Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — Investor Day (2023)
46 slides from Secure Trust Bank's investor day presentation, 2023
Slide 1: Capital Markets Event
SecureTrust Bank CAPITAL MARKETS: ee |=) |
Slide 2: Chairman's Introduction
CHAIRMAN'S INTRODUCTION Chairman
Slide 3: Important notice
oO = a = = = co = (7%) — cc = tu cc a (=) a (7) Important notice The basis of this presentation: This presentation has been prepared by Secure Trust Bank PLC (STB) solely for information. It's not an offer or solicitation of an offer to buy or sell or subscribe for any securities or financial instru
Slide 4: Group Overview
GROUP OVERVIEW DAVID McCREADIE
Slide 5: Today's presentation
Today's presentation 11.00am Chairman's Introduction 11.05am Group Overview 11.20am Retail Finance 11.50am Medium Term Targets 12.05am Conclusions 12.10pm Q&A 12.45pm Close Lord Forsyth David McCreadie Nick Davies and Andrew Phillip: Rachel Lawrence David McCreadie
Slide 6: Group overview: Focused specialist lender
Group overview Focused specialist lender Secu reTrust jan Consumer Business Savings Finance Finance ae Retail Vehicle Real Estate Commercial Consumer ni - sy : A Finance Finance Finance Finance Deposits pen WI sees i etail inanoe Branding WP Rotall | Finance SecureTrust SecureTrust SecureTrust meney
Slide 7: Delivery track record
Delivery track record Established positions in our specialist lending markets Continued product innovation and expansion Proven ability to generate retail deposits Delivered significant lending growth Proven flexibility in adapting to challenging market conditions oo = a = = = ca = an = cc = wu co =
Slide 8: Well positioned for profitable growth
Well positioned for profitable growth ll ag Significant growth opportunity Sufficient capital to in specialist lending markets support growth ambitions Approaching loan book scale to deliver attractive RoAE and capital accretion oo = 5 = = = ca eK wn — oS = lu o —J o hada nn Secure Trust Bank PLC |
Slide 9: Clear strategic focus
2 SECURE TRUST BANK PLC Secure Trust Bank Clear strategic focus Vision To be the most trusted specialist lender in the UK Purpose To help more consumers and businesses fulfil their ambitions Our Strategic Priorities Enhance Customer Leverage Networks Experiences Secure Trust Bank PLC | Capital Marke
Slide 10: Strategic priorities: Good progress across all areas
oo —_! a. = — = co = wn — oo = lu cc —J o ‘hedard nn Strategic priorities Good progress across all areas @ @ =) Enhance Customer Leverage Experiences Networks Exited 4 sub-scale businesses Savings Account Mobile App Supporting >1,400 retailers Office space reduced by 51% AppToPay pilot Partnering >6
Slide 11: Significant further opportunity: c.£4bn net lending unlocks RoAE target
Significant further opport c.£4bn net lending unlocks RoAE target rea Mid-teens market share c.£4bn Loan Book ambition in Retail Finance will deliver 14% - 16% RoAE SECURE TRUST BANK PLC Secure Trust Bank PLC | Capital Markets Event
Slide 12: Retail Finance: An emerging powerhouse
RETAIL FINANCE An emerging powerhouse NICK DAVIES = ANDREW PHILLIPS CEO, V12 Retail Finance Commercial Director, V12 Retail Finance
Slide 13: Substantial specialist retail finance expertise
Substantial specialist retail finance expertise Strong track record of growth and delivering attractive returns SecureTrust Bank Consumer Business Savi Finance Finance eens Vehicle Real Estate Commercial Consumer Finance Finance Finance Deposits Retail Finance % of group lending 2020 H1 2023 Interes
Slide 14: An introduction to V12 Retail Finance
An introduction to V12 Retail Finance G12 Finance lu (=) = = = — — = lo cc 14
Slide 15: Retail Finance: Win-win-win
“RETAIL FINANCE Retail Finan Win-win-win for cust aN r ret ler and nn = ince a
Slide 16: A leading player in the retail finance market
A leading player in the retail finance market We help by providing instant credit for the purchase of goods online and in store Interest Free Credit (IFC) Interest Bearing Credit (IBC) Semaanee Generally higher end prime credit quality, Generally lower end prime credit quality, Mi lower yield and lo
Slide 17: Interest free credit model
lu (=) — = = i — = lu cc Interest free credit model Commercially attractive and improved credit quality Customer {e Interest free loan over 12 months \ Customer makes a £1200 purchase with retailer | Credit and legal relationship 12 monthly payments £100 Retail Finance income £1120 capital £1120 pay
