Secure Trust Bank Plc · LSE:STB
Secure Trust Bank — Investor Presentation (October 2013)
49 slides from Secure Trust Bank's investor presentation, Oct 14, 2013
Slide 1: Investor Presentation 14 October 2013
Investor Presentation 14 October 2013
Slide 2: Paul Lynam – Chief Executive Officer
PAUL LYNAM – Chief Executive Officer
Slide 3: Agenda
Simple, straightforward banking Agenda • Competitive landscape Paul Lynam, CEO STB Group • Strategic focuses – Growth Jon Bowers, Group Head of Lending Danny Malone, CEO Everyday Loans and Head of STB Personal Lending Nick Davies, CEO V12 and Head of STB Retail Finance – Sustainability and Safety Da
Slide 4: Strategy – Continues to Deliver
Simple, straightforward banking Strategy – Continues to Deliver 1. Protect the reputation and sustainability of the bank via prudent balance sheet management, investment for growth and robust risk and operational control. 2. Maximise shareholder value by: a. Strong organic lending growth. b. Promoti
Slide 5: Bringing the corporate strategy to life
Simple, straightforward banking Bringing the corporate strategy to life……. Grow a sustainable business by doing more of our current activity, introducing new product lines & making new acquisitions Safeguarding the integrity & sustainability of the Bank Making this a great Bank to work for PAGE 5
Slide 6: Competitive landscape
Simple, straightforward banking Competitive landscape PAGE 6
Slide 7: February 2013 George Osborne quote on big banks
Simple, straightforward banking February 2013 • ….‘the financial crisis has strengthened the grip of “a few big banks” whose market power “verges on an oligopoly…… “I want upstart challengers offering new and better services that shake up the established players” George Osborne PAGE 7
Slide 8: All of these were standalone competitors 1/1/2000
Simple, straightforward banking All of these were standalone competitors 1/1/2000 Abbey National Alliance and Leicester Bank of Scotland Birmingham Midshires Barnsley BS Bradford and Bingley Bristol and West Britannia BS Chelsea BS Cheltenham and Gloucester Chesham BS Cheshire BS Clydesdale Bank Der
Slide 9: Supportive Political and Regulatory indications
Simple, straightforward banking Supportive Political and Regulatory indications • Public acknowledgement that existing rules favour large banks. • Potential for PRA / BoE to be given competition objective by Parliament in addition to ones around safety and soundness of financial system. • More effec
Slide 10: Conduct headwinds faced by some competitors
Simple, straightforward banking Conduct headwinds faced by some competitors • Previous mis-selling issues continue to absorb resources; – Single Premium PPI – Identity / Card theft insurance (CPP) – Interest rate management derivatives – LIBOR fixing • Potential new reviews? – Packaged Current Accou
Slide 11: Other headwinds faced by some competitors
Simple, straightforward banking Other headwinds faced by some competitors • Banking Reforms and Ring Fencing • Sub optimal legacy IT systems require expensive updating • Is Faster Current Account Switching a precursor to full account number portability akin to mobile phone market? • Is there a profi
Slide 12: Potential implications of headwinds
Simple, straightforward banking Potential implications of headwinds • To rebuild reputation and mitigate the threat to profit / returns some larger competitors might; – Invest heavily in IT / Compliance / Audit and Cultural programmes – Cut costs significantly – Sell businesses / portfolios of asset
Slide 13: Focus of other 'challenger' banks
Simple, straightforward banking Focus of other ‘challenger’ banks Bank Market focus • Tesco Insurance, cards, prime lending, mortgages, Fx • Sainsbury Insurance, cards, prime lending, Fx • Virgin Insurance, cards, prime lending, mortgages, Fx • Aldermore SME & property lending, asset / invoice finan
Slide 14: Market dynamics - scale
Simple, straightforward banking Market dynamics - scale £m’s Activity Market STB % Lending secured on dwellings 1,267,811 0 0.00% Consumer Credit 158,270 366 0.23% Loans provided to SMEs 155,464 <2 0.00% Overdrafts provided to SMEs 21,126 0 0.00% Factoring corporation lending 7,904 0 0.00% Data from
Slide 15: Market dynamics – write off trends
Simple, straightforward banking Market dynamics – write off trends year Corporates Consumers Consumers Consumers Loans to Non Loans secured Credit Card Other financial on dwellings borrowing consumer businesses credit 2008 1,973 408 3,200 3,244 2009 5,619 984 4,117 4,527 2010 6,447 658 6,181 3,753 2
Slide 16: Growing Loan Book
