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Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

Secure Trust Bank (STB) disclosed on 11 March that it is exiting the debt purchase market by agreeing to sell its Debt Managers Service (DMS) portfolio to Intrum UK Finance, a debt purchase specialist. The deal is expected to complete towards the end of Q222. DMS accounts for 4% of STB’s loans balance and STB disclosed that DMS made a small £0.5m loss in 2021. The deal looks to be earnings enhancing. STB estimates that £72m of risk weighted assets will be released (about 50bp of capital), which is useful – our forecast FY22 pre-deal CET 1 was 12.3%. The sale seems consistent with the new management team’s aim to focus on ‘specialist lending segments that have the strongest prospects for delivering sustainable and profitable medium to long-term growth’. STB will report its FY21 results on 24 March and update its medium-term targets to reflect the sale (STB expects a better cost income ratio, but with a reduced net interest margin due to the loan mix change), having already released an upbeat pre-close statement on 14 January.

Secure Trust Bank (STB) disclosed on 11 March that it is exiting the debt purchase market by agreeing to sell its Debt Managers Service (DMS) portfolio to Intrum UK Finance, a debt purchase specialist. The deal is expected to complete towards the end of Q222. DMS accounts for 4% of STB’s loans balance and STB disclosed that DMS made a small £0.5m loss in 2021. The deal looks to be earnings enhancing. STB estimates that £72m of risk weighted assets will be released (about 50bp of capital), which is useful – our forecast FY22 pre-deal CET 1 was 12.3%. The sale seems consistent with the new management team’s aim to focus on ‘specialist lending segments that have the strongest prospects for delivering sustainable and profitable medium to long-term growth’. STB will report its FY21 results on 24 March and update its medium-term targets to reflect the sale (STB expects a better cost income ratio, but with a reduced net interest margin due to the loan mix change), having already released an upbeat pre-close statement on 14 January. 

Secure Trust Bank - Selling debt purchase loan book

STB disclosed in its pre-close trading update that loan growth is strong and ahead of our forecasts. STB said that it saw a record level of new business lending in Q421 at £471.1m (+52% year-on-year). The core loan balances were up ‘by double digits’ year-on-year versus FY20, compared to our forecasts of 6% (core loans) and 2% (total loans). There were no new statements regarding margins or asset quality, although the news regarding the latter was quite upbeat in the Q3 update. We take note of the positives in this statement and will wait for the release of the full set of results on 24 March to update our model and estimates.

STB disclosed in its pre-close trading update that loan growth is strong and ahead of our forecasts. STB said that it saw a record level of new business lending in Q421 at £471.1m (+52% year-on-year). The core loan balances were up ‘by double digits’ year-on-year versus FY20, compared to our forecasts of 6% (core loans) and 2% (total loans). There were no new statements regarding margins or asset quality, although the news regarding the latter was quite upbeat in the Q3 update. We take note of the positives in this statement and will wait for the release of the full set of results on 24 March to update our model and estimates. 

Secure Trust Bank - Pre-close shows loan growth ahead of forecasts

Secure Trust Bank (STB) announced that it has acquired AppToPay for an undisclosed ‘small amount’ and plans to use AppToPay’s proprietary technology platform to develop and grow its digital Buy Now Pay Later (BNPL) business. STB has also disclosed that its FY21 loan impairments will be ‘materially below’ analyst consensus of £12.9m (Edison: £12.7m). This is welcome news, although most investor attention regarding impairments has moved to focus on FY22. We are adjusting our FY21e EPS by 7% to 226.5p due to our now reduced £7.9m impairment estimate. All our other assumptions are unchanged, as detailed in our August 2021 update note, Good news as flagged. Our fair value remains 2,234p.

Secure Trust Bank (STB) announced that it has acquired AppToPay for an undisclosed ‘small amount’ and plans to use AppToPay’s proprietary technology platform to develop and grow its digital Buy Now Pay Later (BNPL) business. STB has also disclosed that its FY21 loan impairments will be ‘materially below’ analyst consensus of £12.9m (Edison: £12.7m). This is welcome news, although most investor attention regarding impairments has moved to focus on FY22. We are adjusting our FY21e EPS by 7% to 226.5p due to our now reduced £7.9m impairment estimate. All our other assumptions are unchanged, as detailed in our August 2021 update note, Good news as flagged. Our fair value remains 2,234p.

Secure Trust Bank - New tech and lower impairments

After Secure Trust Bank’s (STB) upbeat trading update in October, we feel there was a bullish tone to its capital markets day presentations on 3 November. This was underlined by the announcement of a new medium-term target for loan book CAGR of 15%+. Areas highlighted for greater focus and opportunity included: 1) growth of digital ‘buy now pay later’ (BNPL) and interest-free products in retail finance, 2) the growing presence of corporate landlords in the UK residential market and 3) new upcoming products in vehicle finance including in personal contract purchase (PCP). STB is seeing good loan demand in its key segments and appears well positioned to take advantage of this to grow its balance sheet and profitability.

