Secure Trust Bank hails record lending growth despite 24 per cent profit drop

Secure Trust Bank has posted record lending growth in 2023, while annual profit fell due to one-off charges.

The specialist lender reported that its net lending book grew 13.6 per cent year-on-year in 2023. Its consumer finance business saw record new business lending of £1.7bn last year, up from £1.5bn in 2022.

“We have four specialist lending businesses, each with relatively low market shares in quite large niche markets, and across all four we saw record levels of new lending last year,” chief executive David McCreadie told City A.M. “It takes us closer to our ambition for a £4bn loan book.”

In 2021, the bank set a target of growing its lending book by 15 per cent per year until around 2025 to prove it could grow organically post-pandemic.  McCreadie noted 52 per cent lending growth over the last three years.

Secure Trust Bank’s pretax profit came in at £33.4m last year, down 24 per cent from £44.0m in 2022. Its shares ticked down 3.3 per cent on Thursday morning.

The firm mainly pinned the decline in profit on £6.5m in “exceptional items”, including a £4.7m provision for costs tied to the FCA’s Borrowers in Financial Difficulty review and corporate activity costs of £1.8m.

Secure Trust Bank took an impairment charge of £43.2m, up from £38.2m in 2022, including one “material loss” of £7.2m relating to a “long-running problem debt case” within its commercial finance business. On an adjusted basis pre impairments, the bank’s pretax profit rose 12 per cent to £85.5m.

The bank said that while its motor finance arm did sometimes use now-banned discretionary commission arrangements, the proportion was small relative to the wider industry.

The Financial Conduct Authority in January announced it would review claims the practice led to customers being charged unfairly, with analysts estimating that the auto lending industry could take an overall hit of up to £16bn from compensation costs.

“Motor finance is one of our smaller businesses from a lending perspective,” McCreadie said. “We stopped using those structures in 2017, three-and-a-half years before the FCA banned them, and when we did use them they were mid-single digit percentages on our loan agreements.”

He added: “We have seen an increase in customer enquiries – 97 per cent of those enquiries are from customers who are not eligible.”

Secure Trust Bank expected to see “further simplification of the group” in 2024 and said it had “identified opportunities for further cost efficiencies”.