Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — H1 2019 Earnings Presentation
39 slides from Secure Trust Bank's earnings presentation, Aug 7, 2019
Slide 1: Secure Trust Bank PLC 2019 Interim Results
SECURE TRUST BANK PLC 2019 INTERIM RESULTS 7 AUGUST 2019
Slide 2: Introduction & Business Review
1 INTRODUCTION SECTION & BUSINESS REVIEW PAUL LYNAM | CHIEF EXECUTIVE OFFICER
Slide 3: Positive Momentum Sustained
POSITIVE MOMENTUM SUSTAINED H1 2019 statutory PBT of £18.1m v £15.1m (H1 2018), Continued investment delivering growth strategy an increase of 19.9% Significant income growth in both Business and H1 2019 adjusted PBT of £18.8m vs £16.5m (H1 2018), Consumer finance an increase of 13.9% Customer numbe
Slide 4: Continued Growth in Diverse Loan Book
CONTINUED GROWTH IN DIVERSE LOAN BOOK Business Finance Consumer Finance 50.1% of loan book (H1 2018 53.3%) 49.5% of loan book (H1 2018 46.0%) Real Estate Finance Asset Finance Commercial Finance Retail Finance DMS Motor Finance Consumer Mortgages Prime credit portfolio The Group's debt Owner occupie
Slide 5: Income Diversified Across Lending Type
INCOME DIVERSIFIED ACROSS LENDING TYPE Income growth across the core businesses H1 2019 H1 2018 KEY £1.7m £3.2m £4.4m £23.5m £0.4m £4.0m £3.1m Real Estate Finance £18.3m Asset Finance £24.3m £23.8m Commercial Finance Retail Finance £103.5m £1.9m £103.5m £89.0m £89.0m £3.8m £6.2m Motor Finance £8.4m
Slide 6: Well Positioned to Meet Customer Demand and Grow Earnings
WELL POSITIONED TO MEET CUSTOMER DEMAND AND GROW EARNINGS Group strategy remains unchanged as one of Short duration nature of the Consumer asset responsible lending across a diverse portfolio portfolio also means Group can react quickly to both of attractive segments opportunities and threats Group
Slide 7: Strategy Yielding Strong Returns
STRATEGY YIELDING STRONG RETURNS Shareholder value created since 2011 IPO 300 £284.6m capital generated since IPO 280 including the sale of Everyday Loans 260 43% of total capital generated paid in 240 dividends 220 200 Capital remains strong with Common 180 Equity Tier 1 ratio of 12.8%** £m 160 Lev
Slide 8: Financial Review
2 SECTION FINANCIAL REVIEW NEERAJ KAPUR | CHIEF FINANCIAL OFFICER
Slide 9: Sustainable Positive Progress
SUSTAINABLE POSITIVE PROGRESS Earnings growth driven by increased revenues and well managed impairments and costs £m H1 2019 H1 2018 Gross interest income 92.3 79.2 Total Lending Assets £m Interest expense (21.8) (15.5) Net interest income 70.5 63.7 Impairment losses (17.8) (16.3) 2,500 Statutory PB
Slide 10: Summary Income Statement
SUMMARY INCOME STATEMENT Strong profit and earnings growth, with progressive dividend policy maintained 10.7% increase in net interest income £m H1 2019 H1 2018 % change • Both Consumer Finance and Business Finance continue to grow strongly Net Interest income 70.5 63.7 10.7% Net Fee, commission and
Slide 11: KPI Summary
KPI SUMMARY Increased earnings delivers improved return on average equity of 12.7% Key Performance Indicator H1 2019 H1 2018 Key Performance Indicator H1 2019 H1 2018 EPS (Basic) 79.0 68.7 Cost of risk 1.7% 1.9% EPS (Adjusted) 82.3 74.7 Cost of funding 2.1% 1.8% Annualised underlying ROAA 1.2% 1.4%
Slide 12: Impairment
IMPAIRMENT Cost of risk reduced from 1.9% to 1.7%, driven by improved credit quality Business Finance Consumer Finance Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance* Consumer Mortgages Impairment losses H1 2019 £m 0.2 0.3 0.2 9.1 8.0 0.1 Impairment losses H1 2018
Slide 13: Capital Analysis
CAPITAL ANALYSIS Progressive Capital Strategy YE 2018 H1 2019 The Group's capital management policy is based on Total Capital optimising shareholder value over the long term Total Capital £302.8m £297.5m Capital is allocated to achieve targeted risk adjusted Subordinated Subordinated returns whilst
