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 7
17/03/2016 07:06
- Part 7: For the preceding part double click ID:nRSQ3659Sf
Value of share options at 31 December 2015 (£million) 0.6 0.5
Cash settled share based payments
On 16 March 2015, a four year "phantom" share option scheme was established in order to provide effective long-term
incentive to senior management of the Group. Under the scheme, no actual shares would be issued by the Company, but those
granted awards under the scheme would be entitled to a cash payment. The amount of the award is calculated by reference to
the increase in the value of an ordinary share in the Company over an initial value set at £25 per ordinary share, being
the price at which the shares resulting from the exercise of the first tranche of share options under the Share Option
Scheme were sold in November 2014.
As at 31 December 2015, 326,917 share options remained outstanding following the departure of one employee from the scheme.
An additional 14,000 share options should lapse following the expected departure of a further three employees following the
conditional sale of ELG.
As at 31 December 2015, the estimated fair value has been prepared using the Black-Scholes model. Measurement inputs and
assumptions used were as follows:
2015
Expected stock price volatility 27.00%
Expected dividend yield 2.09%
Risk free interest rate 0.72%
Average expected life (years) 2.85
This resulted in the following being recognised in the financial statements:
2015 2014
£million £million
Balance at 1 January - -
Charge for the year (included in staff costs - see Note 8 ) 1.2 -
Balance at 31 December 1.2 -
Intrinsic value 0.8 -
28. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three
months' maturity from the date of acquisition.
2015 2014
Group £million £million
Cash and balances at central banks 131.8 81.2
Loans and advances to banks (Note 12) 9.8 24.8
141.6 106.0
Included in assets held for sale
Loans and advances to banks (Note 33) 1.7 -
143.3 106.0
2015 2014
Company £million £million
Cash and balances at central banks 131.8 81.2
Loans and advances to banks (Note 12) 9.2 22.9
141.0 104.1
29. Related party transactions
Related parties of the Company and Group include subsidiaries, Key Management Personnel, close family members of Key
Management Personnel and entities which are controlled, jointly controlled or significantly influenced, or for which
significant voting power is held, by Key Management Personnel or their close family members.
A number of banking transactions are entered into with related parties in the normal course of business on normal
commercial terms. These include deposits only during 2015 and 2014. Except for the directors' disclosures, there were no
other Key Management Personnel disclosures, therefore the tables below relate to directors only.
Directors
2015 2014
£million £million
Loans advanced 0.2 -
Loans outstanding at 31 December 0.2 -
Deposits
Deposits outstanding at 1 January 0.4 0.3
Additional deposits made during the year 0.1 0.1
Deposits outstanding at 31 December 0.5 0.4
The above loan is part of a £2.5m facility agreed by the Real Estate Finance business with a company in which a director holds 50% of the voting shares, which is secured by property and personal guarantees.
The above transactions arose during the normal course of business and are on substantially the same terms as for comparable transactions with third parties.
