2nd Jul 2025 13:04
(Alliance News) - Secure Trust Bank PLC on Wednesday said it will stop new lending within its Vehicle Finance business and put the existing book into run-off, after a UK court ruling late last year requiring lenders to provide customer redress for commission payments made for business referrals from motor dealers.
Following the Court of Appeals judgement in October in the cases against motor finance peers Close Brothers Ltd and Firstrand Bank Ltd, Secure Trust took a GBP6.4 million provision against costs and potential customer redress. The case has now been appealed to the UK Supreme Court, which is expected to make a decision this month.
Secure Trust's Vehicle Finance division suffered a loss before tax and exceptional items of GBP21.8 million in 2024. It had a net lending balance of GBP558.3 million on December 31.
The Solihull, England-based specialist lender predicted its pivot away from motor finance will improve its return on average equity over time. A completed exit from the business would have increased adjusted pretax profit to GBP56.6 million in 2024 from the GBP39.1 million actually reported.
As the loan book runs down, streamlining of its cost base will enable more than GBP25 million in operating costs to be removed by 2030, Secure Trust Bank said. A total of 284 roles are expected to be at risk by 2030, including 78 roles at risk in financial 2025.
Secure Trust Bank expects to incur around GBP5.0 million in restructuring costs from the business closure and will provide a further update in its 2025 interim results release on August 14, it said. On Wednesday, the company said trading was in line with expectations in the half-year that ended on Monday.
Secure Trust Bank plans instead to increase capital allocation to its Retail Finance, Real Estate Finance and Commercial Finance businesses, which "all have a strong track record of generating attractive returns". It is planning a capital markets event to update on strategy in the fourth quarter.
Shares in Secure Trust Bank rose 5.8% to 844.00 pence on Wednesday afternoon in London.
"The strategic repositioning of the group, as we rapidly approach our GBP4 billion net lending target, marks another critical milestone in our 'optimising for growth' strategic framework," Chief Executive Officer David McCreadie said.
"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."
By Tom Waite, Alliance News editor
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