Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — FY2019 Earnings Presentation
40 slides from Secure Trust Bank's earnings presentation, May 7, 2020
Slide 1: Secure Trust Bank PLC 2019 Year End Results
SECURE TRUST BANK PLC 2019 YEAR END RESULTS 7 MAY 2020
Slide 2: Introduction & Business Review
SECTION 1 INTRODUCTION & BUSINESS REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER
Slide 3: Continued progress and profitable growth in 2019
CONTINUED PROGRESS AND PROFITABLE GROWTH IN 2019 FY 2019 statutory PBT of £38.7m v £34.7m (FY 2018), Continued progress in both Business Finance and an increase of 11.5% Consumer Finance Volume and revenue growth in all core product areas FY 2019 adjusted PBT of £41.1m vs £36.7m (FY 2018), an increa
Slide 4: Continued growth in diverse loan book
CONTINUED GROWTH IN DIVERSE LOAN BOOK Business Finance Consumer Finance 50.7% of loan book (FY 2018 50.6%) 49.0% of loan book (FY 2018 48.8%) Real Estate Finance Asset Finance Commercial Finance DMS Retail Finance Motor Finance Consumer Mortgages The Group's debt Prime credit portfolio Owner occupie
Slide 5: Income diversified across lending type
INCOME DIVERSIFIED ACROSS LENDING TYPE Income growth across the core businesses YE 2019 YE 2018 KEY £3.7m £6.9m £8.4m £1.5m £48.9m £7.6m £7.0m Real Estate Finance £41.2m Asset Finance £49.7m Commercial Finance £48.5m £212.3m £3.2m £194.7m £188.6m£188.6m Retail Finance £6.6m Motor Finance £16.8m £13.
Slide 6: Well positioned to navigate the COVID-19 crisis
WELL POSITIONED TO NAVIGATE THE COVID-19 CRISIS Group strategy remains unchanged as one of responsible Diversified portfolio and business model leaves the Group lending across a diverse portfolio of attractive segments well placed to continue to pursue its objectives once the UK emerges from the cri
Slide 7: Strategy yielding strong returns
STRATEGY YIELDING STRONG RETURNS Shareholder value created since 2011 IPO 300 £302.1m capital generated since IPO 280 including the sale of Everyday Loans 260 41% of total capital generated paid in 240 dividends 220 200 Capital remains strong with Common 180 Equity Tier 1 ratio of 12.7% £m 160 Lever
Slide 8: Financial Review
SECTION 2 FINANCIAL REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER STEVE HEELEY | INTERIM CHIEF FINANCIAL OFFICER
Slide 9: Continued strong growth
CONTINUED STRONG GROWTH Increased revenues and stable impairments despite slowing economic growth in H2 (£m) FY 2019 FY 2018 Gross interest income 191.4 169.2 Total Lending Assets £m Tier 2 interest expense (3.4) (1.2) Customer interest expense (42.6) (34.3) Net interest income 165.5 151.6 Impairmen
Slide 10: Summary income statement
SUMMARY INCOME STATEMENT Profit growth driven by improved book quality and revenue growth 8.8% increase in net interest income £m FY 2019 FY 2018 % change • Increase is volume driven; NIM reduced due to book mix and reduced risk profile of lending Net Interest income 145.4 133.7 8.8% Net Fee, commis
Slide 11: KPI summary
KPI SUMMARY Increased earnings delivers improved return on average equity of 13.5% Key Performance Indicator FY 2019 FY 2018 Key Performance Indicator FY 2019 FY 2018 EPS (Basic) 168.3 153.2 Cost of risk 1.4% 1.8% EPS (Adjusted) 178.6 161.8 Cost of funding 2.0% 2.0% Adjusted ROAA 1.3% 1.4% Cost of c
Slide 12: Impairment
IMPAIRMENT Cost of risk reduced from 1.8% to 1.4%, driven by improved credit quality Business Finance Consumer Finance Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance* Consumer Mortgages Loan book % change from 25.0% (55.9)% 29.3% 15.4% 17.1% 25.0% December 2018 Imp
Slide 13: Capital analysis
CAPITAL ANALYSIS Progressive Capital Strategy YE 2018 YE 2019 The Group's capital management policy is based on Total Capital Total Capital optimising shareholder value over the long term £297.5m £318.0m Capital is allocated to achieve targeted risk adjusted Subordinated returns whilst ensuring appr
Slide 14: Capital analysis (continued)
CAPITAL ANALYSIS (CONTINUED) Healthy Capital Ratios YE 2018 YE 2019 The capital conservation and countercyclical buffers have increased 42% to £74.2m due to balance sheet growth and the increase to the Capital Conservation Buffer Total Capital The Group’s CET1 capital levels are healthy with Total C
Slide 15: CET1 capital bridge
CET 1 CAPITAL BRIDGE CET1 of £268.0m reflecting an increase on FY 2018 of £16.2m (6%), primarily driven by the increase in Group profits net of dividends paid. The IFRS 9 transitional adjustment to capital arises from the group making an election to phase in the impact of transitioning to IFRS 9 ove
Slide 16: Profit bridge
PROFIT BRIDGE Statutory PBT of £38.7m reflecting an increase on FY 2018 of £4m (11.5%) £4m 40 35 £m 30 25 STB Fair value Other Bonus Transformation STB Adjusted STB Fair value Other Bonus Property Transformation STB Statutory amortisation Payments Costs Adjusted continuing Adjusted amortisation Paym
Slide 17: Income bridge
INCOME BRIDGE Increase on FY 2018 of £23.7m (13%) £23.7m 214 212 210 208 206 204 202 200 198 £m 196 194 192 190 188 186 184 182 180 FY 2018 Real Estate Asset Commercial Retail Motor DMS Consumer Other* FY 2019 £188.6m Finance Finance Finance Finance Finance £1.4m Mortgages £(0.7)m £212.3m £7.7m £(3.