Slide 14: Capital Analysis (Continued)
CAPITAL ANALYSIS (CONTINUED) Healthy Capital Ratios YE 2018 H1 2019 The capital conservation and countercyclical buffers have increased 33% to £69.6m due to balance sheet growth and the increase to the Capital Conservation Buffer Total Capital The Group’s CET1 capital levels are healthy with Require
Slide 15: CET1 Capital Bridge
CET 1 CAPITAL BRIDGE CET1 of £253.5m reflecting an increase on FY 2018 of £1.7m (1%) and primarily driven by the increase in Group profits net of final dividend paid. The IFRS 9 transitional adjustment to capital arises from the group making an election to phase in the impact of transitioning to IFR
Slide 16: Profit Bridge
PROFIT BRIDGE Statutory PBT of £18.1m reflecting an increase on H1 2018 of £3m (20%) £3m 25 20 £m 15 10 STB Fair value Transformation Other bonus STB Adjusted STB Fair value Transformation STB Statutory amortisation Costs payments Adjusted profit Adjusted amortisation costs Statutory PBT H1 £0.1m £0
Slide 17: Income Bridge
INCOME BRIDGE Increase on H1 2018 of £14.5m (20%) £14.5m 120 110 £m 100 90 80 H1 2018 Real Estate Asset Commercial Retail Motor DMS Consumer Other* H1 2019 £89.0m Finance Finance Finance Finance Finance £1.3m Mortgages £(0.8)m £103.5m £5.2m £(1.9)m £2.2m £6.7m £0.5m £1.3m Income before interest expe
Slide 18: Evolving Net Revenue Margin
EVOLVING NET REVENUE MARGIN Successful shift towards lower risk, lower margin lending % Improvement / New business volumes have driven 12% (Worsening) increase in operating income £72.5m £81.4m 12% Reduction in net revenue margin driven by shift to better quality lending within the Consumer Finance
Slide 19: Investing in Business Growth and New Product Lines
INVESTING IN BUSINESS GROWTH AND NEW PRODUCT LINES Reflects continued investment in the Group’s businesses, most notably Motor Finance, as well as in Treasury and Risk Management capabilities Cost to income ratio 56.7% Cost to income ratio 55.9% 12% growth in operating income 11% growth in costs £72
Slide 20: Balance Sheet Summary
BALANCE SHEET SUMMARY On a continuing basis: £m H1 2019 H1 2018 Loan book has exceeded £2.2bn up 24% over prior year (H1 2018: £1.8bn) Cash and balances at central banks 101.9 126.7 Deposits from customers up 21% Debt securities held to maturity 110.0 150.0 to £2,001.5m Loans and advances to banks 6
Slide 21: Lending Bridge
LENDING BRIDGE Increase of £439.2m (24%) year on year +£439.2m 2,400 2,300 2,200 2,100 2,000 £m 1,900 1,800 1,700 1,600 1,500 H1 2018 Real Estate Asset Commercial Retail Motor DMS Consumer Other H1 2019 £1,839.1m Finance Finance Finance Finance Finance £14.0m Mortgages Lending £2,278.3m £174.2m £(45
Slide 22: Customer Loan Progression
CUSTOMER LOAN PROGRESSION Increase on YE 2018 of £249.4m (12.3%) on a continuing basis 2,500 2,000 1,500 £m 1,000 500 0 H1 2017* YE 2017* H1 2018** YE 2018** H1 2019** Real Estate Finance Asset Finance Commercial Finance Retail Finance Motor Finance DMS Consumer Mortgages Other Lending *On an IAS 39
Slide 23: Customer Deposit Progression
CUSTOMER DEPOSIT PROGRESSION Increase on YE 2018 of £153.8m (8.3%) 2,500 2000 1,500 £m 68.4% 71.3% 71.8% 1,000 68.3% 68% 0.9% 0.8% 0.2% 1.0% 1.0% 500 30.7% 31.8% 30.7% 27.2% 27.9% 0 H1 2017 YE 2017 H1 2018 YE 2018 H1 2019 Notice Deposits Sight Deposits Term Deposits 23
Slide 24: Strategic Priorities Delivering for Further Growth
STRATEGIC PRIORITIES DELIVERING FOR FURTHER GROWTH Organic growth Credit quality • Motor transformation underway with first • New business mix to continue to reduce credit risk wholesale finance product, auction stocking, delivered under the V12 Vehicle Finance brand M&A Activity • Continuing to inv