The Company undertook the following transactions with other companies in the Arbuthnot Banking Group:
2015 2014
£million £million
Arbuthnot Latham & Co., Ltd - recharge income of shared services (0.8) (0.2)
Arbuthnot Banking Group PLC - group recharges 0.4 0.4
Everyday Loans Holdings Limited - dividends received (11.5) (5.0)
Everyday Loans Limited - management recharge income - 8.7
Everyday Lending Limited - interest income on loan receivable (2.9) (2.6)
Everyday Lending Limited - property and leasing recharges (0.2) -
Debt Managers (Services) Limited - income from sale of debt portfolio (2.4) (3.1)
Secure Homes Services Limited - dividend received (2.0) -
Secure Homes Services Limited - building rental paid 0.4 0.4
STB Leasing Limited - dividend received (4.0) -
V12 Finance Group Limited - dividends received (2.0) -
V12 Retail Finance Limited - financial intermediary charges - applications proposed 1.7 1.5
V12 Retail Finance Limited - financial intermediary charges - applications accepted 3.4 0.8
V12 Retail Finance Limited - financial intermediary charges - loan set-up and processing 3.3 1.7
V12 Retail Finance Limited - loan book management and servicing fees 4.0 1.7
(12.6) 4.3
The loans and advances with, and amounts receivable and payable to, related companies are noted below:
2015 2014
Group £million £million
Loans and advances to related companies - 20.0
Amounts receivable from ultimate parent undertaking 1.3 0.8
Amounts due to related companies (0.1) (0.3)
1.2 20.5
2015 2014
Company £million £million
Loans and advances to related companies - 20.0
Amounts receivable from ultimate parent undertaking 1.3 0.8
Amounts receivable from subsidiary undertakings 140.1 113.8
Amounts due to related companies (10.4) (4.6)
131.0 130.0
Directors' remuneration
The directors' emoluments (including pension contributions and benefits in kind) for the year are disclosed in the Remuneration Report.
At the year end the ordinary shares held by the directors are disclosed in the Directors' Report. Details of the directors'
holdings of share options, as well as details of those share options exercised during the year, are also disclosed in the
Directors' Report.
The interests of any directors who hold shares in the ultimate parent company, Arbuthnot Banking Group PLC, are shown in
the Directors' Report of the ultimate parent company.
30. Operating segments
The Group changed the structure of its internal organisation during the year, and as a result the reportable segments have
been restated. The business is currently organised into six main operating segments, which consist of the different
products available, disclosed below:
Business finance
1) Real Estate Finance: buy-to-let and development loans secured by UK real estate.
2) Asset Finance: loans to small and medium sized enterprises to acquire commercial assets.
3) Commercial Finance: invoice discounting and invoice financing.
Consumer finance
4) Personal Lending: Unsecured consumer loans sold to customers via brokers and affinity partners.
5) Motor Finance: Hire purchase agreements secured against the vehicle being financed.
6) Retail Finance: Point of sale unsecured finance for in-store and online retailers.
Other
Other includes Current Account, OneBill, Pay4later, Rentsmart and debt collection.
Management review these segments by looking at the income, size and growth rate of the loan books, impairments and customer
numbers. Except for these items no costs or balance sheet items are allocated to the segments.
Interest receivable and similar income Fee and commission income Revenue from external customers Net impairment losses on loans and advances to customers Loans and advances to customers
Year ended 31 December 2015 £million £million £million £million £million
Business finance
Real Estate Finance 20.2 0.1 20.3 - 368.0
Asset Finance 2.4 - 2.4 - 70.7
Commercial Finance 0.4 1.2 1.6 0.3 29.3
Consumer finance
Personal Lending 17.2 - 17.2 4.8 74.3
Motor Finance 33.2 0.1 33.3 7.3 165.7
Retail Finance 22.5 1.7 24.2 5.2 220.4
Other 4.6 13.8 18.4 (0.8) 32.2
100.5 16.9 117.4 16.8 960.6
Discontinued operations and assets held for sale
Personal Lending 39.2 1.5 40.7 7.5 114.3
139.7 18.4 158.1 24.3 1,074.9
Interest receivable and similar income Fee and commission income Revenue from external customers Net impairment losses on loans and advances to customers Loans and advances to customers
Year ended 31 December 2014 £million £million £million £million £million
Business finance
Real Estate Finance 2.5 - 2.5 - 133.8
Asset Finance - - - - 4.5
Commercial Finance - 0.1 0.1 - 5.0
Consumer finance
Personal Lending 15.1 - 15.1 3.3 87.5
Motor Finance 27.2 - 27.2 3.9 137.9
Retail Finance 12.8 0.8 13.6 1.2 116.7
Other 5.8 15.2 21.0 0.3 43.2
63.4 16.1 79.5 8.7 528.6
Discontinued operations and assets held for sale
Personal Lending 30.2 4.1 34.3 6.6 93.9
93.6 20.2 113.8 15.3 622.5
The 'other' segment above includes other products which are individually below the quantitative threshold for separate
disclosure and fulfils the requirement of IFRS 8.28 by reconciling operating segments to the amounts reported in the
financial statements.
