The half-year results for Secure Trust Bank asset finance have shown a ‘contraction’ in asset book lending, a year-on-year drop of 21% to £87.9m (€98.58m), down from £111.5m (€125m).
Invoice Finance lending balances grew year-on-year to £187.5m from £94.2m. During this time Secure Trust funded over £2bn of customers’ invoices since invoice finance operations started in September 2014.
Overall, Secure Trust Bank announced a 31.3% year-on-year increase in Group profit before tax to £15.1m for the six months to 30 June 2018. Emphasis was on ‘the repositioning of the business model towards lower risk lending in attractive market segments’. Secure Trust claimed the cost of risk was 20% lower year-on-year.
Secure Trust said that its lending criteria explained the reduced figures in asset finance.
Secure Trust stated: “Some lenders are offering loans up to or exceeding 100% of open market value on asset finance at extremely low margins, by historical standards.
“We are not prepared to compromise on risk or price simply to achieve short-term net balance sheet growth, and as matters stand expect this part of the lending portfolio to continue to contract. We will revisit our appetite for recommencing new lending in light of market developments in this scale part of the UK SME lending market.”
The asset finance division outsourced lending to Haydock Finance until its sale in January 2018. New business volumes in the six months following hit £5.7m. Secure Trust Bank said: “With the sale of Haydock, the Group continues to assess options within the asset finance market, but in the meantime, the asset finance portfolio will be expected to reduce in line with contractual repayments from customers.”
In related news, Arbuthnot Latham announced that Paul Lynam would retire as director with immediate effect as the group’s recent move to launch an asset based finance business raises the conflict of interest risk for Lynam, who also serves as chief executive officer of Secure Trust Bank.
In July Arbuthnot Latham reported £2.3m in income through its 18.6% share in Secure Trust Bank.