.9%.

• Net interest margin declined to 5.3% (from 5.4% year-over-year), but exited the half at 5.4%; cost-income ratio improved to 53.7%.

• Project Fusion cost savings target upgraded to £8m annualised by end of 2025, with £4.4m already delivered and further organisational redesign underway.

• Interim dividend of 11.3p per share declared, reflecting a move to a progressive dividend policy.

Financial highlights

• Net interest income up 8.9% to £88.2m; operating income up 7.9% to £96.1m; average lending balances grew 11.8%.

• Adjusted profit before tax pre-impairment rose to £45.2m; adjusted profit before tax flat at £17.1m due to higher impairments.

• Impairment charge increased 23.2% to £28.2m, mainly from Vehicle Finance collections pause.

• Return on average equity at 7.3%, down from 8.0% in HY 2023.

• CET1 ratio at 12.7%, total capital ratio at 15.0%, both above regulatory minimums.

Outlook and guidance

• Expect improved consumer and business confidence and increased credit demand in H2 2024 and into 2025 as interest rates fall.

• Confident in achieving £4bn net lending target and 14%-16% return on equity medium-term.

• NIM expected to expand as deposit pricing pressure eases and cost of retail funding has peaked.

• Organisational redesign and Project Fusion to unlock further cost savings.

• Top priority is to increase collections in Vehicle Finance to reduce stage 3 balances and improve profitability in H2.