As interest, fee and commission and operating expenses are not aligned to operating segments for day to day management of
the business and cannot be allocated on a reliable basis, profit by operating segment has not been disclosed.
All of the Group's operations are conducted wholly within the United Kingdom and geographical information is therefore not
presented.
31. Immediate and ultimate parent company
The Company regards Arbuthnot Banking Group PLC, a company registered in England and Wales, as the immediate and ultimate
parent company. Sir Henry Angest, the Group Chairman and Chief Executive has a beneficial interest in 53.7% of the issued
share capital of Arbuthnot Banking Group PLC and is regarded by the Company as the ultimate controlling party. A copy of
the consolidated financial statements of Arbuthnot Banking Group PLC may be obtained from the Secretary, Arbuthnot Banking
Group PLC, Arbuthnot House, 7 Wilson Street, London, EC2M 2SN.
32. Events after the balance sheet date
There were no material post balance sheet events in the Group.
33. Discontinued operations and assets and liabilities held for sale
On 4 December 2015, the Bank agreed to the conditional sale of its non-standard consumer lending business, ELG, which
comprises Everyday Loans Holdings Limited and subsidiary companies Everyday Lending Limited and Everyday Loans Limited, to
Non Standard Finance PLC (NSF) for £107 million in cash subject to a net asset adjustment and £20 million in NSF ordinary
shares. The Disposal is conditional on regulatory approval and satisfaction of the conditions to the NSF financing.
Completion is expected in the near future. On completion, NSF will repay the current intercompany debt of £108 million to
STB.
Under the Bank's ownership, ELG has achieved impressive growth, within the constraints imposed upon it as part of a highly
regulated banking group. An unsolicited approach revealed that NSF was prepared to pay an attractive valuation for ELG.
The net effect of the Disposal will therefore be to nearly double the equity base of Group to circa £250 million. This
substantially improves STB's capital resources and broadens the range of strategic options available to it.
Subject to confirmation by the regulator, the Disposal is expected to improve the Group's CET1 ratio and Leverage ratios to
24% and 18% respectively, on a proforma basis as if the Disposal had occurred on 31 December 2015 (from 15% and 12% on an
unadjusted basis as at 30 June 2015). This represents a substantial capital surplus and significant headroom over PRA
minimum leverage requirements and will support the strong growth in lending of the Group.
While in the short term the Disposal is expected to reduce earnings, given the disposal of ELG's profit streams, the Board
is confident that the proceeds can be reinvested to accelerate the Group's growth prospects and secure new income streams.
Details of the discontinued operations profit for the current year and prior year, assets and liabilities held for sale and
cash flow of discontinued operations is set out below.
Income statement Year ended 31 December Year ended 31 December
2015 2014
£million £million
Interest receivable and similar income 39.2 30.2
Net interest income 39.2 30.2
Fee and commission income 1.5 4.1
Fee and commission expense (0.3) (0.1)
Net fee and commission income 1.2 4.0
Operating income 40.4 34.2
Net impairment losses on loans and advances to customers (7.5) (6.6)
Operating expenses (21.2) (19.0)
Profit before income tax 11.7 8.6
Income tax expense (2.3) (2.0)
Profit for the period - Discontinued operations 9.4 6.6
Group At 31 December
2015
Assets and liabilities held for sale £million
ASSETS
Loans and advances to banks 1.7
Loans and advances to customers 114.3
Property, plant and equipment 0.4
Intangible assets 1.2
Deferred tax assets 0.4
Other assets 0.5
Total assets 118.5
LIABILITIES
Current tax liabilities 3.4
Other liabilities 5.3
Total liabilities 8.7
Net assets held for sale 109.8
Company
Assets held for sale comprises investment in subsidiary undertaking totalling £1.