Slide 18: Strategic push into interest free credit
Strategic push into interest free credit Significant reduction in cost of risk since 2019 Interest Free Credit - average loan book mix 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 83.4% 855% 2019 2020 2021 2022 H1'23 Cost of Risk as % average loan book 3.5% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% cOVID 2.4% \ 1.6%
Slide 19: Innovative proprietary technology platform
Innovative proprietary technology platform Technology platform supports ease of integration and efficient customer journey October August July July April 2001 2011 2016 2019 2023 Launched the first ever First retail finance Dedicated collections Ten millionth AppToPay ‘online retail finance company
Slide 20: Digitised customer journey
Digitised customer journey Highly automated processes driving efficiency and great customer experience of applications are decisioned in under 6 seconds Intelligent application process Application/ credit check Agreement Customer notified of repayments lu o — 4 = i — = lu cc Payment made Items/servi
Slide 21: Simplification and digitisation driving cost efficiency
21 Simplification and digitisation driving cost efficiency Material economies of scale delivered Spot net loan book fm vs FTE - average Online account management penetration % — average £1,400.0 1400 80.0% 73.9% £1,200.0 1200 70.0% 68.9% £1,000.0 1000 air g 56.3% 2 50.0% £800.0 800 5 VE. £ % 40.0% a
Slide 22: Significant increase in new business growth
Significant increase in new business growth Business relationships built over many years using our direct sales model, without heavy marketing costs £1,200 £1,000 £800 £600 £m £400 £200 £0 Achieved > % increase > *Year-on-year growth rate of H1 2023 vs H1 2022 Secure Trust Bank PLC | Capital Markets
Slide 23: V12 has gained significant market share
V12 has gained significant market share Increased market share without increased cost of risk Market Share 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2019 2020 2021 2022 H1'23 Source: Finance and Leasing Association Secure Trust Bank PLC | Capital Markets Event
Slide 24: Proactive price pass through to retailers
60% of retailers receive automatic quarterly pricing changes 40% of retailers receive immediate pricing changes >» Proactive price pass through to retailers Furniture lead times delay impact of pricing changes for both price increases and decreases Changes to retailer pricing has no impact upon the
Slide 25: Focus on business growth in high credit quality sectors
Focus on business growth in high credit quality sectors Significant opportunities for growth in both current and new sectors High Home Improvements Credit Quality Low 8 1 2 3 4 5 é 7 High market share Low market share V12 Retail Finance ranking by the Finance and Leasing Association. Total addressab
Slide 26: V12 consistently achieves excellent customer ratings
V12 consistently achieves excellent customer ratings Making our customers smile for over 20 years I have been working alongside V12 for several years and always find the team to be professional and efficient. Our supporters are also happy with the product and services offered by V12 and if ever they
Slide 27: V12 has established strong retailer partnerships
V12 has established strong retailer partnerships Excellent service has delivered high retention rate Miterlons Music co. a sofology Dreams Oak furnitureland - Optical americangolf BA RIBBLE = GOLDSMITHS BEAVERBROOKS Fontes SINCE 177% 8 lu o — 4 = i — = lu cc N N Secure Trust Bank PLC | Capital Marke
Slide 28: AppToPay pilot well received by retail partners
ApptToPay pilot well received by retail partners Ease of integration for retailers and customer journey working well "s £: f £ la a aay Can r=) o, — Pay in 3* Spread the cost No upfront payment or deposit In-store or online Interest free GMa. Winfields Be = Pay in 3*, interest free with AppToPay The
Slide 29: AppToPay pilot providing great insights and learnings
AppToPay pilot providing great insights and learnings Pilot now deployed across store, mail order and online r AppToPay ©Met, — TASKERS =@ G {my} dentist’ ere Saoors . wm A) A successful product launch has been chevin - FRASER HART wor Francis Gaye CG fAJX)) SW BAMOND incredibly well received by bot
