Capital Markets Day update

Secure Trust Bank PLC ("STB" or the "Group"), a leading specialist lender, hosts its Capital Markets Day ("CMD") today and will provide an update on its V12 Retail Finance business and more detail on the pathway to achieving the Group's medium term financial targets.

V12 Retail Finance: An emerging powerhouse

Over the last decade, the V12 Retail Finance ("V12") has delivered significant growth, a structural improvement in its cost of risk and significant operational leverage on the back of digitalisation and automation of customer service. V12 has consistently demonstrated its scalability.

Nick Davies (CEO, V12 Retail Finance) and Andrew Phillips (Commercial Director, V12 Retail Finance) will provide details on the strong track record of V12, including the technology platform, customer experience and the establishment of deep relationships with retail partners.

Growth track record

V12 has grown lending balances from £658m in 2020 to over £1,178m at the end of Q3 2023, representing 79% total growth. Over the same period, market share has increased from 7.5% in 2020 to 13.2% at H1 2023.

Net interest margin

V12 has a strong track record for passing on changes in cost of funds, with commercial agreements in place to pass through rate changes. 40% of retailers receive immediate pricing changes when market rates change with the remaining 60% of retailers receiving changes quarterly.

V12 has delivered strong growth in the Furniture category in the last couple of years which has longer product lead times. As the market yield curve steepens, a time lag exists before benefitting fully from pricing increases passed through to retailers. The Group expects to benefit from the pricing pass through on this category as the yield curve flattens and then is expected to reduce.

Improved lending quality and lower cost of risk

Management has repositioned the business to serve better quality, lower credit risk retail segments and customers. This action structurally lowered the cost of risk for the business as overall exposure to the provision of interest free credit has increased to 86% today from 62% in 2019. As a result, the cost of risk reduced from 3.0% of the loan book in 2019 to 1.6% at H1 2023.

Cost efficiency - Operational leverage

Costs have been tightly controlled while the business has seen rapid growth in the loan book. Digitalisation has been an important driver with online account management penetration increasing from 11% of customers in 2019 to 74% today. Calls to the customer service team reduced by 63% over the same period and average staff numbers (full-time equivalents) decreased from 230 in 2019 to 224 in H1 2023 while almost doubling the size of the loan book.

Gaining market share

The Group sees the opportunity for V12 to continue growing in existing and new market segments, gaining market share through service, technology and overall proposition. V12's ability to onboard multiple new retailers in an agile and efficient manner, a key benefit of the technology platform, is an important advantage compared to some peers. STB believes the opportunity exists to achieve a 'mid-teens' share of the retail finance market compared to the current 13.2%.

Secure Trust Bank - Medium term targets

Rachel Lawrence, Chief Financial Officer, will provide an update on the Group's medium term targets and the pathway to achieving a 14%-16% return on average equity. Two refinements are made to the existing medium term targets:-

• Loan book growth. Having grown net lending by 45% since the end of 2020 the Group has an ambition to deliver a £4bn loan book. The Group is removing its current target to grow lending at 15%+ CAGR as it considers a £4bn loan book to be a more specific KPI towards achieving the Group's overall medium term targets. The Group had spot lending balances of £3.2bn at the end of Q3 2023.
• Cost income ratio. Scaling to £4bn of lending and continued progress on disciplined cost management will allow the Group to deliver a cost income ratio (CIR) of 44-46%. The Group's previous target had been for the CIR to be less than 50%. In addition, Project Fusion, the Group's previously announced cost optimisation programme, is now expected to deliver £5m of annualised savings by the end of 2024.

Nick Davies, CEO, V12 Retail Finance, said:

"Secure Trust's V12's business can continue to build on its long-term track record of delivering attractive growth and cost leverage. The business has increased its market share by over 50% since 2019 to over 13% today and we have the ambition to get to a mid-teens market share without compromising our returns.

The strategic repositioning of our business towards lower risk retail categories, serving prime credit customers, has dramatically reduced the cost of risk within our loan portfolio."

David McCreadie, Chief Executive Officer, said:

"Secure Trust Bank continues to deliver on its strategic priorities, and I'm pleased to announce that we are refining two of our medium term targets at our Capital Markets Day. The Group has a strong track record of capturing opportunities in challenging economic conditions and the loan book has grown by 45% since the end of 2020. That's £1bn of net lending growth and so we are well on our way to delivering a £4bn loan book and driving down our cost income ratio further.

I remain very confident in the Group's ability to deliver on our 14-16% return on average equity target."

Capital Markets Event details

A live webcast of the presentation and slides will be available at the following link at 11am.

Topic: Secure Trust Bank Capital Markets Day

Time: 8 November, 2023 11am London

Please click the link below to join the webinar:

Webinar ID: 940 9092 2132

Passcode: 201446

Presentation materials from the event will be made available afterwards on the Investor Relations section of our website.