Solihull-based Secure Trust Bank which listed on the London Stock Exchange in November last year has seen its share price rise by 50 per cent in just three months.
The bank’s chief executive Paul Lynam said while its growth potential had been buoyed by last November’s IPO, through which it raised new capital to support growth in its lending business, STB had benefited greatly by ceasing to lend during the crash.
Lending volumes were also up as the firm reported its first annual accounts.
“What we did in 2007 was identify that the market was overheating and stopped lending,” said Mr Lynam. “We were one of the few banks getting off the bandwagon.
“When the crash came we had very limited exposure so sailed through the credit crunch in fine fettle.”
Despite making what turned out to be a shrewd move, Mr Lynam acknowledged it went against the grain when it came to good banking practice.
“We were introducing people who wanted to borrow from us to other lenders, paying a commission and it was more profitable to us than if we were lending ourselves,” he said.
“We were making more money from not taking risks than from taking risks – which was madness.
“But rather than staying in the hamster wheel the board decided to get off and with the benefit of hindsight it was the right thing to do.”
STB lent £135.9 million in 2011, which represented a 51 per cent increase on 2010. It has also increased its customer base by 45 per cent and created 44 jobs last year, representing a 20 per cent increase in its workforce.
The firm revealed pre-tax profits had remained at £9.6 million, but while operating income rose from £24.2 million to £28.5 million, profits before income tax fell.
Customer deposits increased to £272.1 million, which represented a 77 per cent increase on 2010 and fee-based current accounts grew to 17,178, a 79 per cent rise.
As STB enters its 60th year Mr Lynam also believes it is perfectly placed to take advantage of growth opportunities and said he was “very pleased” – particularly as its share price had risen by around 50 per cent since last November.
“It has become increasingly evident that many of the larger banks have significant challenges,” he said.
“Many of the bigger financial institutions have got ongoing financial challenges and they are effectively concentrating on current account and mortgage customers.
“The activity they do is diminishing, which is creating a space behind them for well funded and well capitalised banks. The space behind the big banks that was always there is getting bigger and the number of people there is getting smaller.
“We wouldn’t compete trying to lend money at six per cent but the double digit APR space we are in is growing and the overseas banks that used to be present have gone home.”
Mr Lynam said there bank had three main areas when it came to lending, the first being finance for the purchase of a broad spread of consumer goods including bicycles, washing machines, furniture, jewellery and technology.
The other two areas are motor finance and unsecured lending covering the purchase of one-off items or occasions such as home extensions and weddings.
“We are keen to maintain a balance across these three portfolios as we grow to make sure we don’t get overweighted in any particular lending segment,” he added.
Looking to the future he said the bank was looking at a mixture of expanding its existing operations as well as targeting new areas.
“One of the things we raised capital for was to support and accelerate our growth and we are continuing to grow aggressively,” he said. “We are continuing to look at a range of opportunities in different lending areas but none of these potential pipelines have reached fruition. We see huge opportunity to expand in what we are currently doing but if there are alternative markets will give them full consideration.”
One thing is certain though in that STB will not be attempting to establish itself as a high street bank, preferring to boost its existing internet presence and consolidate existing relationships with retailers and car dealers.
“You won’t see us on the High Street sandwiched in between Nat West and Barclays as it’s not a cost effective way for us to do business,” said Mr Lynam.
“We’re an internet bank, though we need to increase prominence of the brand so we will be continuing to invest in brand promotion.”
One thing STB is keen to do is to balance its deposit and lending operations, having proved popular with savers due to the high interest rates it offers.
“We are one of the few banks that have considerably more deposits than we have lending,” said Mr Lynam.
“Because the rates we offer are very attractive people are very keen to put money on deposit.
“Our five year fixed rate bond was paying 5.1 per cent while our 120 day notice account was paying out three per cent.
“At the moment have a lot more deposits than we have lending but that will change as we grow through the years.
“We haven’t been embroiled in any scandal, the brand reputation is strong – it is a good place to be.
“It is not every bank that can say it is growing its lending, growing its profits, growing its customers, paying dividends and creating jobs.”