Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — H1 2018 Earnings Presentation
33 slides from Secure Trust Bank's earnings presentation, Aug 8, 2018
Slide 1: Secure Trust Bank PLC 2018 Interim Results
SECURE TRUST BANK PLC 2018 INTERIM RESULTS 8 AUGUST 2018
Slide 2: Introduction & Business Review
1 INTRODUCTION SECTION & BUSINESS REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER
Slide 3: H1 2018 Highlights
H1 2018 HIGHLIGHTS Benefits of strategic repositioning – quality driving profitability Strong growth in profits Exceeded the million customer mark with numbers Statutory PBT up 31.3% to £15.1m of 1,096,854, an increase of 31% on H1 2017 Cost of risk down 20% on IAS 39 basis High levels of customer a
Slide 4: 2018 Developments
2018 DEVELOPMENTS Business evolving as planned in the first half of the year Continuing evolution of the balance sheet Internet banking offered and savings product Growth in both Business Finance and Consumer expansion planned following new deposit platform Finance, targeted in selected markets goin
Slide 5: Strategy: Very significant shareholder value created since 2011 IPO
STRATEGY Very significant shareholder value created since 2011 IPO 300 £253.8m capital generated since IPO 280 Consistently strong dividend payment pattern 260 240 Capital remains strong with Common 220 Equity Tier 1 ratio of 13.6% (13.8% before 200 interim dividend) 180 Leverage ratio of 10.4% well
Slide 6: Strategy: Growth and diversification
STRATEGY Growth and diversification Continue to grow our business responsibly with new products where appropriate Use M&A to accelerate growth in portfolios that are less mature or repositioning in their market, with potential opportunities in the Asset Finance and Commercial Finance markets Investm
Slide 7: Continued Growth in Diverse Loan Book
CONTINUED GROWTH IN DIVERSE LOAN BOOK Consumer Mortgages Business Finance Consumer Finance 2% of loan book 53% of loan book (H1 2017 51%) 42% of loan book (H1 2017 46%) (Initiated H1 2017) Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance Personal Lending* Consumer Mo
Slide 8: Financial Review
2 SECTION FINANCIAL REVIEW NEERAJ KAPUR | CHIEF FINANCIAL OFFICER
Slide 9: Positive Momentum and Strong Profit Growth
POSITIVE MOMENTUM AND STRONG PROFIT GROWTH H1 2018 H1 2017* Total Lending Assets £1,839m £m £m Gross interest income 79.2 66.5 Interest expense (15.5) (12.7) 1,800 GROWTH 26 ON H1 2017* Net interest income 63.7 53.8 1,700 % Impairment losses (16.3) (16.4) 1,600 Reported PBT 15.1 11.5 Underlying PBT
Slide 10: Summary Income Statement
SUMMARY INCOME STATEMENT Balancing growth and risk by repositioning the business 19% increase in operating income £m H1 2018 H1 2017* % change • Maintaining strong growth in both Consumer Net interest income 63.7 53.8 18.4% Finance and Business Finance sectors whilst Net fee, commission and other in
Slide 11: IFRS 9
IFRS 9 Impact of the new standard has been offset by improved performance Requires accounting for impairment on an expected rather than incurred loss basis – no impact on cash flows Impact on transition of £25.8m net of tax, through opening reserves Expected increase in provisions due to accelerated
Slide 12: KPI Summary
KPI SUMMARY Improved credit quality driving results H1 2018 H1 2017* H1 2018 H1 2017* Key Performance Indicator IFRS 9 IAS 39 Key Performance Indicator IFRS 9 IAS 39 Gross revenue margin 10.6% 11.3% Cost of funding 1.8% 1.9% Net interest margin 7.6% 8.2% Total cost to income ratio 56.7% 54.8% Net re
Slide 13: Underlying Profit Bridge
UNDERLYING PROFIT BRIDGE Profit driven by growing loan book and improved cost of risk 20 +36% 15 £m 10 5 0 STB Fair value Transformation Profit on sale STB Change in STB Fair value Transformation Other bonus STB Statutory amortisation costs of NSF plc Underlying underlying Underlying amortisation co
Slide 14: Underlying Profit Growth
UNDERLYING PROFIT GROWTH 25 20 15 £m 10 +36% 5 0 H1 2017* Net Interest Net fees and Impairments Operating costs Other H1 2018 £12.1m Income commissions £0.1m £(7.6)m £0.5m £16.5m £9.9m £1.5m *H1 2017 is reported on a continuing basis. 14
Slide 15: Growing Income Across All Major Divisions
GROWING INCOME* ACROSS ALL MAJOR DIVISIONS Delivered increased income of 20% YoY** £14.7m 90 85 80 75 £m 70 65 0 H1 2017** Real Estate Commercial Asset Motor Retail Consumer Other H1 2018 £74.3m Finance Finance Finance Finance Finance Mortgages £0.7m £89.0m £3.5m £3.2m £(0.5)m £1.4m £6.0m £0.4m *Inc
Slide 16: Diversified Business
DIVERSIFIED BUSINESS Income growth across majority of businesses H1 2018 H1 2017* KEY £7.1m £18.3m £6.4m £0.4m £14.8m Real Estate Finance £29.4m Asset Finance Commercial Finance £3.8m £89.0m £89.0m £23.4m £74.3m £74.3m £4.3m Motor Finance £6.2m £3.0m Retail Finance Consumer Mortgages Central and Oth
Slide 17: Evolving Net Revenue Margin
EVOLVING NET REVENUE MARGIN Successful shift towards lower risk, lower margin lending Reduction in group net revenue margins is a reflection of the move to lower risk, lower margin lending and cessation of personal lending originations in Q1 2017 Cost of funding reduced despite increased competition