Slide 18: Evolving net revenue margin
EVOLVING NET REVENUE MARGIN Margin shift driven by change in risk profile % Improvement / New business volumes have driven 9% (Worsening) increase in operating income £151.6m £165.5m 9% Reduction in net revenue margin driven by shift to better quality lending within the Consumer Finance books Delive
Slide 19: Net revenue margin reduction driven by shift in risk profile
NET REVENUE MARGIN REDUCTION DRIVEN BY SHIFT IN RISK PROFILE Improved quality of lending is driving lower net margins and lower cost of risk 190 Significant increase in the volume of lending 180 albeit at lower margins resulted in an increase in operating income of £13.9m 170 £m Lower net revenue ma
Slide 20: Investing in business growth and new product lines
INVESTING IN BUSINESS GROWTH AND NEW PRODUCT LINES Reflects continued investment in the Group’s businesses, as well as in Treasury and Risk Management capabilities Cost to income ratio 55.7% Cost to income ratio 55.5% 10.6% growth in operating income 10.2% growth in costs £151.6m £84.5m £167.6m £93.
Slide 21: Balance sheet summary
BALANCE SHEET SUMMARY Loan book has exceeded £2.4bn up £m FY 2019 FY 2018 20.8% over prior year (2018: £2.0bn) Cash and balances at central banks 105.8 169.7 Deposits from customers up 9.3% Debt securities held to maturity 25.0 149.7 to £2.0bn Loans and advances to banks 48.4 44.8 Modest utilisation
Slide 22: Lending bridge
LENDING BRIDGE Increase of £420.3m (20.7%) year on year +£420.3m 2,500 2,400 2,300 £m 2,200 2,100 2,000 1,900 FY 2018 Real Estate Asset Commercial Retail Motor DMS Consumer Other FY 2019 £2,028.9m Finance Finance Finance Finance Finance £50.1m Mortgages £(3.6)m £2,450.1m £192.4m £(35.1)m £57.0m £91.
Slide 23: Customer loan progression
CUSTOMER LOAN PROGRESSION Increase on YE 2018 of £421.2m (20.8%) on a continuing basis 2,500 2,000 1,500 £m 1,000 500 0 2017* 2018** 2019** Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance DMS Consumer Mortgages Other Lending *On an IAS 39 basis. **On an IFRS 9 basis
Slide 24: Customer deposit progression
CUSTOMER DEPOSIT PROGRESSION Increase on YE 2018 of £171.9m (9.3%) 2,500 2000 1,500 £m 64.2% 71.3% 1,000 68.3% 1.9% 500 32.9% 30.7% 27.9% 1.0% 0.8% 1.0% 0 2017 2018 2019 Sight Deposits Notice Deposits Individual Savings Account Term Deposits 24
Slide 25: Strategic priorities delivering for further growth
STRATEGIC PRIORITIES DELIVERING FOR FURTHER GROWTH Organic growth M&A Activity • Motor transformation underway with first • The Group expects to be well placed, when provision of Trade and Forecourt Finance the COVID-19 crisis ends, to take advantage of delivered under the V12 Vehicle Finance brand
Slide 26: Outlook impacted by COVID-19
OUTLOOK IMPACTED BY COVID-19 COVID-19 outbreak will bring significant Full impact on the Group not yet clear: challenges to the UK and global economy: • Stress testing indicates that the Group will • Potentially significant dampening of demand maintain required levels of capital and liquidity which
Slide 27: Summary
SUMMARY 2019 Performance: Outlook: • Positive momentum has continued delivering • Focus throughout the crisis will be on supporting strong profit growth: Statutory PBT up 11.5% our workforce and customers, mitigating risk and and adjusted PBT up 12.0% preserving capital • Healthy capital and liquidi
Slide 28: Section
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Slide 29: Customer feedback and awards: Deposits
CUSTOMER FEEDBACK AND AWARDS Deposits Customer feedback from 4.5 stars Straightforward and professional. Easy to set up, excellent rates and website easy to navigate. Prompt and efficient service, as usual. All my questions and requests were dealt with in a Great service so far. Thanks Secure Trust!
Slide 30: Customer feedback and awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars Excellent service get a reminder txt the week Perfect, helpful attentive service throughout calls. before payment is due. Was quick and easy to sort Prompt text reminders. Upon requesting finance out. paperwork arrives withi
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 A very fast and very smooth service. I would Always brilliant to deal with. Quick and reliable, recommend V12 and I would definitely use them been using V12 for a few
Slide 34: Business to business feedback
BUSINESS TO BUSINESS FEEDBACK Commercial Finance Real Estate Finance In the past, it has been difficult for us to secure an Staycity’s aparthotel is a fantastic addition to our asset-based facility due to the complexities of the mixed-use portfolio and demonstrates our ability whisky market. to deve
Slide 35: Business Finance
BUSINESS FINANCE Business Finance Loan book £m 1,200 1,000 Business Finance FY 2017 FY 2018 FY 2019 800 Revenue £m 48.0 61.2 68.9 £m 600 Impairments £m (0.9) (2.7) (0.9) Loan book £m 824.0 1,027.3 1,241.6 400 200 0 FY FY FY 2017 2018 2019 35
Slide 36: Business Finance: business overview
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 1,200 1,000 Consumer Finance FY 2017 FY 2018 FY 2019 800 Revenue £m 102.8 119.8 136.5 £m 600 Impairments £m (34.6) (30.8) (31.6) Loan book £m 759.0 990.4 1,200.9 400 200 0 FY FY FY 2017 2018 2019 FY 2017 Consumer Financials have been restated to include
Slide 38: Consumer Finance: business 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