REG - Secure Trust BankArbuthnot Banking - Final Results for the year to 31 December 2015 <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 6
17/03/2016 07:06
- Part 6: For the preceding part double click ID:nRSQ3659Se
£million £million
Placements with banks included in cash and cash equivalents (Note 28) 9.8 24.8
Other loans and advances to banks - 15.0
9.8 39.8
Included within loans and advances to banks are amounts placed with Arbuthnot Latham & Co., Limited, a related company, of £5.3 million (31 December 2014: £20.0 million).
Moody's long-term ratings: 2015 2014
Group £million £million
A1 0.1 -
A2 (1.4) 19.8
A3 5.8 -
No rating 5.3 20.0
9.8 39.8
The £1.4 million negative balance above represents an overdraft attributable to continuing operations. When amounts included in loans and advances to banks attributable to discontinued operations are taken into account, the overall balance is in credit.
2015 2014
Company £million £million
Placements with banks included in cash and cash equivalents 3.9 22.9
Other loans and advances to banks included in cash and cash equivalents 5.3 -
Cash and cash equivalents (Note 28) 9.2 22.9
Other loans and advances to banks - 15.0
9.2 37.9
Moody's long-term ratings: 2015 2014
Company £million £million
A1 0.1 -
A2 - 17.9
A3 3.8 -
No rating 5.3 20.0
9.2 37.9
None of the loans and advances to banks are either past due or impaired.
13. Loans and advances to customers
2015 2014
Group £million £million
Gross loans and advances 994.9 656.6
Less: allowances for impairment on loans and advances (Note 14) (34.3) (34.1)
960.6 622.5
The fair value of loans and advances to customers is shown in Note 4. For a maturity profile of loans and advances to customers, refer to Note 3.
Loans and advances to customers include finance lease receivables as follows:
2015 2014
Group £million £million
Gross investment in finance lease receivables:
- No later than 1 year 121.4 80.2
- Later than 1 year and no later than 5 years 244.0 164.4
- Later than 5 years 0.9 -
366.3 244.6
Unearned future finance income on finance leases (109.0) (81.2)
Net investment in finance leases 257.3 163.4
The net investment in finance leases may be analysed as follows:
- No later than 1 year 73.3 46.0
- Later than 1 year and no later than 5 years 183.2 117.4
- Later than 5 years 0.8 -
257.3 163.4
Loans and advances to customers can be further summarised as follows:
2015 2015 2014 2014
Group £million % £million %
Neither past due nor impaired 939.1 94.4% 581.9 88.7%
Past due but not impaired - 0.0% 0.3 0.0%
Past due up to 90 days and impaired 24.8 2.5% 30.3 4.6%
Past due after 90 days and impaired 31.0 3.1% 44.1 6.7%
Gross 994.9 100.0% 656.6 100.0%
Less: allowance for impairment (34.3) (34.1)
Net 960.6 622.5
Gross amounts of loans and advances to customers that were past due up to 90 days were as follows:
2015 2014
Group £million £million
Past due up to 30 days 16.5 22.6
Past due 30 - 60 days 5.5 5.3
Past due 60 - 90 days 2.8 2.7
Total 24.8 30.6
Interest income on loans classified as impaired totalled £6.0 million (31 December 2014: £3.1 million).
2015 2014
Company £million £million
Gross loans and advances 953.3 518.1
Less: allowances for impairment on loans and advances (Note 14) (20.6) (18.0)
932.7 500.1
The fair value of loans and advances to customers is shown in Note 4.
For a maturity profile of loans and advances to customers, refer to Note 3.
2015 2014
Company £million £million
Gross investment in finance lease receivables
No later than 1 year 103.9 61.9
Later than 1 year and no later than 5 years 232.3 151.4
Later than 5 years 0.9 -
337.1 213.3
Unearned future finance income on finance leases (103.3) (75.4)
Net investment in finance leases 233.8 137.9
The net investment in finance leases may be analysed as follows:
No later than 1 year 60.3 32.1
Later than 1 year and no later than 5 years 172.7 105.8
Later than 5 years 0.8 -
233.8 137.9
The prior year finance lease receivables have been restated, as certain of the Company's loans and advances to customers have been
reclassified as finance leases. These changes had no effect on net assets or profits of the prior period.