After Secure Trust Bank’s (STB) upbeat trading update in October, we feel there was a bullish tone to its capital markets day presentations on 3 November. This was underlined by the announcement of a new medium-term target for loan book CAGR of 15%+. Areas highlighted for greater focus and opportunity included: 1) growth of digital ‘buy now pay later’ (BNPL) and interest-free products in retail finance, 2) the growing presence of corporate landlords in the UK residential market and 3) new upcoming products in vehicle finance including in personal contract purchase (PCP). STB is seeing good loan demand in its key segments and appears well positioned to take advantage of this to grow its balance sheet and profitability.

Secure Trust Bank - Capital markets day optimism

In its Q3 trading update, Secure Trust Bank (STB) disclosed that it is experiencing robust loan growth. New business lending is now above pre-pandemic levels. STB’s core lending book in Q321 rose 3.3% quarter-on-quarter and 7% year-on-year. Motor finance new business grew 15% in just three months. New business lending in the quarter was up 20% and 59% on the previous quarter and 12 months ago. Net loan balances were £2,404m in Q321, which is in line with our end-FY21 forecast of £2,400m. We therefore believe that if STB maintains this growth pace, its loan book is likely to come in 3–5% above our year-end forecasts. Although there was no formal statement on either asset quality or interest margins, management stated that the bank is trading in line with its guidance from the July update. STB will have a capital markets day for analysts and institutional investors on 3 November 2021.

In its Q3 trading update, Secure Trust Bank (STB) disclosed that it is experiencing robust loan growth. New business lending is now above pre-pandemic levels. STB’s core lending book in Q321 rose 3.3% quarter-on-quarter and 7% year-on-year. Motor finance new business grew 15% in just three months. New business lending in the quarter was up 20% and 59% on the previous quarter and 12 months ago. Net loan balances were £2,404m in Q321, which is in line with our end-FY21 forecast of £2,400m. We therefore believe that if STB maintains this growth pace, its loan book is likely to come in 3–5% above our year-end forecasts. Although there was no formal statement on either asset quality or interest margins, management stated that the bank is trading in line with its guidance from the July update. STB will have a capital markets day for analysts and institutional investors on 3 November 2021.

Secure Trust Bank - Momentum building in Q3

United Kingdom

Arbuthnot Banking Group PLC, together with its subsidiaries, provides various banking and financial products and services in the United Kingdom. It operates through three segments: Retail Banking, UK Private banking, and Group Centre. The company provides private banking services, such as current accounts, deposit accounts, loans, overdrafts, and foreign exchange services; wealth planning services comprising estate and tax planning, pensions, and wealth preservation and generation; and discretionary investment management services, including asset management and developing tailored investment strategies. It also offers retail banking products and services, such as savings and current accounts; consumer finance products in motor finance, retail finance, and unsecured personal lending areas; and SME?s funding for asset finance, invoice finance, and real estate finance. In addition, the company offers commercial banking services comprising financing and cash transaction requirements of SMEs, as well as household cash management and insurance services. Further, the company offers leasing, debt collection, and property rental and management services. Arbuthnot Banking Group PLC was founded in 1833 and is headquartered in London, the United Kingdom.

Metro Bank PLC provides a full range of commercial banking services for retail and institutional customers. The Bank offers services such as current accounts, mortgages, safe deposit boxes, cash management, private banking, and debit and credit cards. Metro Bank conducts its business in the United Kingdom.

Bank of Georgia Group PLC operates as a bank. The Bank services includes retail banking and payment services, corporate and investment banking, and wealth management operations solutions. Bank of Georgia Group serves customers in the United Kingdom, Belarus, and Georgia.

Mortgage Advice Bureau (Holdings) PLC, through its subsidiaries, operates as mortgage broker. The company offers face to face and telephone advice for customers. It also provides lifestyle and income protection cover. The company was incorporated in 2000 and is based in the Derby, United Kingdom.

Mortgage Advice Bureau (Holdings) (MAB1 LN)

Provident Financial plc is a financial services group specialising in the provision of personal credit products for consumers in the United Kingdom non standard lending market. The Company's Consumer Credit division provides small, unsecured loans, which they collect in weekly installments. The Company's Credit Cards business is operated through Vanquis Bank.

India Capital Growth Fund Limited is a close-ended equity mutual fund launched and managed by Ocean Dial Asset Management Limited. The fund invests in the public equity markets of India. It seeks to invest in stocks of companies operating across diversified sectors. The fund primarily invests in stocks of mid and small cap companies. It employs fundamental analysis with a bottom-up stock selection approach and top-down thematic overlay, focusing on such factors as structural liquidity, cyclical liquidity, earnings momentum, strong management, sound financials, and competitive advantage to create its portfolio. The fund benchmarks the performance of its portfolio against the BSE Mid-Cap Index. It conducts in-house research to make its investments. India Capital Growth Fund Limited was formed on November 11, 2005 and is domiciled in Guernsey.

