Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — H1 2017 Earnings Presentation
32 slides from Secure Trust Bank's earnings presentation, Aug 22, 2017
Slide 1: Secure Trust Bank Plc 2017 Interim Results
SECURE TRUST BANK PLC 2017 INTERIM RESULTS 22 AUGUST 2017
Slide 2: Introduction & Business Review
INTRODUCTION & BUSINESS REVIEW SECTION PAUL LYNAM | CHIEF EXECUTIVE OFFICER
Slide 3: H1 2017 Highlights
H1 2017 HIGHLIGHTS Strong half year performance with a prudent approach to risk Strong returns and shareholder value Well positioned to accelerate future growth Total PBT £13.9m, underlying PBT £14.5m Reduced risk appetite and repositioning the business model from higher risk unsecured consumer Unde
Slide 4: 2017 Developments
2017 DEVELOPMENTS Strategic initiatives impacting 2017 results Launch of Residential Mortgage lending Deposits platform – H2 2017 – Q1 2017 Provides a wider range of retail funding options Part of long term diversification strategy to including ISAs and easy access accounts balance the portfolio acr
Slide 5: Strategic Goals
STRATEGIC GOALS 1 ORGANIC GROWTH 2 DIVERSIFICATION 3 M&A ACTIVITY 5
Slide 6: Strategy: Shareholder value created since 2011 IPO
STRATEGY Very significant shareholder value created since 2011 IPO 300 £227.7m capital generated since IPO 280 Consistently strong dividend payment pattern 260 240 Capital remains strong with Common 220 Equity Tier 1 ratio of 15.3% 200 Leverage ratio of 12.7% well above the PRA 180 minimum £m 160 14
Slide 7: Continued Growth in Diverse Loan Book
CONTINUED GROWTH IN DIVERSE LOAN BOOK Residential Business Finance* Consumer Finance Mortgage Lending 53% of loan book (H1 2016 47%) 47% of loan book (H1 2016 48%) Initiated H1 2017 Real Estate Finance Asset Finance Commercial Finance Retail Lending Motor Finance Personal Lending** Consumer Mortgage
Slide 8: Sustainable Lending Growth
SUSTAINABLE LENDING GROWTH H1 2017 H1 2016* Total Lending Assets £1,510m £m £m Gross interest income 71.2 62.7 1,600 Interest expense (12.7) (13.2) GROWTH 34 Net interest income 58.5 49.5 1,400 ON H1 2016 Impairment losses (18.5) (13.3) 1,200 % Reported PBT 13.9 12.5 1,000 Underlying PBT 14.5 16.2 £
Slide 9: Financial Review
SECTION 2 FINANCIAL REVIEW NEERAJ KAPUR | CHIEF FINANCIAL OFFICER
Slide 10: Summary Income Statement
SUMMARY INCOME STATEMENT Balancing growth and risk by repositioning the business 15% increase in operating income £m H1 2017 H1 2016* % change • Maintaining strong growth in both Consumer Net interest income 58.5 49.5 18.2% finance and Business finance sectors whilst moving Net fee, commission and o
Slide 11: KPI Summary
KPI SUMMARY Increasing asset quality at reduced margins Key Performance Indicator H1 2017 H1 2016 Key Performance Indicator H1 2017 H1 2016 Gross revenue margin 11.5% 13.5% Cost of funding 1.9% 2.5% Net interest margin 8.5% 9.5% Total cost to income ratio 51.2% 55.0% Net revenue margin 9.6% 11.0% Lo
Slide 12: Underlying Profit Bridge
UNDERLYING PROFIT BRIDGE Reduction in underlying profit reflecting repositioning of the business 20 15 £m £m 10 5 0 STB Fair value Share-based Group Transformation Costs in STB Change in STB Underlying Fair value Transformation Profit on STB Statutory amortisation incentive scheme management costs r
Slide 13: Income Bridge
INCOME BRIDGE* Increase on H1 2016** of 11% £7.6m 82 80 78 76 74 £m £m 72 70 68 0 H1 2016** Real Estate Commercial Asset Personal Motor Retail Other H1 2017 £71.4m Finance Finance Finance Lending Finance Finance £(2.4)m £79.0m £0.8m £1.3m £0.8m £(3.3)m £3.6m £6.8m *Income before interest expense, co
Slide 14: Income Analysis
INCOME ANALYSIS Changing mix with focus on growth of lower risk lending activities H1 2017 H1 2016 KEY £6.4m £14.8m £8.8m £14.0m Real Estate Finance £23.4m Asset Finance Commercial Finance £4.3m £79.0m £79.0m £16.6m £71.4m £71.4m £3.5m Personal Lending £3.0m £1.7m Motor Finance £4.7m £8.0m Retail Fi
Slide 15: Net Revenue Margin Summary
NET REVENUE MARGIN SUMMARY Change of mix towards lower risk, lower margin lending Reduction in net revenue margins is a reflection of the move to lower risk, lower margin lending and cessation of personal lending originations in Q1 2017 The reduction in cost of funding reflects the current market fo
Slide 16: Costs and Income Analysis
COSTS AND INCOME ANALYSIS Cost to income ratio 55.0% Cost to income ratio 51.2% 14.8% growth in operating income 7.0% growth in costs £57.3m £31.5m £65.8m £33.7m H1 2016* H1 2017 Net operating income Operating expenses *H1 2016 is reported on a continuing basis. 16