Loans and advances to customers can be further summarised as follows:
2015 2015 2014 2014
Company £million % £million %
Neither past due nor impaired 916.0 96.1% 461.7 89.1%
Past due up to 90 days and impaired 24.5 2.6% 26.2 5.1%
Past due after 90 days and impaired 12.8 1.3% 30.2 5.8%
Gross 953.3 100.0% 518.1 100.0%
Less: allowance for impairment (20.6) (18.0)
Net 932.7 500.1
Gross amounts of loans and advances to customers that were past up to 90 days were as follows:
2015 2014
Company £million £million
Past due up to 30 days 16.3 20.4
Past due 30 - 60 days 5.5 4.0
Past due 60 - 90 days 2.7 1.8
Total 24.5 26.2
The majority of the loans are unsecured personal loans with an average size at inception of £5,000; therefore the portfolio
does not have a significant concentration to any individuals, sectors or geographic locations.
At 31 December 2015 loans and advances to customers of £56.4 million were pre-positioned under the Bank of England's
Funding for Lending Scheme and were available for use as collateral within the scheme (2014: £11.5 million).
At 31 December 2015, £36.0 million of UK Treasury Bills were drawn under the Funding for Lending Scheme (2014: £15.0
million). During the year, these Treasury Bills were pledged as part of a sale and repurchase agreement with an original
maturity period of six months (2014: three months). Monies arising as a result are disclosed in note 21.
£0.2 million (2014: £0.2 million) is a standard mortgage loan secured upon residential property and this is neither past
due nor impaired. The residential property over which the mortgage loan is secured has a fair value of £0.2 million based
on other recent property sales, and a loan to value ratio of 72% (2014: 76%).
£368.0 million (2014: £133.7 million) of the loans are secured upon residential or commercial property and these are
neither past due nor impaired. All loans secured are at a loan to value ratio of less than 80%. All property valuations at
loan inception, and the majority of development stage valuations, are performed by independent Chartered Surveyors, who
perform their work in accordance with the Royal Institution of Chartered Surveyors Valuation - Professional Standards.
£165.7 million (2014: £137.9 million) of the loans are secured against motor vehicles where the security is discharged when
the buyer exercises an option to buy the goods at a predetermined price at the end of the loan term. Management's estimate
of the fair value of the motor vehicles was £127.1 million (2014: £109.5 million), giving a loan to value ratio of 130.4%
(2014: 125.9%).
14. Allowances for impairment of loans and advances
A reconciliation of the allowance accounts for losses on loans and advances is as follows:
Group 2015 2014
Specific allowances for impairment £million £million
At 1 January 32.1 25.5
Provision for impairment losses 24.3 15.1
Loans written off during the year as uncollectible (19.4) (8.5)
Transfer to assets held for sale (4.7) -
At 31 December 32.3 32.1
Collective allowances for impairment
At 1 January 2.0 1.6
Provision for impairment losses 1.1 0.4
Transfer to assets held for sale (1.1) -
At 31 December 2.0 2.0
Total allowances for impairment 34.3 34.1
Company 2015 2014
Specific allowances for impairment £million £million
At 1 January 16.9 21.9
Provision for impairment losses 16.5 8.5
Release of allowance for impairment on the sale of debt (12.1) (12.5)
Loans written off during the year as uncollectible (2.8) (1.0)
At 31 December 18.5 16.9
Collective allowances for impairment
At 1 January 1.1 1.0
Provision for impairment losses 1.0 0.1
At 31 December 2.1 1.1
Total allowances for impairment 20.6 18.0
15. Debt securities held-to-maturity
Debt securities of £3.8 million (31 December 2014: £16.3 million) represent UK Treasury Bills. The Group's intention is to
hold them to maturity and, therefore, they are stated in the Statement of Financial Position at amortised cost.
