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LONDON - Secure Trust Bank PLC (LSE:STB) announced Wednesday it will cease new lending in its Vehicle Finance business and place the existing loan book into run-off, as part of a strategic shift aimed at improving its Return on Average Equity (ROAE).
The specialist lender said the decision reflects the "historical financial performance and medium-term outlook" of its Vehicle Finance unit, which generated a loss before tax of £21.8 million in fiscal year 2024. The business represented £558.3 million in net lending balances as of December 31, 2024.
On an unaudited pro forma basis, STB estimates the strategic pivot would have increased its adjusted profit before tax for FY2024 to £56.6 million from £39.1 million, with an estimated 800 basis point improvement to Group ROAE.
The bank will continue supporting existing Vehicle Finance customers, noting the average outstanding consumer loan length is 37 months, with the longest contractual agreement being 60 months.
As the loan book runs down, STB plans to streamline its cost base, targeting more than £25 million in operating cost reductions by 2030. The restructuring is expected to put 284 roles at risk by 2030, including 78 positions in FY2025, with anticipated restructuring costs of approximately £5 million.
"We have made the difficult decision to stop new lending in Vehicle Finance, our lowest return business line, and to redeploy capital to our three higher returning businesses of Retail Finance, Real Estate Finance and Commercial Finance," said David McCreadie, Chief Executive Officer, in the press release statement.
The bank confirmed it has traded in line with management expectations in the first half of 2025 and continues to progress toward its £4 billion net lending target. Vehicle Finance will be reported as non-core activity in the FY2025 results and thereafter.
STB plans to provide further details on its strategic plans and updated targets at a capital markets event expected in the fourth quarter of 2025.
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