Business downturn fuels fears of recession

By John-Paul Ford Rojas

Updated: 16:50 EDT, 22 September 2023

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Banks have been in the spotlight for all the wrong reasons lately – shutting down accounts, penalising savers, losing customer trust. But Solihull-based Secure Trust Bank strives to be different.

Under ambitious chief executive David Creadie, the bank defines its mission as helping consumers and businesses to fulfil their ambitions.

In a world awash with flowery but meaningless corporate gobbledegook, Secure Trust’s ethos is reassuringly simple. And it is backed by hard graft and consistent service across four main areas of lending – goods and services, cars, professional property and business.

The first arm is all about helping shops to offer credit, largely interest-free, to their customers. 

Secure Trust works with more than 1,500 retailers, including Watches of Switzerland and furniture giant DFS. Creadie also supplies all the Premier League clubs with finance so they can offer season ticket deals to fans. And with some London clubs charging well over £1,000 for a single season of games, supporters need all the help they can muster.

Not so long ago, Secure Trust focused on costly loans for hard-pressed shoppers. Now, the bank tends towards interest-free credit, generally offered to more affluent consumers, who are less susceptible to economic pressures. 

Bad debts are lower, credit facilities are higher and Secure Trust is expanding at a fair clip, increasing lending by more than £1billion last year alone, while remaining prudent about the customers it takes on.

Secure Trust also supplies finance to nearly 500 car dealers and brokers so they can offer deals to motorists in search of second-hand vehicles.

Again, business is brisk. The bank offers cutting-edge technology that allows loans to be made swiftly and efficiently and new business more than doubled last year. 

On the property front, Creadie is keen to distinguish his business from other buy-to-let mortgage lenders. His bank specialises in lending to individuals and small firms that own four or five properties, each with several flats. These are experienced property hands, borrowing around £10million on average. 

But Secure Trust takes a conservative approach to lending, so bad debts are minimal. The bank supplies credit to small businesses too, generally backed by assets such as invoices. Typical customers include food processors and manufacturers which supply supermarkets and may have to wait weeks or months before invoices are settled.

The bank advances up to 90 per cent of the funds up-front, so firms have access to the working capital they need. Across the group, net lending rose 17 per cent to more than £3billion in the first quarter of 2023, with further growth expected throughout the year.

Loans are largely funded by deposits and here too Secure Trust is expanding, attracting more than £2.5billion of savings in the first quarter of 2023 and on track to deliver more of the same through the year. 

Secure Trust shares have been hit hard by macro-economic worries, more than halving in value to £5.56 since last August. The price is a poor reflection of current trading and future prospects.

Interim figures, out this week, should prove encouraging. Secure Trust is a minnow compared to other banks, valued on the stock market at just £107million. 

But it has more than 1.2million customers and Creadie is confident of delivering growth. He took the helm in 2021, has made some canny moves to date and won support among City analysts. Brokers forecast a 13 per cent increase in profits to £44million this year, rising to £53million in 2024. Dividends are pretty decent too, with 43p pencilled in for 2023, rising to more than 50p next year.

Midas verdict: Secure Trust shares were more than £12 last summer. Now they are just £5.56, even though the business has grown, costs have been streamlined and the outlook is bright. 

Banks may be unloved right now but Secure Trust is a rather different animal and David Creadie is determined to make his mark. The shares are a buy and the 7.5 per cent dividend yield is an added attraction.

Traded on: Main market Ticker: STB Contact: securetrustbank.com or 0121 693 9100

Marshalls sank into the red after the patios and driveways specialist suffered a bleak start to the year.

The FTSE 250 landscaping group said fewer homes are being built in the wake of the disastrous mini-Budget in September last year.

It also pointed towards increased mortgage costs as the Bank of England hikes interest rates as well as the end of the Help to Buy scheme. 

At the same time, Marshalls said households were not spending as much doing up their homes and gardens as they did during the pandemic when business boomed.

As such, sales in the first four months of 2023 were 14 per cent lower than in the same period last year.

And in a further blow, Marshalls warned its full-year results were likely to be lower than expected.

The Yorkshire-based firm is planning to axe 70 jobs in a bid to save money. Shares in the company, which were trading above £8 each during the pandemic, fell 8.7 per cent, or 26p, to 272p.

The FTSE 100 fell 0.2 per cent, or 14.29 points, to 7764.09 and the FTSE 250 dropped 0.9 per cent, or 175.46 points, to 19277.04.

Official data out of China was a mixed bag as the world’s second largest economy grew faster than expected in the first three months of the year. But imports fell 7.9 per cent year-on-year in April while export growth slowed.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the ‘numbers are yet another warning light that China is far from immune from the global slowdown’.

Investors had much to digest closer to home.

Figures from Halifax showed house prices rising at the slowest pace for more than a decade as rising interest rates take their toll.

Shares in builder Persimmon slid 2.3 per cent, or 32p, to 1335.5p, Berkeley Group shed 2.2 per cent, or 98p, to 4368p and Taylor Wimpey fell 1.6 per cent, or 1.95p, to 124.1p.

Victoria Scholar, head of investment at Interactive Investor, said: ‘Many potential buyers are holding off amid hopes that property prices will cool and mortgage rates will ease later this year as inflation finally starts to come down.’

Direct Line warned its earnings could come under pressure this year due to the rising cost of repairing damaged cars.

Motor insurers have been hit by the rising price of second-hand cars and parts as well as higher labour costs. Shares plunged 4.6 per cent, or 7.55p, to 156.8p

The chief executive of DCC is to step down temporarily for health reasons. Donal Murphy, who has led the Irish conglomerate since July 2017, will ‘address a medical condition’ and hand over his day-to-day responsibilities for the next few weeks to the finance boss Kevin Lucey.

He hopes to return to working as normal before the annual general meeting in July, DCC added.

Shares fell 3.1 per cent, or 151p, to 4714p. Ingredients maker Treatt highlighted the reopening of China as it posted record half-year revenues. 

Sales shot up 14.6 per cent to £76million in the six months to the end of March while profit rose 15 per cent to £7.3million. 

Revenue across China – which it said remains an ‘important strategic region’ – soared by 38.6 per cent during the period as Covid measures were lifted. But shares fell 2.1 per cent, or 14p, to 650p.

TT Electronics said revenue in the first four months of 2023 was 16 per cent higher than the same period a year ago. Shares in the electronic components manufacturer inched up 1.1 per cent, or 1.8p, to 171.6p.

Victrex saw sales of polymer slide 14 per cent to 1,941 tonnes in the six months to the end of March. 

Profit fell 10 per cent to £39.1million due to weaker demand, a higher wage bill and an increase in investment. Shares fell 9.6 per cent, or 160p, to 1504p.