Simple, straightforward banking Growing Loan Book CAGR of 78% 400 350 300 250 £m 200 150 100 50 0 2008 2009 2010 2011 2012 H1 2013 Unsecured Lending Motor Finance Retail Finance Acquired and Other ELL V12 PAGE 16
Slide 17: Diversifying revenue streams
Simple, straightforward banking Diversifying revenue streams Motor finance (22% of revenue1) (2010 16%) Retail POS finance (15% of revenue1) (2010 9%) Unsecured lending (44% of revenue1) (2010 18%) Fee-based accounts (19% of revenue1) (2010 57%) Data from H1 2013 interim report . 2010 data excludes
Slide 18: Diversifying revenue streams
Simple, straightforward banking Diversifying revenue streams Total income through lending and transactional channels is split as follows: H1 2013 H1 2012 £2.1m Personal lending £4.0m £0.3m £5.3m Motor finance Retail finance £0.4m £2.3m £4.0m £4.2m Everyday Loans £2.2m £10.0m V12 £45.2m £2.2m £22.1m
Slide 19: Recent Acquisitions
Simple, straightforward banking Recent Acquisitions • New business volumes have increased and credit quality has remained stable. • Investment in new offices in Belfast and Ipswich Q1 2013 and Edinburgh Q3 2013. More offices planned. • Rationalising datacentre into STB facility to generate efficienc
Slide 20: Summary
Simple, straightforward banking Summary • Operating environment has been and is likely to remain conducive to growth of well funded and strongly capitalised banks not burdened by historic issues. • Market is huge and supports significant numbers of competitors. • Our 3 year growth focus is on; 1. Ma
Slide 21: Our strategy
Simple, straightforward banking Our strategy Grow a sustainable business by doing more of our current activity, introducing new product lines & making new acquisitions PAGE 21
Slide 22: STB Commercial Finance
Simple, straightforward banking STB Commercial Finance PAGE 22
Slide 23: Commercial Lending – SME landscape
Simple, straightforward banking Commercial Lending – SME landscape • Approximately 45% of all those employed in the UK are employed by businesses with revenue of less than £25m. (Source ONS and BIS) • It is a business segment that has suffered most and continues to suffer from a lack of liquidity fr
Slide 24: Invoice Finance Landscape
Simple, straightforward banking Invoice Finance Landscape • ABFA (Asset Based Finance Association) has circa 40 members (95% penetration) • > 40,000 companies use a form of Invoice Finance, with exposure £15bn • Market is split: – High street banks have 65% market share / Independents have 35% marke
Slide 25: Invoice Finance competitive positioning
Simple, straightforward banking Invoice Finance competitive positioning • Key to success is to leverage strength of bank with agility of an independent – Major high street banks have cumbersome operating models which provide poor service – Some independents provide good service but others have poor
Slide 26: Invoice Finance Management Team
Simple, straightforward banking Invoice Finance Management Team • Managing Director – Proven individual with appropriate industry expertise and professional standing – Known to senior management of Secure Trust – Start date TBA • COO – Proven individual with appropriate industry expertise – Known to
Slide 27: Secure Trust Bank - Property Finance
Simple, straightforward banking Secure Trust Bank - Property Finance • Capital values (i.e. collateral/asset values) are becoming more stable although focus will be on better counterparties and prime assets in prime locations. • Market is underserved as larger banks deal with legacy real estate port
Slide 28: Motor Finance: Lending via dealerships and brokers
Simple, straightforward banking Motor Finance : Lending via dealerships and brokers • Customers typically considered to be from socio-economic groups C1, C2 and D Loan book progression 120 • Distribution through geographically spread 100 dealerships and centralised key accounts (i.e. CAGR = 143% 80
Slide 29: Unsecured lending: direct, affinity partners and Everyday Loans
Simple, straightforward banking Unsecured lending: Lending direct and through affinity partners and Everyday Loans Limited • Unsecured lending to customers typically Loan book progression considered to be from socio-economic groups 160 A-D 140 • Sources of business are internet, affinities, 120 CAGR
Slide 30: Personal Lending Growth opportunities
Simple, straightforward banking Personal Lending Growth opportunities • Direct to Bank increased spend & customer acquisition • Increased branch footprint for Everyday Loans • Improved customer referral down product chain • Portfolio acquisition • Efficiencies through integrated systems and MI • Pro
