Secure Trust Bank (STB)

Hi Maynard, was just wondering if you had any thoughts on STB. They are in a similar sector to SUS. From what I have calculated, they trade on an EV/EBITDA of 3.6 based on '22 earnings. They also have a price to book ratio of 0.89 (not uncommon for this sector) but before covid they were trading as high as 1.7x. They are growing their earnings and with the introduction of their Buy Now Pay Later product and PCP in the motor division I believe they could see an uplift in earnings.

Based on a book ratio of 1.2x I believe the price target for the near term could be £18.50. Moreover, in 2017 they traded at £24 on an EPS of 106p whereas based on their current growth targets I believe by 2024 this could be closer to 200p. This would imply a target of £26.

Would be interesting to know your thoughts on the company.


Hi ravp29,

Many thanks for the post and welcome to the forum.

I would always start with management rather than valuation with moneylenders. There is an old saying along the lines of “any fool can lend money, the skill is getting it back” and various lenders over the years have shown not to have sufficient skill!

With SUS, veteran family management with its significant shareholding has shown sufficient skill at lending over many years, which was emphasised by the company’s relatively good performance during the pandemic.

While I am sure STB’s executives are competent, they are professional salary earners and I just don’t have the same conviction with such employees. Especially with financial companies, where the accounts are never easy to pick apart and lots of boardroom assumptions are applied to guess write-offs etc.

So sadly STB is not one for me, but that is not to say the shares are cheap on your sums! I would add that the sector is subject to regulation and I would double check whether STB’s products are ever likely to attract adverse attention in that area.


Hi - I think you are on the right lines as it looks pretty cheap all round for a fairly well diversified, lowish risk bank if there is such a thing. I think ROE & P/B are quite useful on banks and on that basis the higher share price targets you are talking about may not be out of court in the medium term. Although that obviously depends on them actually delivering on their medium term target of 14-16% ROE and the market choosing to re-rate them. Having said that the price might be up with events approaching resistance in the short term ahead of the results.

On a similar basis I think Barclays still looks pretty good value on 0.5x P/B versus the 10%+ ROE they look like achieving. While they look like they are trying to break out above 200p as a beneficiary of the rotation to value and rising interest rates.

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Just to chip in on STB, I looked at it fairly seriously a couple of years ago as it always feels undervalued. At that time it was run by Paul Lyman who I thought talked a lot of sense. What I could not get comfortable with was that they had the cost base of a big bank without the funding advantage nor without the margins/niches of a speciality lender (like SUS or CBG).

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