Secure Trust Bank (STB): FY21 earnings beat wit...
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Edison Investment Research Limited
London, UK, 8 April 2022
Secure Trust Bank (STB): FY21 earnings beat with momentum Secure Trust Bank (STB) reported FY21 PBT of £56.0m (£57.4m normalised, we forecast £52.7m) and a ROE of 15.9%. The beat was driven by provision reversions: the loan loss ratio was 0.1% versus 0.3%. The numbers otherwise were in line with our expectations. Revenue was flat year-on-year, but pre-provisions profit fell by 18% since costs rose 12% as STB invested for growth. We are forecasting 15-17% annual loan growth for FY22-23 as management sees good risk-adjusted opportunities despite the inflation uncertainty. This is backed by a strong capital base (CET1 14.5%) and good returns (forecast ROE of 10.2% and 12.3% for FY22e and FY23e). We have increased our fair value to 2,491p/share (from 2,234p) mainly due to rolling the model forward one year. We obtain a fair value (FV) of 2,491p per share using a net asset value (NAV) approach. We continue to assume a sustainable return on equity (ROE) of 13.5%, a 10% cost of equity (COE) and 2% annual growth. The FV is the present value of the (ROE-g)/(COE-g) formula at end 2022 discounted to FY21. The 2,491p value implies an FY22e P/BV of 1.4x; STB is currently trading on a 0.74x P/BV ratio.
All reports published by Edison are available to download free of charge from its website About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on the volume and quality of investors reached - across institutions, family offices, wealth managers and retail investors - Edison can create and gauge intent to purchase, even in the darkest pools of capital, and then make introductions via non-deal roadshows, events or virtual meetings. Having been the first in-market 17 years ago, Edison now has more than 100 analysts covering every economic sector. Headquartered in London, Edison also has offices in New York, Frankfurt, Amsterdam and Tel Aviv and a presence in Athens, Johannesburg and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities. For more information, please contact Edison: Pedro Fonseca +44 (0)20 3077 5700 financials@edisongroup.com Andrew Mitchell +44 (0)20 3681 2500 financials@edisongroup.com Learn more at www.edisongroup.com and connect with Edison on: LinkedIn https://www.linkedin.com/company/edison-group-/ Twitter www.twitter.com/Edison_Inv_Res YouTube www.youtube.com/edisonitv
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1323273 08-Apr-2022
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