All of the debt securities held-to-maturity had a rating agency designation at 31 December 2015, based on Moody's long-term
ratings of Aa1. None of the debt securities held-to-maturity are either past due or impaired.
16. Intangible assets
Goodwill Computer software Other intangible assets Total
Group £million £million £million £million
Cost or valuation
At 1 January 2014 1.0 6.5 7.3 14.8
Additions - 0.8 - 0.8
At 31 December 2014 1.0 7.3 7.3 15.6
Additions - 2.3 - 2.3
Transfer to assets held for disposal - (0.3) (5.1) (5.4)
At 31 December 2015 1.0 9.3 2.2 12.5
Accumulated amortisation
At 1 January 2014 - (2.7) (2.2) (4.9)
Amortisation charge - (1.1) (1.4) (2.5)
At 31 December 2014 - (3.8) (3.6) (7.4)
Amortisation charge - (1.2) (1.1) (2.3)
Transfer to assets held for disposal - 0.2 4.0 4.2
At 31 December 2015 - (4.8) (0.7) (5.5)
Net book amount
At 31 December 2014 1.0 3.5 3.7 8.2
At 31 December 2015 1.0 4.5 1.5 7.0
Goodwill Computer software Total
Company £million £million £million
Cost or valuation
At 1 January 2014 0.3 2.6 2.9
Additions - 0.7 0.7
At 31 December 2014 0.3 3.3 3.6
Additions - 2.2 2.2
At 31 December 2015 0.3 5.5 5.8
Accumulated amortisation
At 1 January 2014 - (2.0) (2.0)
Amortisation charge - (0.3) (0.3)
At 31 December 2014 - (2.3) (2.3)
Amortisation charge - (0.3) (0.3)
At 31 December 2015 - (2.6) (2.6)
Net book amount
At 31 December 2014 0.3 1.0 1.3
At 31 December 2015 0.3 2.9 3.2
An annual impairment review is undertaken on the carrying value of the Group's intangible assets to determine whether an
impairment event has occurred.
17. Investments
Shares at cost Impairment provisions Net investments
Company £million £million £million
At 31 December 2014 and 1 January 2014 3.7 - 3.7
At 31 December 2015 3.7 - 3.7
Shares in subsidiary undertakings of Secure Trust Bank plc at 31 December 2015 are stated at cost less any provision for
impairment. All subsidiary undertakings are unlisted and none are banking institutions. The subsidiary undertakings were
all incorporated in the UK and wholly owned via Ordinary shares. All subsidiary undertakings are included in the
consolidated financial statements and have an accounting reference date of 31 December.
Details are as follows:
Principal activity
Owned directly
Debt Managers (Services) Limited Debt collection company
Everyday Loans Holdings Limited* Holding company
Secure Homes Services Limited Property rental
STB Leasing Limited Leasing
V12 Finance Group Limited Holding company
Owned indirectly via intermediate holding companies
Everyday Loans Limited* Sourcing and servicing of unsecured and secured loans
Everyday Lending Limited* Provider of unsecured and secured loans
V12 Personal Finance Limited Dormant
V12 Retail Finance Limited Sourcing and servicing of unsecured loans
*Included in assets held for sale.
