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 deposits to £3.0bn since end of 2023, despite a high interest rate environment.

• Profit before tax, pre-impairments, rose 12.4% year-over-year, but statutory profit before tax was £17.1m, up 3.6% year-over-year, with higher impairments mainly in Vehicle Finance.

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

• Interim dividend of 11.3p per share declared, reflecting a progressive full-year dividend policy.

• Net lending moved closer to the £4bn target, with strong growth in Consumer and Vehicle Finance.

Financial highlights

• Net interest margin at 5.3% (down from 5.4% year-over-year), with net interest income up 8.9% to £88.2m.

• Operating income up 7.9% year-over-year; operating costs up 3.6%, driving a 2.2% reduction in cost-income ratio to 53.7%.

• Impairment charge rose 23.2% to £28.1m, mainly due to a pause in Vehicle Finance collections.

• Return on average equity was 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

• Lending demand expected to increase as market confidence improves and interest rates fall.

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

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

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

• Board remains confident in achieving medium-term targets as trading environment improves.