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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) reported H121 PBT of £30.7m, boosted by a net impairments reversion of £1.1m (vs a net charge of £19.8m in H220). The good news on provisions had been previously flagged by management. Loan arrears have remained lower than expected and most borrowers have returned from payment holidays. Loan demand is picking up and loans grew 1.3% (core division loan growth of 2.6%) in the six months to 30 June 2021. STB also announced a new 25% payout dividend policy along with a surprise 20p interim dividend. This policy better matches the bank’s growth strategy of organic and opportunistic acquisitions. We have raised our FY21 earnings forecasts to reflect lower impairments while trimming FY22 EPS by 11% (ROE forecast 9.5%) to reflect higher costs as the bank expands. Our fair value has edged to 2,234p from 2,163p per share.

Secure Trust Bank (STB) reported H121 PBT of £30.7m, boosted by a net impairments reversion of £1.1m (vs a net charge of £19.8m in H220). The good news on provisions had been previously flagged by management. Loan arrears have remained lower than expected and most borrowers have returned from payment holidays. Loan demand is picking up and loans grew 1.3% (core division loan growth of 2.6%) in the six months to 30 June 2021. STB also announced a new 25% payout dividend policy along with a surprise 20p interim dividend. This policy better matches the bank’s growth strategy of organic and opportunistic acquisitions. We have raised our FY21 earnings forecasts to reflect lower impairments while trimming FY22 EPS by 11% (ROE forecast 9.5%) to reflect higher costs as the bank expands. Our fair value has edged to 2,234p from 2,163p per share.

Secure Trust Bank (STB) announced on 23 July it has agreed the sale of its entire residential mortgage loan book to Jacqali Designated Activity Company, a financing vehicle created in 2021 by an undisclosed global financial institution. STB estimates the sale price at £54.6m and above net book value. Mortgages represent 2% of loan book so the sale is not needle moving – we estimate 10–20bp might be added to our FY21 forecast tier 1 capital ratio of 13.6%. STB stopped writing new business before the pandemic started in 2020, viewing market conditions as creating unattractive risk adjusted margins in this segment. This sale simplifies the group structure and draws a line under STB’s exit from the business. The capital will be reallocated to STB’s remaining business and general corporate businesses. We forecast STB’s loan growth to be 5.1% in FY21 and for it to increase to 15.3% in FY22.

Secure Trust Bank (STB) announced on 23 July it has agreed the sale of its entire residential mortgage loan book to Jacqali Designated Activity Company, a financing vehicle created in 2021 by an undisclosed global financial institution. STB estimates the sale price at £54.6m and above net book value. Mortgages represent 2% of loan book so the sale is not needle moving – we estimate 10–20bp might be added to our FY21 forecast tier 1 capital ratio of 13.6%. STB stopped writing new business before the pandemic started in 2020, viewing market conditions as creating unattractive risk adjusted margins in this segment. This sale simplifies the group structure and draws a line under STB’s exit from the business. The capital will be reallocated to STB’s remaining business and general corporate businesses. We forecast STB’s loan growth to be 5.1% in FY21 and for it to increase to 15.3% in FY22.   


Secure Trust Bank - Drawing the line under mortgages exit

Secure Trust Bank (STB) issued an upbeat pre-close interims update, noting that positive trends in Q1, particularly regarding asset quality, have continued into Q221. The recovery in loan impairments underpins STB’s board now expecting FY21e PBT to be ‘materially’ ahead of company collected consensus of £29.5m (Edison forecast £27.4m) and above the top end of the range at £36.8m. STB disclosed that the board ‘remains cautious on the near to medium term UK economic outlook and will maintain a prudent provisioning policy, in case economic conditions worsen in the second half’. STB will report its interims on 5 August 2021 and we are likely to review our forecasts following the results. The adjustment in impairments is likely to be lower in FY22 than in FY21, with STB guidance along similar lines in its statement.

Secure Trust Bank (STB) issued an upbeat pre-close interims update, noting that positive trends in Q1, particularly regarding asset quality, have continued into Q221. The recovery in loan impairments underpins STB’s board now expecting FY21e PBT to be ‘materially’ ahead of company collected consensus of £29.5m (Edison forecast £27.4m) and above the top end of the range at £36.8m. STB disclosed that the board ‘remains cautious on the near to medium term UK economic outlook and will maintain a prudent provisioning policy, in case economic conditions worsen in the second half’. STB will report its interims on 5 August 2021 and we are likely to review our forecasts following the results. The adjustment in impairments is likely to be lower in FY22 than in FY21, with STB guidance along similar lines in its statement. 