18. Property, plant and equipment
Freehold land and buildings Leasehold improvements Computer and other equipment Total
Group £million £million £million £million
Cost or valuation
At 1 January 2014 4.4 0.4 8.9 13.7
Additions 2.7 - 0.9 3.6
Disposals - - (0.5) (0.5)
At 31 December 2014 7.1 0.4 9.3 16.8
Additions - 0.2 1.2 1.4
Transfer to assets held for disposal - (0.6) (0.4) (1.0)
At 31 December 2015 7.1 - 10.1 17.2
Accumulated depreciation
At 1 January 2014 (0.4) (0.2) (8.1) (8.7)
Depreciation charge (0.1) (0.1) (0.3) (0.5)
Disposals - - 0.5 0.5
At 31 December 2014 (0.5) (0.3) (7.9) (8.7)
Depreciation charge (0.1) (0.1) (0.4) (0.6)
Transfer to assets held for disposal - 0.4 0.2 0.6
At 31 December 2015 (0.6) - (8.1) (8.7)
Net book amount
At 31 December 2014 6.6 0.1 1.4 8.1
At 31 December 2015 6.5 - 2.0 8.5
Freehold property Computer and other equipment Total
Company £million £million £million
Cost
At 1 January 2014 - 8.5 8.5
Additions 2.7 0.7 3.4
Disposals - (0.5) (0.5)
At 31 December 2014 2.7 8.7 11.4
Additions - 0.8 0.8
At 31 December 2015 2.7 9.5 12.2
Accumulated depreciation
At 1 January 2014 - (8.0) (8.0)
Depreciation charge - (0.2) (0.2)
Disposals - 0.5 0.5
At 31 December 2014 - (7.7) (7.7)
Depreciation charge - (0.3) (0.3)
At 31 December 2015 - (8.0) (8.0)
Net book amount
At 31 December 2014 2.7 1.0 3.7
At 31 December 2015 2.7 1.5 4.2
The Group's freehold properties are the Registered Office of the Company, which is fully utilised for the Group's own
purposes, and Secure Trust House, Boston Drive, Bourne End SL8 5YS, the majority of which is also used for the Group's own
purposes.
The directors have assessed the value of the Group's freehold property at the year-end through comparison to current rental
yields on similar properties in the same area and do not believe that the fair value of freehold property is materially
different from its carrying value.
The carrying value of freehold land which is included in the total carrying value of freehold land and buildings and which
is not depreciated is £1.7 million (2014: £1.7 million).
The historical cost of freehold property included at valuation is as follows:
2015 2014
£million £million
Cost 7.5 7.5
Accumulated depreciation (1.3) (1.2)
Net book amount 6.2 6.3
19. Derivative financial instruments
In order to protect its floating rate deposit book from increases in Bank of England base rates above 1.5%, the Group
entered into an interest rate cap on 30 June 2011, with a notional amount of £20 million and a maturity date of 30 June
2015. The losses recognised in other comprehensive income in relation to the interest rate cap previously are not expected
to be recovered in future periods, therefore they were been transferred to profit or loss in 2014. The Moody's long term
rating of the counterparty was A2.
20. Other assets
2015 2014
Group £million £million
Trade receivables 1.5 0.9
Amounts due from related companies 1.3 0.8
Prepayments and accrued income 4.3 3.5
7.1 5.2
2015 2014
Company £million £million
Trade receivables 1.4 0.6
Amounts due from related companies 142.0 114.6
Prepayments and accrued income 2.6 1.0
146.0 116.2
21. Due to banks
2015 2014
Group £million £million
Amounts due to other credit institutions 35.0 15.9
35.0 15.9
2015 2014
Company £million £million
Amounts due to other credit institutions 36.4 15.9
36.4 15.9
Amounts due to banks for the current year represent monies arising from the sale and repurchase of drawings under the
Funding for Lending Scheme. These are due for repayment in March 2015.
22. Deposits from customers
2015 2014
Group and Company £million £million
Current/demand accounts 39.5 37.8
Term deposits 993.6 570.6
1,033.1 608.4
For a maturity profile of deposits from customers, refer to Note 3.
23. Other liabilities
2015 2014
Group £million £million
Trade payables 13.8 10.9
Amounts due to related companies 0.1 0.3
Accruals and deferred income 12.3 18.3
26.2 29.5
2015 2014
Company £million £million
Trade payables 8.3 4.2
Amounts due to related companies 10.4 4.6
Accruals and deferred income 11.5 13.4
30.2 22.2
Within Group trade payables at 31 December 2015 there is £3.7 million (2014: £4.3 million) collateral held from RentSmart.
