Secure Trust Bank maintains discipline as customer numbers soar

18th Jul 2013 10:57

Secure Trust Bank grew underlying profits by just over a third in the first half as customer numbers continued to soar. Looking to provide "simple, straightforward banking solutions" and manage a prudent balance sheet, the West Midlands based bank grew customer numbers 64% to slightly above 325,000, helping operating income more than double year-on-year to £36.3m from £16.9m the same period in 2012.Chief Executive Officer Paul Lynam said: "The increasing number of customers we serve across all parts of the bank and the net increase in our lending provides evidence of the clear opportunity that exists for so called 'challenger banks' like Secure Trust Bank." Lynam stressed that the bank was careful to maintain its firm control risk management discipline and would not compromise these standards just to achieve growth. "The benefits of this approach and the contributions from acquired businesses are reflected in the very healthy growth in our underlying profits," he said.STB, which has been operating since the 1950s and demerged from Arbuthnot in 2011, generated underlying profits of £10.3m, 37% higher than those in the first half of 2012. While reported profit before tax for the period is £6.2m, down from the prior year's £12.4m, it included a one-off fair value gain of £8.9m from an acquisition.The loan book was up 41% year-on-year and 23% on the previous six months at £365.8m.The board expressed cautious optimism about the second half as they proposed an interim dividend of 15p per share.Broker Canaccord Genuity noted that the bank should benefit in the second half from its new direct-to-market personal unsecured lending proposition, a new loan referral programme scheduled to begin shortly and new access to the government's Funding For Lending scheme.Analyst Robin Savage has raised his operating income forecasts, but maintained those for loan book growth and underlying profit. On valuation grounds, Canaccord's recommendation was downgraded from 'buy' to 'hold'."While the new initiatives are encouraging our forecasts do not explicitly include their impact on loan book growth, operating income, PBT or EPS. We would expect most of these initiatives to be earnings-accretive immediately."Shares in Secure Trust Bank, which have more than doubled over the last 12 months, retreated 2.3% by 11:45 on Thursday.OH