13 November 2024
Secure Trust Bank
PLC
Capital
Markets Event - Deep dive on Commercial Finance
Secure Trust Bank PLC ("STB" or the
"Group"), a leading specialist lender, will host an investor event
today to provide an update on its Commercial Finance business and
how the business supports the Group in achieving its financial
targets as set out in the capital markets day on 8 November
2023.
Commercial Finance: A trusted funding
partner
Over the last decade, Commercial
Finance, an Asset Based Lending (ABL) specialist, has
achieved:
· Significant
growth, increasing its loan book by
65% in the three years to the end of 2023;
· A low cost of
risk, an average of 0.49% since
2014;
· Delivered
significant operational
leverage by taking advantage of its scalable cost base;
· Taken advantage of
deep sector expertise and strong
relationships, delivering a 4% market share in its chosen
market;
· Provided nearly
£20 billion of funding to
over 250 businesses.
John Bevan (Managing Director,
Commercial Finance), Sean Powell (National Sales Director), James
Hodkinson (Chief Operating Officer) and Will Airey (Head of Risk)
will provide details of Commercial Finance's impressive track
record and the deep relationships it has built.
Growth track record
Commercial Finance is celebrating
its 10th year and has a strong track record of net
lending balance growth. Lending balances grew from £231
million in 2020 to £381 million at the end of 2023, representing
65% total growth. The management team will describe the drivers of
this success and the opportunities for further growth, including
deepening relationships with private equity groups, offering
funding solutions across multiple event-led situations and how
their market expertise and the bespoke relationship driven approach
is particularly valued by clients.
In a market with over £20 billion of
lending outstanding, the long-term growth opportunity remains
significant. Commercial Finance has written 4% of the ABL deals
transacted in the £5 million to £50 million space since the start
of 2022.
Specialist, relationship-led lending
Commercial Finance has adopted an
integrated approach to origination and portfolio management that
clients appreciate. Origination is through a relationship network
of private equity firms, accountants, insolvency practices, and
legal and corporate finance firms. Cost of origination is
low, and the power of the relationship-led model has seen
significant repeat business from over 65% of our active private
equity network.
Private equity backed companies
represent half of the portfolio. A benefit of supporting private
equity backed companies is their access to additional capital,
which helps deliver a lower cost of risk.
Multiple fee streams building endowment-style income
model
Since 2020, total income has grown
by 102% compared to lending balance growth of 65%. The Commercial
Finance business has different income streams compared to STB's
other businesses. Fee income typically accounts for half of total
income for Commercial Finance, and the business has a strong track
record of building income per client over time, delivering an
endowment style business model.
Improved lending quality and low cost of
risk
Commercial Finance has maintained
its credit underwriting discipline, while delivering strong growth
and has not increased its risk profile as the average facility size
has increased over time. The portfolio's utilisation level was 55%
at the end of 2023. Cost of risk has averaged 0.49% since
2014, despite the volatile macro-economic backdrop and the rapid
increase in the Bank of England base rate more
recently.
Cost efficiency - Operational leverage
Costs have been tightly controlled
while the business has seen robust growth in the loan book. Average
staff numbers (full-time equivalents) increased from 29 in 2019 to
32 in 2023, supporting the operational leverage in the
business.
John Bevan, Managing Director, Commercial Finance,
said:
"STB's Commercial Finance business
has a long-term track record of delivering growth in the Asset
Based Lending market. The business has increased its loan
book by 65% in the 3 years to the end of 2023 and we have an
ambition to drive further loan book growth without compromising our
attractive returns. With our specialist, relationship-led lending
approach and a 4% share of our target market, there is plenty of
opportunity to go after."
David McCreadie, Chief Executive Officer,
said:
"Our Capital Markets event will
provide insight into our Commercial Finance business and highlight
the capability of this team as they continue its growth
trajectory.
"Secure Trust Bank continues to
deliver on its strategic priorities across all our specialist
lending businesses. I remain confident in our ability to deliver
the £4 billion loan book ambition that will unlock our 14-16%
return on average equity target."
Capital Markets Event details
A live webcast of the presentation
including Q&A will be held today at 14:00 pm for investors and
analysts and will be available via our website
at https://www.securetrustbank.com/
or on https://brrmedia.news/STB_CMD.
This will be available for playback after the event. The
Group will not provide an update on Vehicle Finance business at the
event.
Enquiries:
Secure Trust Bank PLC
David McCreadie, Chief Executive
Officer
Rachel Lawrence, Chief Financial
Officer
Phil Clark, Investor
Relations
Tel: 0121 693 9100
Investec Bank plc (Joint Broker)
Chris Baird
David Anderson
Maria Gomez de Olea
Tel: +44 (0)20 7597 5970
Shore Capital Stockbrokers (Joint Broker)
Mark Percy / Sophie Collins
(Corporate Advisory)
Guy Wiehahn (Corporate
Broking)
Tel: +44 (0)20 7408 4090
Camarco
Ed Gascoigne-Pees,
Geoffrey Pelham-Lane, Sean
Palmer
securetrustbank@camarco.co.uk
Tel: +44
(0)7591 760844
About STB:
Secure Trust Bank is an established,
well‐funded and capitalised UK retail bank with over 70‐years of
trading history. Secure Trust Bank operates principally from its
head office in Solihull, West Midlands, and had 897 employees
(full‐time equivalent) as at 30 September 2024. The Group's
diversified lending portfolio currently focuses on two
sectors:
(i)
Business finance through its Real Estate
Finance and Commercial Finance divisions, and
(ii)
Consumer finance through its Vehicle Finance
and Retail Finance divisions.
Secure Trust Bank PLC is authorised
by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation
Authority.
Secure Trust Bank PLC, Yorke House,
Arleston Way, Solihull, B90 4LH.