The Group buys assets which are then leased to customers of RentSmart and the Group pays RentSmart a commission, which is
recognised within operating income. In return, RentSmart continues to operate the agreement, retains the credit risk and
provides the Group with a collateral amount that is based upon the balance of customer receivables and expected new
agreements during the following month.
Within Group and Company accruals and deferred income there is £nil million relating to accrued interest payable (2014:
£6.6 million).
Financial Ombudsman Scheme accrual
The Company's FOS accrual reflects a provision for outstanding potential PPI claims of £2.6m (2014: £2.0m) as at 31
December 2015. The increase in provision is a result of new claims emerging following an extension of the deadline for
making claims.
The FCA are currently consulting on a proposed deadline for making PPI claims. The ruling is expected to come into force in
Spring 2016 with a deadline of 2 years from the ruling, which would give consumers until Spring 2018 to make a claim.
Financial Services Compensation Scheme Levy
In common with all regulated UK deposit takers, the Company pays levies to the Financial Services Compensation Scheme
('FSCS') to enable the FSCS to meet claims against it. The FSCS levy consists of two parts: a management expenses levy and
a more significant compensation levy. The management expenses levy covers the costs of running the scheme and the
compensation levy covers the amount of compensation and associated interest the scheme pays, net of any recoveries it makes
using the rights that have been assigned to it.
The Company's FSCS provision reflects market participation up to the reporting date and the accrual of £0.2 million relates
to the interest levy for the scheme year 2015/16 which is payable in September 2016. This amount was calculated on the
basis of the Company's share of protected deposits and the FSCS's estimate of total interest levies payable for each scheme
year. The loan repayment relating to the scheme year 2015/16 was paid by the Company in September 2015.
24. Deferred taxation
2015 2014
Group £million £million
Deferred tax liabilities:
Unrealised surplus on revaluation of freehold property 0.2 0.2
Other short term timing differences (0.2) (0.2)
Deferred tax assets:
Other short term timing differences 0.3 -
Carried forward losses - 1.0
Deferred tax assets 0.3 1.0
Deferred tax liabilities:
At 1 January - (0.4)
Profit and loss account - 0.4
Deferred tax assets:
At 1 January 1.0 1.9
Profit and loss account (0.3) (0.8)
Cash flow hedges - (0.1)
Transferred to assets held for sale (0.4) -
At 31 December 0.3 1.0
2015 2014
Company £million £million
Accelerated capital allowances and other short-term timing differences 0.6 0.3
Deferred tax assets 0.6 0.3
At 1 January 0.3 0.8
Profit and loss account - accelerated capital allowances and other short-term timing differences 0.3 (0.4)
Cash flow hedges - (0.1)
Deferred tax assets at 31 December 0.6 0.3
On 2 July 2013 the Government substantively enacted a reduction in the main rate of UK corporation tax from 21% to 20% with
effect from 1 April 2015. This will reduce the Group's future current tax charge accordingly. Deferred tax has been
calculated based on the enacted rates to the extent that the related temporary or timing differences are expected to
reverse in the future periods.
25. Contingent liabilities and commitments
Capital commitments
At 31 December 2015, the Group had no capital commitments (2014: £0.1 million relating to the refurbishment of an Everyday
Loans branch).
The Company had no capital commitments (2014: £nil).
Credit commitments
At 31 December 2015, the Group and Company both had commitments of £138.6 million to extend credit to customers (2014:
£96.0 million and £96.0 million respectively).
Operating lease commitments
The future aggregate lease payments for non-cancellable operating leases are as follows:
2015 2014
Land and buildings Other Land and buildings Other
Group £million £million £million £million
Within 1 year 1.0 0.5 0.8 0.3
Between 1 year and 5 years 1.6 0.3 1.5 0.2
Over 5 years 0.3 - 0.1 -
2.9 0.8 2.4 0.5
2015 2014
Land and buildings Other Land and buildings Other
Company £million £million £million £million
Within 1 year 0.1 0.3 - 0.3
Between 1 year and 5 years 0.6 0.2 - 0.1
Over 5 years 0.1 - 0.4 -
0.8 0.5 0.4 0.4
There are 35 leases classified as land and buildings in the Group (2014: 35). Other leases include motor vehicles and computer hardware.
