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Secure Trust Bank expects 2018 results to be in line with expectations, but Peel Hunt downgrades on Brexit uncertainty

Secure Trust said its customer numbers in Retail Finance, Motor Finance, Mortgages and SME lending balances increased in the year to 31 December 2018
Lending
The group said its customer lending balances now exceeds £2bn, the first time the bank has exceeded that milestone

Secure Trust Bank PLC (LON:STB) saw its shares rise after the lender said it traded strongly in the fourth quarter and expects its 2018 results to be in line with expectations, although broker Peel Hunt downgraded its rating, citing Brexit uncertainty.

The London main market-listed retail and commercial bank said its customer lending balances now exceeds £2bn, the first time the bank has exceeded that milestone.

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In a trading update for the year ended 31 December 2018, Secure Trust said its customer numbers in Retail Finance, Motor Finance, Mortgages and SME lending balances increased over the period.

However, the bank said: "Given the heightened economic and political uncertainty the group continues to be selective in respect of new lending activities.”

It pointed out that its legacy subprime motor portfolio has been run-down to "immaterial levels", and the shift in portfolio mix led to a "significant" reduction in impairments.

The lender also noted that its proposal to stop all new mortgage lending is not expected to have a material impact on 2018 and 2019 earnings.

Secure Trust Bank said it entered 2019 with "positive business momentum, robust capital positions and very strong liquidity".

It added that it believes the short duration nature of its portfolio means it can react quickly to "both opportunities and threats".

In morning trading, Secure Trust Bank shares were 1.5% higher at 1,200p.

Peel Hunt downgrades to ‘reduce’

Analysts at Peel Hunt, however, lowered their target price for Secure Trust Bank shares to 1,100p, down from 1,550p previously, after cutting its 2019 estimates, leading it to downgrade its rating for the stock to ‘reduce’ from ‘hold’.

In a note to clients, the analysts said: “A short trading update re-iterated STB’s repositioning away from higher-risk lending, with trading in line with expectations. We downgrade FY19 forecasts towards the lower end of consensus given the risks to growth from Brexit uncertainty.”

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