Secure Trust Bank - Upbeat pre-close interims update

Secure Trust Bank (STB) announced in its Q120 trading update that new business lending rose 7.1% year-on-year and 2.4% quarter-on-quarter to £318.5m. Loan balances declined by 6.6% and 1.0% respectively, with lending still affected by the COVID pandemic lockdown. The loan balances of the Business Finance and Consumer Finance divisions were ‘static’, but the run-off of the closed Asset Finance and Consumer Mortgage books led to the 1% decline. Management viewed credit performance as ‘benign’. STB is seeing a phased return to pre-pandemic lending criteria in the Motor Finance division. We continue to forecast a 5% year-on-year increase in group loans by the end of FY21. Client deposits fell 8.2% year-on-year and 3.8% quarter-on-quarter in Q121, but STB said it was able to further reduce its cost of funding.

Secure Trust Bank (STB) announced in its Q120 trading update that new business lending rose 7.1% year-on-year and 2.4% quarter-on-quarter to £318.5m. Loan balances declined by 6.6% and 1.0% respectively, with lending still affected by the COVID pandemic lockdown. The loan balances of the Business Finance and Consumer Finance divisions were ‘static’, but the run-off of the closed Asset Finance and Consumer Mortgage books led to the 1% decline. Management viewed credit performance as ‘benign’. STB is seeing a phased return to pre-pandemic lending criteria in the Motor Finance division. We continue to forecast a 5% year-on-year increase in group loans by the end of FY21. Client deposits fell 8.2% year-on-year and 3.8% quarter-on-quarter in Q121, but STB said it was able to further reduce its cost of funding.

Secure Trust Bank - Benign Q1 trading update

Secure Trust Bank’s (STB) Q3 trading update disclosed that Q3 was stronger than expected and FY20 earnings are likely to be well ahead of consensus forecasts. Loan repayment holidays in its Motor Finance and Retail Finance divisions were down remarkably and credit quality is not deteriorating. Loan demand is strengthening after the lockdown. Capital and liquidity remain good. The bank remains cautious due to continued COVID-19 and Brexit uncertainty and is still not providing formal guidance. We are upping our earnings forecasts and fair value from 1,704p to 1,756p. In our view, the valuation remains depressed compared to fundamentals with banking stocks still out of favour. STB trades on an FY20 P/BV of 0.53x, yet it has a strong track record of value creating returns (ROE above COE), a good capital base and liquidity. The Q3 good news reinforces our view that we are unlikely to see book value deterioration during this downturn to justify any NAV discount.

Secure Trust Bank’s (STB) Q3 trading update disclosed that Q3 was stronger than expected and FY20 earnings are likely to be well ahead of consensus forecasts. Loan repayment holidays in its Motor Finance and Retail Finance divisions were down remarkably and credit quality is not deteriorating. Loan demand is strengthening after the lockdown. Capital and liquidity remain good. The bank remains cautious due to continued COVID-19 and Brexit uncertainty and is still not providing formal guidance. We are upping our earnings forecasts and fair value from 1,704p to 1,756p. In our view, the valuation remains depressed compared to fundamentals with banking stocks still out of favour. STB trades on an FY20 P/BV of 0.53x, yet it has a strong track record of value creating returns (ROE above COE), a good capital base and liquidity. The Q3 good news reinforces our view that we are unlikely to see book value deterioration during this downturn to justify any NAV discount.


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 - Good news as flagged

Secure Trust Bank (STB) reported H121 PBT of £30.7m, boosted by a net impairments reversion of £1.1m (vs a net charge of £19.8m in H220). The good...

Edison Investment Research

Secure Trust Bank - Drawing the line under mortgages exit

Secure Trust Bank (STB) announced on 23 July it has agreed the sale of its entire residential mortgage loan book to Jacqali Designated Activity...

Edison Investment Research

Secure Trust Bank - Upbeat pre-close interims update

Secure Trust Bank (STB) issued an upbeat pre-close interims update, noting that positive trends in Q1, particularly regarding asset quality, have...

Edison Investment Research

Secure Trust Bank - Benign Q1 trading update

Secure Trust Bank (STB) announced in its Q120 trading update that new business lending rose 7.1% year-on-year and 2.4% quarter-on-quarter to...

Edison Investment Research

Secure Trust Bank - Upbeat update

Secure Trust Bank’s (STB) Q3 trading update disclosed that Q3 was stronger than expected and FY20 earnings are likely to be well ahead of consensus...

Edison Investment Research

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