Secure Trust Bank Reports Stable 2025 Profit, Launches New Strategy and £10m Buyback

Business Finance grows despite a tougher backdrop

Real Estate Finance

• New lending £451.0 million; balances £1,466.9 million (up 9.4%).
• Average LTV 57.3% against a 70% maximum on investment loans.
• Impairments £8.8 million, reflecting two specific cases, largely a legacy development now materially resolved.

Mix tilted further toward lower risk residential investment lending at 92.4% of the book, which compresses margin a touch but supports resilience. Bridging launched to offer full lifecycle funding.

Commercial Finance

• New business £287.5 million (more than double the prior year); balances £362.4 million.
• Risk adjusted margin 5.2% with lower volatile termination fees, pointing to a cleaner earnings profile.

Vehicle Finance: exit executed

STB ceased new lending in 2025 and completed the sale of the Consumer Vehicle Finance business in February 2026. The move simplifies the Group, lifts capital and removes a source of returns volatility. Discontinued activities are guided to break even at the profit before tax level pre-exceptionals in 2026.

Costs, capital and funding

• Cost income ratio improved 220 bps to 45.2%. Excluding £2.5 million of non-recurring leadership changes, it would have been 43.7%.
• Project Fusion has delivered around £8 million of annualised savings. STB reaffirms the plan to remove £25 million of run-rate costs by 2028, incurring additional costs of £12 million.
• Customer deposits rose 8.2% to £3.5 billion; TFSME fully repaid; sale and repurchase funding £201.2 million.

Guidance for 2026 and the near-term shape

Management labels 2026 a transitional year as new products launch and costs are reduced:

• Net lending growth 8-10%.
• Risk adjusted margin c.10 bps improvement.
• Cost income ratio c.47%.
• CET1 c.13.5%.
• Progressive dividend policy plus the intention to commence the £10 million buyback, subject to regulatory approval.

You can watch the Annual Results and Investor Update from 13:00 today, with the strategy session from 14:15, here: STB Investor Update webcast.

Risks and watch-outs

• Motor finance commission redress – the provision increased by £16.4 million in October 2025 after the FCA consultation. As at 31 December 2025, the provision stood at £21.5 million. If the FCA scheme were implemented entirely as proposed, STB would expect to increase the redress provision by a further £6 million.
• Credit cost – cost of risk rose to 1.0% from 0.8%, driven by three specific Business Finance cases and normalisation in Retail Finance after one-off model benefits in 2024.
• 2026 will carry some transition costs, with the cost income ratio guided up to around 47% before the medium-term efficiency gains land.

Why this matters for investors

Three things stand out. First, simplification. Exiting Vehicle Finance removes a drag on group returns and frees capital. Second, capital strength. A pro forma CET1 of 14.7% gives room to grow the book, fund the cost takeout, and return surplus cash through dividends and buybacks. Third, execution momentum. Lending grew 8.1%, NIM held at 4.7%, and the cost income ratio moved the right way even in an inflationary year.

On the flip side, the FCA redress outcome remains the main uncertainty, and 2026 will be a bridge year as investments and restructuring flow through. Still, the medium-term targets – c.10% lending growth and ROAE above 16% with a 35-40% cost income ambition – point to a higher-quality earnings mix if delivered.

My take

This is a tidy reset. The core bank is doing the basics well – disciplined pricing, deposit growth and digital adoption – while shedding complexity. The combination of a higher CET1, a progressive dividend and a £10 million buyback is shareholder friendly, particularly with tangible book value at £19.73 per share and a year-end share price that was materially lower.

Execution now becomes the story. If STB sustains c.10% book growth while holding risk adjusted margins and delivering the cost plan, the >16% ROAE target looks achievable. Keep an eye on the FCA’s final redress rules and 2026 cost trajectory, but the direction of travel is positive.