Other commitments
At 31 December 2015 a commitment exists to make further payments with regard to the Financial Services Compensation Scheme
Levy for 2015 and thereafter. Due to uncertainties regarding the elements in the calculation of the levy and the Group's
share thereof, the directors consider this cost to be unquantifiable.
26. Share capital
Number of shares Ordinary shares
£million
At 1 January 2014 15,648,149 6.3
Shares issued during year 2,543,745 1.0
At 31 December 2014 18,191,894 7.3
At 31 December 2015 18,191,894 7.3
27. Share based payments
On 17 October 2011, the Group established the Share Option Scheme (SOS) entitling three directors and certain senior
employees to purchase shares in the Company.
The performance conditions of the Scheme are that for the duration of the vesting period, the dividends paid by the Company
must have increased in percentage terms when compared to an assumed dividend of £8 million in respect of the financial year
ending 31 December 2012, by a minimum of the higher of the increase in the Retail Prices Index during that period or 5% per
annum.
All dividends paid by the Company each year during the vesting period must be paid from the Company's earnings referable to
that year. Also from the grant date to the date the Option is exercised, there must be no public criticism by any
regulatory authority on the operation of the Company or any of its subsidiaries which has a material impact on the business
of the Company.
Options are forfeited if they remain unexercised after a period of more than 10 years from the date of grant. If the
participant ceases to be employed by the Group by reason of injury, disability, ill-health or redundancy; or because his
employing company ceases to be a shareholder of the Group; or because his employing business is being transferred out of
the Group, his option may be exercised within six months after such cessation. In the event of the death of a participant,
the personal representatives of a participant may exercise an option, to the extent exercisable at the date of death,
within six months after the death of the participant.
On cessation of employment for any other reason (or when a participant serves, or has been served with, notice of
termination of such employment), the option will lapse although the Remuneration Committee has discretion to allow the
exercise of the option for a period not exceeding six months from the date of such cessation.
In such circumstances, the performance conditions may be modified or waived as the Remuneration Committee, acting fairly
and reasonably and taking due consideration of the circumstances, thinks fit. The number of Ordinary Shares which can be
acquired on exercise will be pro-rated on a time elapsed basis, unless the Remuneration Committee, acting fairly and
reasonably and taking due consideration of the circumstances, decides otherwise. In determining whether to exercise its
discretion in these respects, the Remuneration Committee must satisfy itself that the early exercise of an option does not
constitute a reward for failure.
On 2 November 2011 934,998 share options were granted at an exercise price of £7.20 per share. Approximately half of the
share options were exercised on 2 November 2014 with the remainder being exercisable on 2 November 2016, being classed as
share option tranches SOS1 and SOS2 respectively. A total of 14,167 share options have been forfeited since their grant
date.
The Share Option Scheme is an equity settled scheme. The original grant date valuation was determined to be £1.69 per
option and this valuation has been used in the calculation. An attrition rate of option holders has been assumed of nil for
the second tranche of share options. Due to the options being fully conditional knockout options, a probability of pay-out
has been assigned based on the likelihood of meeting the performance criteria, which is 100% for SOS2. The Company incurred
an expense in relation to share based payments of £0.2 million during 2015, as disclosed in Note 8.
2015 2015 2014 2014
No. of option holders No. of option holders
SOS2 SOS2
Directors 3 318,751 3 318,751
Senior management 5 141,668 5 141,668
Share options in issue 8 460,419 8 460,419
Exercise price (£) 7.20 7.20
Grant date value per option (£) 1.69 1.69
Fair value of share options, if all share options were exercised (£million) 0.8 0.8
Behavioural assumption (attrition) - -
Probability of pay-out 100% 95%
Assumed value of share options on exercise date (£million) 0.8 0.8
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