Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — H1 2020 Earnings Presentation
40 slides from Secure Trust Bank's earnings presentation, Aug 6, 2020
Slide 1: Secure Trust Bank PLC 2020 Interim Results
SECURE TRUST BANK PLC 2020 INTERIM RESULTS 06 AUGUST 2020
Slide 2: Introduction & Business Review
SECTION 1 INTRODUCTION & BUSINESS REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER
Slide 3: Caution and Resilience Through the COVID-19 Crisis
CAUTION AND RESILIENCE THROUGH THE COVID-19 CRISIS Emphasis on ensuring safety of colleagues, conserving HY 2020 shareholders’ equity of £259.3m vs £240.3m capital, supporting existing customers and minimising risk (HY 2019), an increase of 7.9% Operating income up 4.5% year-on-year Diversified port
Slide 4: Profit Before Tax of £5.1m Despite Impact of COVID-19
PROFIT BEFORE TAX OF £5.1m DESPITE IMPACT OF COVID-19 HY 2020 statutory PBT of £5.1m v £18.1m (HY 2019), Results impacted by impairment charges associated a decrease of 71.8% with the potential worsening of economic conditions Payment holidays offered to customers have also HY 2020 adjusted PBT of £
Slide 5: Loan Book Growth Affected by the Lockdown
LOAN BOOK GROWTH AFFECTED BY THE LOCKDOWN Business Finance Consumer Finance 52.5% of loan book (HY 2019 50.1%) 47.3% of loan book (HY 2019 49.5%) Real Estate Finance Asset Finance Commercial Finance Retail Finance DMS Motor Finance Consumer Mortgages Prime credit portfolio The Group's debt Owner occ
Slide 6: Strategy Yielding Strong Returns
STRATEGY YIELDING STRONG RETURNS Shareholder value created since 2011 IPO 320 £306.3m capital generated since IPO 300 including the sale of Everyday Loans 280 41% of total capital generated paid in 260 240 dividends 220 Common Equity Tier 1 ratio of 13.5% 200 180 Leverage ratio of 10.3% well above t
Slide 7: Financial Review
SECTION 2 FINANCIAL REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER STEVE HEELEY | INTERIM CHIEF FINANCIAL OFFICER
Slide 8: Positive Returns Generated Despite Material COVID-19 Impact
POSITIVE RETURNS GENERATED DESPITE MATERIAL COVID-19 IMPACT Capital ratios strengthened by contracting balance sheet and impairment relief (£m) HY 2020 HY 2019 Gross interest income 100.7 92.3 Total Lending Assets £m Tier 2 interest expense (1.7) (1.7) Customer interest expense (21.1) (20.1) Operati
Slide 9: Summary Income Statement
SUMMARY INCOME STATEMENT Income and cost results improved and profit impacted by impairment provisions 4.3% increase in operating income £m HY 2020 HY 2019 % change • Increase is volume driven with NIM impacted by Net Interest income 77.9 70.5 10.5% cessation of Motor Finance new business in Q2 Net
Slide 10: KPI Summary
KPI SUMMARY Capital and cost ratios improve while interest margins contract due to mix Key Performance Indicator HY 2020 HY 2019 Key Performance Indicator HY 2020 HY 2019 EPS (Basic) 21.0 79.0 Cost of risk 2.9% 1.7% EPS (Adjusted) 24.2 82.3 Cost of funding 1.9% 2.1% Annualised adjusted ROAA 0.3% 1.2
Slide 11: Income Diversified Across Lending Type
INCOME DIVERSIFIED ACROSS LENDING TYPE Income growth driven by Real Estate Finance and DMS HY 2020 HY 2019 KEY £1.7m £2.7m £7.1m £1.7m £26.7m £3.2m £4.4m Real Estate Finance £23.5m Asset Finance £25.6m Commercial Finance £24.3m £107.6m £0.8m £107.6m £103.5m£103.5m Retail Finance £1.9m Motor Finance
Slide 12: Impairment
IMPAIRMENT Cost of risk increased from 1.7% to 2.9% Business Finance Consumer Finance Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance* Consumer Mortgages Loan book % change from 18.0% (54.6)% (13.2)% (3.5)% (3.3)% (16.3)% June 2019 Impairment losses HY 2020 £m 2.0 0
Slide 13: Impairment Assumptions
IMPAIRMENT ASSUMPTIONS Range of forward-looking scenarios used, resulting in conservative provision levels SCENARIO Low Medium Hard Severe Weighting 20% 45% 25% 10% Peak unemployment 6.9% 9.0% 10.7% 12.0% Peak to trough HPI (11.0)% (11.0)% (16.0)% (20.0)% Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Ye
