The specialist lender will stop new vehicle finance lending and put the existing book into run-off.
Secure Trust Bank said the decision was based on the historical financial performance and medium-term outlook of the vehicle finance business. It found that on an unaudited basis, the impact to its 2024 financial results – assuming a completed run-off and cost actions – would increase its adjusted profit before tax from £39.1m to £56.6m and result in an 8% increase to the group ROAE before any reinvestment of capital released from the vehicle finance business.
The group will continue to support existing customers, and as of 30 June this year, the average loan length outstanding was 37 months.
Secure Trust Bank’s vehicle finance business generated a loss before tax pre-exceptional items of £21.8m in 2024, and net lending balances were £558.3m as of 31 December. The division accounted for around 30% of the group’s adjusted operating costs last year.
Secure Trust Bank said it would streamline its cost base as the loan book runs down, allowing for more than £25m of operating costs to be removed by 2030.
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The group will consult with impacted colleagues, and it is expected that 284 roles will be at risk by 2030, including 78 positions this year.
Restructuring costs of around £5m are also expected.
The division will be reported as non-core activity in its full-year results for 2025 and beyond, and a further update will be made in its six-month interim results, planned for release on 14 August.
On track to meet lending target
Provided there are no adverse changes in the economy or trading environment, Secure Trust Bank said in its full-year results for 2024 that it should achieve its £4bn net lending target.
David McCreadie (pictured), chief executive of Secure Trust Bank, said: “The strategic repositioning of the group, as we rapidly approach our £4bn net lending target, marks another critical milestone in our Optimising for Growth strategic framework. 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.
“This pivot will allow the group to prioritise these established specialist businesses and achieve further simplification of the group, combined with the removal of a significant level of costs. These measures will have a material positive impact on ROAE for the group and will position the group to [be] capital-accretive.”
“We will be consulting with impacted colleagues to explain why this pivot in our strategy will drive the future sustainable success of the group,” he added.
