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) 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.