Slide 14: Payment Holidays
PAYMENT HOLIDAYS Accounting treatment requires loan books to be revalued Following government guidance, we have offered payment For loans such as Motor Finance, where the EIR can be holidays for portfolios where these are not provided for in the > 20%, this results in a material reduction loan contr
Slide 15: Capital
CAPITAL Short duration loan books provide resilience as expected We have noted previously that the short duration of our The add back factors are 95%, 85%, 70%, 50% and 25% loan books will allow us to contract the balance sheet for years one to five respectively promptly, if necessary in a crisis In
Slide 16: CET 1 Capital Bridge
CET 1 CAPITAL BRIDGE CET1 of £279.3m reflecting a 4.2% increase on FY 2019 £268.0m, primarily driven by profit after tax, dividend retention and the IFRS 9 transitional adjustment. 280 275 270 265 £m 260 255 250 FY 2019 PAT Transitional IFRS Intangible assets Other HY 2020 £268.0m £3.9m adjustment n
Slide 17: Profit Bridge
PROFIT BRIDGE Statutory PBT of £5.1m reflecting a decrease on HY 2019 of £13.0m (71.9%) –£13.0m 20 15 £m 10 10 0 STB Exceptional STB Total Managed Bad Debts Impact of STB Exceptional STB Statutory Projects Adjusted Revenues Costs £(13.8)m payment Adjusted Projects Statutory PBT £(0.7)m PBT £3.6m £0.
Slide 18: Income Bridge
INCOME BRIDGE Increase on HY 2019 of £4.7m (4.5%) £4.7m 108 107 106 105 £m 104 103 102 101 100 FY 2019 Real Estate Asset Commercial Retail Motor DMS Consumer Other* HY 2020 £103.5m Finance Finance Finance Finance Finance £2.8m Mortgages £0m £108.2m £3.2m £(1.0)m £(1.4)m £0.6m £0.4m £0m Income before
Slide 19: Evolving Net Revenue Margin
EVOLVING NET REVENUE MARGIN Margin shift driven by change in risk profile % Improvement / 4.4% year-on-year increase in loan balances (Worsening) has driven 4.3% increase in operating income £81.4m £84.9m 4.3% Reduction in net revenue margin driven by temporary cessation of Motor Finance lending – o
Slide 20: Costs Controlled
COSTS CONTROLLED Increased income and cost control yields improved cost income ratio Cost to income ratio 55.9% Cost to income ratio 52.7% 4.3% growth in operating income (1.8)% reduction in costs £81.4m £(45.5)m £84.9m £(44.7)m HY 2019 HY 2020 Operating income Operating expenses 20
Slide 21: Cost Management
COST MANAGEMENT Ensuring the business is at the right size for its growth plans Despite continued growth from 30 June 2019 to the first quarter of 2020, staffing levels remained relatively stable The Group had 972 FTE at 30 June 2020 vs 956 at 30 June 2019 Additional cost measures were introduced in
Slide 22: Balance Sheet Summary
BALANCE SHEET SUMMARY Despite contraction since the start of £m HY 2020 HY 2019 Q2 2020, particularly in Retail Finance and Motor Finance, loan balances are Cash and balances at central banks 109.6 101.9 4.4% higher year-on-year Debt securities held to maturity 35.0 110.0 Loans and advances to banks
Slide 23: Lending Bridge
LENDING BRIDGE Decrease of £72.6m (3.0%) since 31 December 2019 –£72.6m 2,550 2,500 2,450 2,400 £m 2,350 2,300 2,250 2,200 YE 2019 Real Estate Asset Commercial Retail Motor DMS Consumer Other HY 2020 £2,450.1m Finance Finance Finance Finance Finance £10.7m Mortgages £(2.3)m £2,377.5m £74.6m £(8.3)m
Slide 24: Customer Loan Progression
CUSTOMER LOAN PROGRESSION Increase on HY 2019 of £99.2m (4.4%) 2,500 2,000 1,500 £m 1,000 500 0 HY 2018 HY 2019 HY 2020 Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance DMS Consumer Mortgages Other Lending 24
Slide 25: Customer Deposit Progression
CUSTOMER DEPOSIT PROGRESSION Shift from term to notice deposits and ISAs 120% 100% 80% 59.3% £m 68.1% 60% 71.9% 4.0% 40% 0.3% 20% 34.0% 27.1% 30.7% 0.9% 1.0% 2.7% 0 HY 2018 HY 2019 HY 2020 Sight Deposits Notice Deposits Individual Savings Account Term Deposits 25
Slide 26: Strategic Priorities Delivering for Further Growth