Slide 17: Balance Sheet Summary
BALANCE SHEET SUMMARY Customer loans £m H1 2017 H1 2016 up 34% to £1.5bn Cash and balances at central banks 114.0 141.8 Customer deposits Loans and advances to banks 25.5 19.1 up 27% to £1.3bn Debt securities held to maturity – 19.8 Customer numbers Loans and advances to customers 1,509.6 1,128.3 up
Slide 18: Lending Bridge
LENDING BRIDGE Increase on H1 2016 of 34% +£381m 1,600 Focus on growth in lower risk lending activities with increase 1,500 on H1 2016 of 50%* 1,400 £m 1,300 £m 1,200 1,100 0 *Excluding sub-prime unsecured personal H1 2016 Real Estate Asset Commercial Personal Motor Retail Other H1 2017 lending and
Slide 19: Customer Loan Progression
CUSTOMER LOAN PROGRESSION Growth of 34% on H1 2016: Business Finance 41%, Consumer Finance 29% 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 £m 800 700 600 £m 500 400 300 200 100 0 FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 Personal Lending ELG Motor Finance Retail Finance Real Estate Finance A
Slide 20: Customer Deposit Progression
CUSTOMER DEPOSIT PROGRESSION Increase on H1 2016 of £283m, weighted towards term deposits 1,400 1,300 1,200 1,100 1,000 900 67.2% 800 66.2% £m 57.0% 700 61.7% £m 600 56.6% 500 54.4% 400 300 39.2% 32.5% 31.6% 200 38.7% 35.0% 39.4% 100 6.2% 4.7% 3.8% 3.3% 1.3% 1.2% 0 FY 2014 H1 2015 FY 2015 H1 2016 FY
Slide 21: Strategy: Strategic priorities to deliver further growth
STRATEGY Strategic priorities to deliver Managing competitive, economic further growth and regulatory challenges Balancing growth and risk Strong capital and liquidity base, will protect • Growing the lower risk, lower margin lending the Group against an unpredictable economic with the benefits of t
Slide 22: Summary and Outlook
SUMMARY AND OUTLOOK Strategic repositioning to generate future momentum 34% loan book increase with Real Estate Finance net lending balances up by 50% since 30 June 2016 Targeting sustained loan growth rate in 2018, albeit Group asset yields will continue to experience risk related effects Second ha
Slide 23: Appendices
# Secure Trust Bank Straightforward transparent bankin: 3 APPENDICES SECTION
Slide 24: Customer Feedback and Awards: V12 Deposits
CUSTOMER FEEDBACK AND AWARDS V12 Deposits Customer feedback from Customer feedback from 4.8 stars 4.5 stars The website was easy and straightforward to Secure Trust is an efficient and highly professional use and I got a prompt decision on my loan. Bank. My application was as simple as could have I
Slide 25: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Thank you. All the worry was taken away from me very happy customer. I had a few questions and Customer feedback from your member of staff on the end of the phone was amazing, explained all my worries I can now Quick, honest and conscientious. Brilliant com
Slide 26: Business to Business Feedback
BUSINESS TO BUSINESS FEEDBACK ‘‘ ‘‘ ‘‘ Motor Finance Commercial Finance Real Estate Finance At DSG we are always striving The business is continuing to grow at ‘‘ Excellent all round service and fast to ensure we have a competitive a rapid pace and we needed a facility decisions. and flexible produc
Slide 27: Business Finance
BUSINESS FINANCE 800 700 Business Finance FY 2014 H1 2015 FY 2015 H1 2016 FY 2016 H1 2017 600 Revenue £m 2.6 9.2 24.3 19.2 40.8 22.1 500 £m 400 Impairments £m - (0.3) (0.3) (0.2) (0.9) (0.6) 300 Loan book £m 143.3 312.4 468.0 528.5 631.0 747.1 200 100 0 FY H1 FY H1 FY H1 2014 2015 2015 2016 2016 201
Slide 28: 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 29: Consumer Finance
CONSUMER FINANCE 800 700 600 500 Consumer Finance FY 2014 H1 2015 FY 2015 H1 2016* FY 2016* H1 2017 £m 400 Revenue £m 90.2 54.4 115.4 54.6 99.6 50.5 300 Impairments £m (15.0) (10.8) (24.8) (15.7) (31.1) (17.9) 200 Net loan book 342.2 399.2 460.4 541.9 627.6 701.2 (exc. ELG) £m 100 ELG loan book £m 9
Slide 30: Consumer Finance: Business overviews
CONSUMER FINANCE Business overview – Business overview – Business overview – Personal Lending Retail Motor Closed to new business following Targeting Prime Credit Portfolio Prime lending product offering announcement in January 2017 Customers greater participation across the risk curve Advances were
Slide 31: 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 32: 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