Slide 31: Retail finance: Lending solution for store based and online retailers
Simple, straightforward banking Retail finance: Lending solution for store based and online retailers • Targeting Prime Credit Profile Customers typically from socio-economic groups A,B&C1 Loan book progression • Loan products mainly promotional credit 120 subsidised by retailers or suppliers 100 •
Slide 32: Retail finance: Lending solution for store based and online retailers
Simple, straightforward banking Retail finance: Lending solution for store based and online retailers • Focus on controlled organic growth to sustain current margins (‘more of the same’) Market Overview 2013 - est • Expansion driven by service based proposition : Annual Lending Volumes – Multi Chann
Slide 33: Our strategy: Safeguarding the integrity & sustainability of the Bank
Simple, straightforward banking Our strategy Safeguarding the integrity & sustainability of the Bank PAGE 33
Slide 34: Funding and Capital strategies unchanged
Simple, straightforward banking Funding and Capital strategies unchanged • Funding – Minimum 100% Deposit to Loan ratio with additional surplus funding accessible via FLS – Maturity profiles broadly matched minimising maturity transformation risks – Interest basis risk managed via use of fixed rate
Slide 35: Risk and Operational disciplines
Simple, straightforward banking Risk and Operational disciplines • Governance – Established Board and committee structures – Moving to blend of internal and external operational audit – Significant investment in team and specialisms • Risk – Scorecard driven with defined policy validation were manua
Slide 36: Treating customers fairly – Philosophy
Simple, straightforward banking Treating customers fairly • Philosophy – Customer focus is at the heart of what we do and how our employees behave, not just one of our core values – Our products are consistently simple and straight forward in their design. We see this as a competitive advantage. – W
Slide 37: Treating customers fairly – In action
Simple, straightforward banking Treating customers fairly • In action – Savings – We don’t entice customers with attractive introductory offers with the hope that the deposits will remain after that offer expires – When we reduced the rate of our notice accounts we extended the notice period we gave
Slide 38: Simple, straightforward banking
Simple, straightforward banking PAGE 38
Slide 39: Simple, straightforward banking
Simple, straightforward banking PAGE 39
Slide 40: Simple, straightforward banking
Simple, straightforward banking PAGE 40
Slide 41: Simple, straightforward banking
Simple, straightforward banking PAGE 41
Slide 42: Simple, straightforward banking
Simple, straightforward banking PAGE 42
Slide 43: Our strategy: Making this a great Bank to work for
Simple, straightforward banking Our strategy Making this a great Bank to work for PAGE 43
Slide 44: Our strategy – Encouraging Personal Growth
Simple, straightforward banking Our strategy – Encouraging Personal Growth • Structured induction and development framework • Earn and Learn initiative • Ifs university college and relevant professional qualifications • Apprenticeships – internal and external • Leadership Development Programme Makin
Slide 45: Our strategy – Treating Employees Fairly
Simple, straightforward banking Our strategy – Treating Employees Fairly • Clear performance objectives aligned to our strategy • Open, transparent and equitable remuneration framework • Encouraging employees to have a voice • Rewarding and recognising contribution • Anniversary and key event awards
Slide 46: Measures of success
Simple, straightforward banking Measures of success ‘People state that they are treated equally and fairly throughout the organisation, and appreciate the development that they receive both in terms of their training and also in the assistance that they receive when they need support from the organi
Slide 47: What next? – Our Aspiration
Simple, straightforward banking What next? – Our Aspiration PAGE 47
Slide 48: Wrap up
Wrap up PAUL LYNAM – Chief Executive Officer
Slide 49: Secure Trust Bank - Invoice Finance
Simple, straightforward banking Secure Trust Bank - Invoice Finance FACTORING CONFIDENTIAL INVOICE DISCOUNTING • Assignment is fully disclosed to debtors • Confidential arrangement • Financier provides outsourced credit control, • Client handles own credit control, cash cash allocation and debtor li
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