STRATEGIC PRIORITIES DELIVERING FOR FURTHER GROWTH Organic growth M&A Activity • Potential for long-term sustainable growth for all • The Group expects to be well placed, when of our core products the COVID-19 crisis ends, to take advantage of • Timing and extent of growth dependent on credit new bu
Slide 27: Summary
SUMMARY H1 2020 Performance: Outlook: • Profits impacted by the pandemic: statutory and • Medium-term strategy unchanged adjusted PBT both down to just under one third of the equivalent period last year • Short-term priority continues to be to support our workforce, customers and business partners •
Slide 28: Appendices
SecureTrust Bank APPENDICES
Slide 29: Customer Feedback and Awards: Deposits
CUSTOMER FEEDBACK AND AWARDS Deposits Customer feedback from 4.5 stars Just what we all need. Always helpful and friendly customer service. Excellent service. A1+. I've used their service to pay all my bills for 40years +. Excellent, works for me. The people are really helpful and polite when you ha
Slide 30: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars Moneyway has really helped me out with this Can't fault them; I called to change the date of my pandemic going on I don't know what I would have payment when my pay date changed and they done if they didn't help me over the
Slide 31: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars I am grateful and thankful for the excellent service I've always been reluctant to get a car on finance. I have received from Moneyway, for my first car to However after deciding to enquire, Moneyway my second car. Due to ci
Slide 32: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars Quick, easy, smooth transaction with excellent The service from Moneyway has been second to customer service and communication. none. The adviser I spoke to was both friendly and Highly recommend. efficient and kept me infor
Slide 33: Customer Feedback and Awards: V12 Retail Finance
CUSTOMER FEEDBACK AND AWARDS V12 Retail Finance V12 Retail Finance Customer feedback from Customer feedback from 4.9 stars 4.9 stars V12 have been brilliant especially as we are in the A good way to spread the cost. midst of a pandemic. Very easy to apply and a very quick response, this is the secon
Slide 34: Business to Business Feedback
BUSINESS TO BUSINESS FEEDBACK Commercial Finance Real Estate Finance Secure Trust have been rock solid partners for our The Residence is newly finished to a high portfolio companies during the pandemic. They specification. It is in the heart of Bedford and less have shown cool heads and a supportive
Slide 35: Business Finance
BUSINESS FINANCE Business Finance Loan book £m 1,400 1,200 1,000 Business Finance HY 2018 HY 2019 HY 2020 800 Gross Revenue £m 28.5 33.8 34.4 £m 600 Impairments £m (1.5) (0.7) (3.7) 400 Loan book £m 980.2 1,142.4 1,247.8 200 0 HY 2018 HY 2019 HY 2020 35
Slide 36: 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 37: Consumer Finance
CONSUMER FINANCE Consumer Finance Loan book £m 1,400 1,200 1,000 Consumer Finance HY 2018 HY 2019 HY 2020 800 Gross Revenue £m 56.7 66.5 71.1 £m 600 Impairments £m (15.4) (17.2) (27.8) 400 Loan book £m 845.6 1,127.0 1,124.4 200 0 HY 2018 HY 2019 HY 2020 37
Slide 38: Consumer Finance: Retail and Motor Overview
CONSUMER FINANCE Business overview – Business overview – Retail Motor Targeting Prime Credit Portfolio Prime lending and near-prime Customers offering greater participation across the risk curve Active across a range of retail markets including cycle retailers, Maximum loans of £25,000 with season t
Slide 39: 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 40: Important Notice
IMPORTANT NOTICE This presentation and the information, statements The Group’s actual future results may differ materially and opinions in it do not constitute, and should not from the results expressed or implied in these forward be construed as, a public offer under any applicable looking statemen