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 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.