Year ended 31 December Year ended 31 December
2015 2014
Cash flows from discontinued operations £million £million
Cash flows from operating activities
Profit for the year 7.5 6.6
Adjustments for:
Income tax expense 2.3 2.0
Depreciation of property, plant and equipment 0.1 0.1
Amortisation of intangible assets 1.0 1.3
Impairment losses on loans and advances to customers 7.5 6.6
Cash flows from operating profits before changes in operating assets and liabilities 18.4 16.6
Changes in operating assets and liabilities:
- net increase in loans and advances to customers (27.9) (19.1)
- net (increase) in other assets (0.1) -
- net increase in other liabilities 10.0 5.6
Income tax paid (0.1) (2.3)
Net cash inflow from operating activities 0.3 0.8
Cash flows from investing activities
Purchase of property, plant and equipment (0.3) (0.1)
Net cash flows from investing activities (0.3) (0.1)
Net increase in cash and cash equivalents - 0.7
Cash and cash equivalents at 1 January 1.7 1.0
Cash and cash equivalents at 31 December 1.7 1.7
34. Country by Country reporting
The Capital Requirements (Country-by-Country Reporting) Regulations 2013 introduced reporting obligations for institutions
within the scope of the European Union's Capital Requirements Directive (CRD IV). The requirements aim to give increased
transparency regarding the activities of institutions.
The Country-by-Country Information is set out below:
31 December 2015 Number of FTE Profit before tax Tax paid on profit
Name Nature of activity Location Turnover employees £000 £000
Secure Trust Bank plc Banking services UK 158.1 706 36.5 4.2
31 December 2014 Number of FTE Profit before tax Tax paid on profit
Name Nature of activity Location Turnover employees £000 £000
Secure Trust Bank plc Banking services UK 113.8 608 26.1 3.1
Five year summary
2015 2014 2013 2012 2011
£million £million £million £million £million
Profit for the year
Interest and similar income 139.7 93.6 73.8 44.9 22.9
Interest expense and similar charges (21.6) (14.2) (12.9) (10.5) (5.6)
Net interest income 118.1 79.4 60.9 34.4 17.3
Net fee and commission income 14.4 18.5 18.1 12.6 11.2
Operating income 132.5 97.9 79.0 47.0 28.5
Impairment losses on loans and advances (24.3) (15.3) (15.6) (8.9) (4.6)
Gain from a bargain purchase - - 0.4 9.8 -
Other income - - - 0.1 -
Exceptional costs - - (0.9) (1.4) (0.5)
Arbuthnot Banking Group recharges (0.8) (0.2) (0.1) (0.1) (1.8)
Operating expenses (70.9) (56.3) (45.7) (29.3) (14.3)
Profit before income tax 36.5 26.1 17.1 17.2 7.3
Earnings per share for profit attributable to the equity holders of the Group during the year
(expressed in pence per share)
- basic 157.8 122.3 78.3 108.9 39.6
Financial position
Cash and balances at central banks 131.8 81.2 - - -
Loans and advances to banks 11.5 39.8 110.0 155.3 139.5
Loans and advances to customers 1,074.9 622.5 391.0 297.6 154.6
Debt securities held-to-maturity 3.8 16.3 - - -
Other assets 25.4 22.5 24.9 21.7 13.7
Total assets 1,247.4 782.3 525.9 474.6 307.8
Due to banks 35.0 15.9 0.1 - -
Deposits from customers 1,033.1 608.4 436.6 398.9 272.1
Other liabilities 38.1 33.1 27.6 19.8 11.9
Total shareholders' equity 141.2 124.9 61.6 55.9 23.8
Total liabilities and shareholders' equity 1,247.4 782.3 525.9 474.6 307.8
This information is provided by RNS
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