Secure Trust Bank reports solid first-half growth

14th Aug 2024 10:46

(Sharecast News) - Secure Trust Bank reported a solid set of first-half financial results on Wednesday, with a 14% increase in profit before tax to £17.1m, up from £15m in the same period last year.

The London-listed bank said its loan book grew 3.2% during the period, reaching £3.4bn, driven primarily by a 7.3% increase in consumer finance, despite a slight decline in business finance lending due to subdued commercial finance and real estate markets.

Its adjusted profit before tax, excluding impairments, rose 12.4% to £45.2m, while the net interest margin remained stable at 5.3%, with an end-period exit rate of 5.4%.

Secure Trust Bank also reported a 220 basis point improvement in its adjusted cost income ratio, which fell to 53.7%, reflecting the ongoing success of its 'Project Fusion' cost optimisation programme.

The programme also led the bank to increase its annualised cost savings target from £5m to £8m by the end of 2025.

Despite facing challenges in its vehicle finance division due to a temporary pause in collections following a review by the Financial Conduct Authority, the bank said it had resumed the activities and expected further progress in managing default cases in the second half.

Meanwhile, retail finance saw a significant improvement in its cost of risk, which dropped to 0.7%, underscoring the quality of new business and enhanced IFRS 9 models.

Customer deposits reached a record £3bn, enabling the bank to repay £75m of TFSME funding ahead of schedule.

Secure Trust Bank announced an interim dividend of 11.3p per share, in line with its revised progressive dividend policy.

Looking ahead, Secure Trust Bank was optimistic about its growth prospects despite an uncertain macroeconomic environment.

The bank said it expected continued loan book expansion towards its £4bn target, and anticipated further improvements in its cost income ratio as Project Fusion delivered additional efficiencies.

It said the recent cut in the Bank of England Base Rate and a more favourable inflation outlook were expected to support demand across its business areas, positioning the bank for continued profitability in the second half of 2024.

"Secure Trust Bank continues to make progress towards its medium-term targets and strategic priorities. In the first half, we have delivered solid loan book growth and managed cost increases through our cost optimisation programme, Project Fusion," said chief executive officer David McCreadie.

"Today we are upgrading our cost savings target for Project Fusion from £5m to £8m."

McCreadie noted that the business had delivered a double-digit increase in its adjusted profit before tax pre- impairments.

"We have continued to grow our loan book towards the £4bn target, the level at which we expect to deliver an adjusted return on average equity of 14% to 16%.

"As such, we remain confident in achieving our medium-term targets."

At 1027 BST, shares in Secure Trust Bank were down 2.81% at 830p.

Reporting by Josh White for Sharecast.com.