Slide 25: Navigating Continued Uncertainty
NAVIGATING CONTINUED UNCERTAINTY The Group is well positioned to navigate Regulatory direction of travel appears to continue uncertain conditions: to move towards a more level playing field for • Continuing economic and political uncertainty specialist lenders including: • Variable demand for proper
Slide 26: Summary and Outlook
SUMMARY AND OUTLOOK Positive momentum has continued delivering strong profit growth: • Statutory PBT up 20% and adjusted PBT up 14% Healthy capital and liquidity positions maintained Continued focus on credit quality improvement Continuing investment in the business, including further phases of moto
Slide 27: Appendices
SecureTrust Bank Straightfor ightforward transparent banking > fi | ee 3 APPENDICES a SECTION
Slide 28: Customer Feedback and Awards
CUSTOMER FEEDBACK AND AWARDS V12 Customer feedback from 4.8 stars I have used this service on a few occasions and have found it very handy. It has allowed me to purchase goods on sale prices and save money by paying off the finances early. Would highly recommend. Hassle free seamless purchase of goo
Slide 29: Customer Feedback and Awards: Deposits
CUSTOMER FEEDBACK AND AWARDS Deposits Customer feedback from 4.4 stars Everything ran very smoothly and customer service Thoroughly recommend. staff were very helpful. Excellent, easy to set up. First class. So happy, I have just reinvested with Secure Trust when my current bond matured. Very easy t
Slide 30: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars Quick and easy to deal with. Great company helped me when others wouldn’t and always helpful if I have No problems no hassle, which is what we any problems. all want as time is precious. Really quick response easy to set eve
Slide 31: Customer Feedback and Awards: Motor Finance
CUSTOMER FEEDBACK AND AWARDS Motor Finance Customer feedback from 4.7 stars Moneyway was fantastic from start to the I used Moneyway for a hire purchase agreement end, service 10 out of 10. Patience, polite, and they have been nothing but amazing! helpful. Kept us informed all the way. Can't fault M
Slide 32: Business to Business Feedback
BUSINESS TO BUSINESS FEEDBACK Motor Finance Commercial Finance The V12 VF stock funding facility system and process Secure Trust Bank Commercial Finance made an was so simple and easy to use, from initial set up to excellent partner in this transaction. Working with the purchase of vehicles at the a
Slide 33: Business to Business Feedback: Real Estate Finance
BUSINESS TO BUSINESS FEEDBACK Real Estate Finance We have built a good relationship with the team At Kingsford Group we have been impressed with at STB and were once again impressed by their the proactive approach taken by the team at Secure passion for our product and drive to deliver on Trust. Pro
Slide 34: Business Finance
BUSINESS FINANCE Business Finance Loan book £m 1,200 1,000 Business Finance H1 2018 YE 2018 H1 2019 800 Revenue £m 28.3 61.2 33.8 £m 600 Impairments £m (1.6) (2.7) (0.7) Loan book £m 980.2 1,027.3 1,142.4 400 200 0 H1 YE H1 2018 2018 2019 34
Slide 35: 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 36: Consumer Finance
CONSUMER FINANCE Consumer Finance Loan book £m 1,200 1,000 Consumer Finance H1 2018 YE 2018 H1 2019 800 Revenue £m 56.7 119.8 66.5 £m 600 Impairments £m (15.4) (30.8) (17.2) Loan book £m 845.6 990.4 1,127.0 400 200 0 H1 YE H1 2018 2018 2019 H1 2018 and YE 2018 Consumer Financials have been restated
Slide 37: 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 38: 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 39: 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