Secure Trust Bank’s switch to lower-risk markets ‘paying off ’

THE boss of challenger bank Secure Trust has claimed that rival lenders are “mis-pricing” credit cards and other unsecured lending, after the firm managed to lift half-year profits despite a shift to lower-risk markets.

Paul Lynam, the chief executive of Secure Trust, said that the lender’s improved results showed its move away from unsecured credit since last year was “paying off ”.

He told The Daily Telegraph a sudden economic downturn could yet damage rivals exposed to the riskier end of the market. Mr Lynam said: “We think some others are mis-pricing risk in unsecured credit – that’s why we are not in that market.

“The danger is we could suddenly have a very disruptive trade war that results in a rise in the cost of living [and more defaults on credit].”

In recent days, banks have cheered the City by generally reporting lower than expected writedowns on bad loans.

However, RBS chief Ross Mcewan said he expected impairments on bad debt to rise from current low levels, with lenders heading into “a more uncertain and highly competitive environment”.

The Bank of England warned lenders about risks in unsecured credit last year and forced them to increase their capital buffers to protect themselves in case of a downturn.

Secure Trust stopped offering subprime car loans and other unsecured lending a year ago, following the sale of subprime lender Everyday Loans in 2016. Instead it is targeting growth in real estate, lending against company invoices and supporting retailers to offer “buy now, pay later” finance.

Secure Trust’s pre-tax profits for the first half of the year were £15.1m, up 21pc on the previous year.

Underlying pre-tax profits – which strip out one-off costs – were up even more strongly, increasing 36pc to £16.5m.

Writedowns on bad loans were flat despite an increase in the loan book of more than a quarter to £1.8bn, reflecting the shift to offering lower-risk products.

Martin Williams, analyst at Keefe, Bruyette & Woods, commented: “These results clearly show the benefits of improved credit quality and strong but measured growth.”

The company’s shares closed up 1.5pc at £16.35.