H&T Group plc primarily provides pawnbroking services in the United Kingdom. It operates in six segments: Pawnbroking, Gold Purchasing, Retail, Pawnbroking Scrap, Personal Loans, and Other Services. The company also offers gold purchasing, jewelry retail, cheque cashing, unsecured lending, buyback, foreign exchange, money transfer, and prepaid debit card services. As of June 30, 2016, it operated 186 H&T Pawnbrokers stores and est1897 second hand jewelry retail stores. The company was incorporated in 2004 and is headquartered in Sutton, the United Kingdom.

Mercia Asset Management PLC is a venture capital firm specializing in incubation, seed EIS, and early stage investments. It invests in technology focusing on sectors such as digital entertainment, gaming, software, electronics and hardware, advanced materials, engineering and specialist manufacturing, and life sciences. The firm invests in Midlands and the North of the United Kingdom. It makes equity investments in companies either directly or via its funds under management and can also provides investments in form of debt or convertible securities. The firm seeks board position in its portfolio companies. Mercia Technologies PLC was founded in April, 2014 and is based in Henley-in-Arden, United Kingdom with an additional office in Edinburgh, United Kingdom.

Record PLC is a specialist currency management firm. The Company provides specialist currency management to institutions and corporations, pension plans, and other institutional investors. ... More

Weiss Korea Opportunity Fund Ltd.is a closed-ended equity mutual fund launched and managed by Weiss Asset Management LP. The fund invests in the public equity markets of South Korea. It seeks to invest in stocks of companies operating across diversified sectors. The fund primarily invests in value stocks and preferred shares of companies. It focuses on such factors as dividend yield, liquidity, and common shares weighting to create its portfolio. The fund benchmarks the performance of its portfolio against the MSCI Korea 25/50 Net Total Return Index. Weiss Korea Opportunity Fund Ltd. was formed on April 12, 2013 and is domiciled in Guernsey.

Weiss Korea Opportunity Fund Ltd (WKOF LN)

Penns Woods Bancorp, Inc. is a bank holding company of Jersey Shore State Bank. The Company provides a variety of commercial and consumer banking services to individual, business, public, and institutional customers.  Penns Woods operates a network of offices in north central Pennsylvania.

Public Financial Holdings Ltd, through its subsidiaries, operates in the deposit taking, personal and commercial lending, credit card, mortgage financing, stockbroking, and property investment businesses.  The Company also provides financing to purchasers of taxis and public light buses, leases taxis, and trades taxi cabs and taxi licenses.

Ames National Corporation is a multi-bank holding corporation.  The Banks offer commercial banking, personal banking, agricultural lending and deposit account services along with trust services and Internet banking services.  Ames affiliates have locations throughout the state of Iowa.

PT Bank Capital Indonesia Tbk provides commercial banking services.

PT Bank Neo Commerce Tbk is a full service commercial bank based in Indonesia.

PT Bank China Construction Bank Indonesia Tbk provides banking and related services. The Bank also provides interbank transaction services that includes import/export transactions, funds transfer, foreign currency transactions, and bank guarantees.

Bank China Construction Bank Indonesia (MCOR IJ)

National Bankshares, Inc. is a holding company for the National Bank of Blacksburg.  The Bank attracts deposits from the general public and use these funds to originate commercial, real estate, and consumer loans.  National Bankshares operates in Montgomery, Giles, Carroll,Tazewell, and Grayson counties in Virginia, and Mercer county West Virginia.

THE TOCHIGI BANK, LTD. is a regional bank based in Tochigi.  The Bank provides commercial banking services including deposits, loans, foreign exchange transactions, and securities investments.  The Tochigi Bank also provides financial services such as mutual funds sales, credit cards, leasing, and clerical works for banks' daily operations.

Tsukuba Bank, Ltd. provides commercial and personal banking services. The Bank offers personal and business checking, savings accounts, mortgages, issues credit card, and business loans for customers. Tsukuba Bank serves customers in Japan.

PT. Bank Agris Tbk provide financing services. The Bank offers investment products, working capital loans, consumer credit, product trade finance and remittance services.

Secure Trust Bank PLC accepts deposits and offers retail banking services.  The Company offers automobile and retail point of sale financing, and personal unsecured lending.

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Secure Trust Bank (STB LN)

Secure Trust Bank - Selling debt purchase loan book

Secure Trust Bank (STB) disclosed on 11 March that it is exiting the debt purchase market by agreeing to sell its Debt Managers Service (DMS)...

Edison Investment Research

Secure Trust Bank - Pre-close shows loan growth ahead of forecasts

STB disclosed in its pre-close trading update that loan growth is strong and ahead of our forecasts. STB said that it saw a record level of new...

Edison Investment Research

Secure Trust Bank - New tech and lower impairments

Secure Trust Bank (STB) announced that it has acquired AppToPay for an undisclosed ‘small amount’ and plans to use AppToPay’s proprietary...

Edison Investment Research

Secure Trust Bank - Capital markets day optimism

After Secure Trust Bank’s (STB) upbeat trading update in October, we feel there was a bullish tone to its capital markets day presentations on 3...

Edison Investment Research

Secure Trust Bank - Momentum building in Q3

In its Q3 trading update, Secure Trust Bank (STB) disclosed that it is experiencing robust loan growth. New business lending is now above...

Edison Investment Research

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