Slide 30: The emerging powerhouse
> The emerging powerhouse £ il Strong track record of Improved credit quality growth and returns and cost efficiencies Opportunities exist Mid-teens market in existing and new market share ambition segments Secure Trust Bank PLC | Capital Markets Event
Slide 31: Medium Term Targets
MEDIUM TERM TARGETS RACHEL LAWRENCE
Slide 32: Medium Term Targets (MTT)
Medium Term Targets (MTT) MTT first put in place in 2021 Metric Return on Net Cost Lending Average Equity Interest Margin Income Ratio Book CAGR' Target 15%+ oo = a = — = ca = an = cc = wu co —J o aw nn 1. CAGR from 31st December 2020 Secure Trust Bank PLC | Capital Markets Event
Slide 33: Refreshed Medium Term Targets (MTT)
Refreshed Medium Term Targets (MTT) Updated to reflect ambitions for scale of Lending book and Cost Income ratio Metric Return on Net Cost Lending Average Equity Interest Margin Income Ratio Book Target 44% -46% c.£4bn oo = a = — = ca = an = cc = wu co —J o aw nn Secure Trust Bank PLC | Capital Mark
Slide 34: Pathway to delivering 14%-16% Return on Average Equity
oo = a = = = ca = an = cc = wu co —J o aw nn Pathway to delivering 14%-16% Return on Average Equity (RoAE) @ Net Lending ambition @ Yield curve flatting, opportunity for NIM expansion @ Lending growth = operational leverage and reduced cost income ratio @ Stable cost of risk @ Deployment of excess C
Slide 35: Net Lending growth
Net Lending growth On track to achieve c.£4bn ambition Loan Book Evolution to c.f4bn FY 2020 HY 2023 14%-16% RoAE 4 Lo} a 3 +45% bas 45% growth in 30 months Ss Pal (Business 20% and Consumer 80%) = CS Low market shares — opportunity — 2 to grow = = Improving credit quality in Ee) Consumer lending =
Slide 36: Net interest margin (NIM)
Net interest margin (NIM) Increase in mix towards Consumer lending increases NIM HY 2023 1ppt increase in Consumer lending mix 55% Consumer lending mix - Business Consumer Business Consumer Business Consumer Finance 49% Finance 51% Finance 48% Finance 52% Finance 45% Finance 55% @ Diversified busine
Slide 37: Cost Income Ratio (CiR)
Cost Income Ratio (CiR) Lending growth = operational leverage and reduced cost income ratio CiR Bridge (Illustrative) 60.0% 55.0% ° FY 2022 delivered c.10% 50.0% reduction in CiR 45.0% al Ae 8.0%" 45.0% ote ae 40.0% 2 as Impacte y intiation 35.0% Project Fusion on track to deliver c.£5m of annualise
Slide 38: Cost of Risk (CoR)
Cost of Risk (CoR) Track record of prudent lending with stable cost of risk Cost of Risk History 7.00% 6.00% Step change improvement 5.00% in Retail Finance CoR 4.00% Through the cycle Group COR ¢.1.3% - 1.5% 3.00% 2.00% Diversified portfolio results: in stable Group CoR 1.00% 0.00% a a ~ a FY 2019
Slide 39: Strong capital position
Strong capital position Capital accretive once at c.£4bn net lending CET1 Requirement 16.00% Tier 2 raise in February 2023 increased 14.00%, capacity to lend an additional c.£700m when onto fully utilised 10.00% 7 Without the Tier 2 raise this would have had to be funded by CET1, slowing down our Et
Slide 40: Return on Average Equity (RoAE)
Return on Average Equity (RoAE) c.£4bn net lending supports 14% - 16% RoAE Annual costs Ro A E ul + in Consumer lending inflation at Netlonding - cous stable CoR a 5 14% - 16% PS SECURE TRUST BANK PLC roy Secure Trust Bank PLE | Capital Markets Event
Slide 41: Conclusion
CONCLUSION DAVID McCREADIE Chief Executive Officer
Slide 42: Looking forward with confidence
Looking forward with confidence @ Clear focus on our attractive specialist lending markets @ Diversified and resilient business model a key strength fanict r 5 hile Mid-teens market share Y Focused on our Optimising for Growth strategic priorities in RetaillEinance — Simplify — Enhance customer expe
Slide 43: Questions and Answers
QUESTIONS AND ANSWERS DAVID McCREADIE Chief Executive Officer
Slide 44: Appendix
Company Confidential
Slide 45: Management Biographies
MANAGEMENT BIOGRAPHIES
Slide 46: Management team biographies
o a = = = ca = (7) = cc = wu co =) o pr nn Management team biographies > DAVID McCREADIE > CHIEF EXECUTIVE OFFICER David is a career banker and a Fellow of the Chartered Banking Institute. He spent 22 years at The Royal Bank of Scotland (RBS) holding roles in Branch Banking, Consumer Finance and sev