Slide 18: Investing in Business Growth and New Product Lines
INVESTING IN BUSINESS GROWTH AND NEW PRODUCT LINES Cost to income ratio 54.8% Cost to income ratio 56.7% 18.7% growth in operating income 22.7% growth in costs reflecting business growth and investment in the £61.1m £33.5m Motor and Mortgages £72.5m £41.1m businesses, and Treasury and risk managemen
Slide 19: Balance Sheet Summary
BALANCE SHEET SUMMARY Customer loans up 26% to £1.8bn H1 2018 H1 2017 £m Continuing Continuing Customer deposits up 24% to £1.6bn Operations Operations Cash and balances at central banks 126.7 114.0 Customer numbers up 31% to £1.1m Loans and advances to banks 34.2 25.5 Modest utilisation of TFS Debt
Slide 20: Successful Deployment of Capital in Line with Strategy
SUCCESSFUL DEPLOYMENT OF CAPITAL IN LINE WITH STRATEGY Increase on H1 2017 of 26%* +£378m 1,800 1,700 1,600 1,500 £m 1,400 1,300 1,200 1,100 0 *On a continuing basis H1 2017* Real Estate Asset Commercial Motor Retail Consumer Other H1 2018 £1,461.1m Finance Finance Finance Finance Finance Mortgages
Slide 21: Customer Loan Progression
CUSTOMER LOAN PROGRESSION Growth of 26% on H1 2017*: Business Finance 31%, Consumer Finance 20% 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 £m 900 800 700 600 500 400 300 200 100 0 FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 FY 2017 HY 2018 Personal Lending ELG Motor Finance Reta
Slide 22: Customer Deposit Progression
CUSTOMER DEPOSIT PROGRESSION Increase on H1 2017 of £320m, weighted towards term deposits 1,700 1,600 1,500 1,400 1,300 1,200 1,100 71.8% 1,000 68.3% 900 67.2% £m 800 66.2% 57.0% 700 61.7% £m 600 56.6% 500 54.4% 400 300 32.5% 31.6% 30.7% 27.3% 39.2% 35.0% 200 39.4% 38.7% 100 6.2% 4.7% 3.8% 3.3% 1.3%
Slide 23: Summary and Outlook
SUMMARY AND OUTLOOK Strategic repositioning delivered strong profit growth Statutory PBT up 31.3% and underlying PBT up 36.4% Cost of risk reduced by 24%* Asset yields reduced in line with higher quality balance sheet However, income growth across majority of products Legacy higher risk loan book la
Slide 24: Appendices
§ Secure Trust Bank Straightforwarc 3 APPENDICES SECTION
Slide 25: Customer Feedback and Awards: V12 Deposits
CUSTOMER FEEDBACK AND AWARDS V12 Deposits Customer feedback from Customer feedback from 4.8 stars 4.4 stars You get a quick decision and payments are easy Very professional to deal with. Always quick to to set up… You can’t go wrong. produce information, and to keep you abreast of what your finances
Slide 26: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance A fast and effective service… MoneyWay’s decision was fast and within one week of applying for Customer feedback from finance I had my new vehicle. I had not used a 4.7 stars finance company before, and was guided through the process which was very helpful
Slide 27: Business to Business Feedback
BUSINESS TO BUSINESS FEEDBACK ‘‘ ‘‘ ‘‘ Motor Finance Commercial Finance Real Estate Finance I’ve been working with We chose to work with Secure We have a very good MoneyWay for over a year, Trust Bank Commercial Finance experience with Secure Trust I’m very impressed with the because of its refreshi
Slide 28: Business Finance
BUSINESS FINANCE 1,000 900 800 700 600 £m 500 400 300 200 100 Loan book 0 FY H1 FY H1 FY H1 FY H1 2014 2015 2015 2016 2016 2017 2017 2018 Business Finance FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 FY 2017 H1 2018 Revenue £m 2.6 9.2 24.3 19.2 40.8 22.1 48.0 28.3 Impairments £m – (0.3) (0.3) (0.
Slide 29: Business Finance: Business Overviews
BUSINESS FINANCE Business overview – Business overview – Business overview – Real Estate Finance Commercial Finance Asset Finance Supports SMEs over a financing Provides a full range of asset Supports SMEs to acquire term of up to 5 years with based lending solutions commercial assets, such as prude
Slide 30: Consumer Finance
CONSUMER FINANCE 800 Consumer 700 FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 FY 2017 H1 2018 Finance* 600 Revenue £m 90.2 54.4 115.4 54.6 99.6 50.5 105.8 53.2 500 Impairments (15.0) (10.8) (24.8) (15.7) (31.1) (17.9) (38.0) (15.4) £m £m 400 Loan book 300 (exc. ELG 254.6 315.6 386.1 477.3 562.1
Slide 31: Consumer Finance: Retail and Motor Overview
CONSUMER FINANCE Business overview – Business overview – Retail Motor Targeting Prime Credit Portfolio Prime lending product offering Customers greater participation across the risk curve Active across a range of retail markets including cycle retailers, Maximum loans of £25,000 with season tickets,
Slide 32: Strategy Continues to Deliver
STRATEGY CONTINUES TO DELIVER Maximise shareholder value: To maximise shareholder value To protect the reputation, integrity To ensure that the fair treatment of through strong lending growth by and sustainability of the Bank customers is central to corporate delivering great customer outcomes for a
Slide 33: Important Notice
IMPORTANT NOTICE This presentation and the information, statements The Group’s actual future results may differ materially from and opinions in it do not constitute, and should not be the results expressed or implied in these forward looking construed as, a public offer under any applicable legislat