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RNS Number : 3086W Secure Trust Bank PLC 12 March 2026
Secure Trust Bank PLC
12 March 2026
For immediate release
SECURE TRUST BANK PLC
2025 Annual Results and Investor Update Event: updated strategic plans and
medium-term targets
Secure Trust Bank PLC ('STB', 'Secure Trust Bank', or the 'Group'), a leading
specialist bank, will host its 2025 Annual Results and Investor Update event
for analysts and institutional investors today, 12 March 2026.
A live webcast of the presentation and slides will be available at the
following link at 13.00: https://brrmedia.news/STB_FY25_Investor_Update
(https://brrmedia.news/STB_FY25_Investor_Update) . The Annual Results
presentation will begin at 13.00, with the Investor Update presentation to
begin at 14.15.
The event will cover the Group's 2025 annual results and refreshed strategic
plans, including product driven growth opportunities, and its capital
allocation strategy. The event includes presentations from the CEO, CFO and
management of the Retail Finance, Business Finance and Savings divisions.
2025 Financial highlights(1):
• Achieved return on average equity ('ROAE') of 14.3% (2024: 14.6%)
• Delivered continuing profit before tax of £59.3 million (2024: £59.4
million)
• Common Equity Tier 1 ('CET 1') ratio improved by 60 bps to 12.9% (2024: 12.3%)
• Sale of Consumer Vehicle Finance business further increases CET 1 ratio to
14.7%(2) on a pro forma basis
• Growth in lending balances of 8.1% to £3.3 billion (2024: £3.1 billion)
• Cost income ratio improved by 220 bps to 45.2% (2024: 47.4%)
• Tangible book value per share increased by 5.8% to £19.73 per share (2024:
£18.64 per share)
• Increased total dividend to 35.5 pence per share (2024: 33.8 pence per share),
in line with progressive dividend policy
• Committing £10 million of capital to initiate a share buyback programme to be
delivered over 12 months, subject to regulatory approval
Strategic update
• Refreshed strategic priorities centred on product expansion, effective digital
solutions and capital discipline will deliver targeted growth for higher
returns
• New medium-term targets of c.10% annual growth and ROAE above 16%
• Simplified business on clear trajectory to grow in large scale markets at
lower cost of risk
• Investment in cost efficiency alongside operating leverage will drive strong
cost income ratio
2025 Annual Results
The Group achieved strong levels of new business lending, leading to an 8.1%
increase in net lending balances to £3.3 billion (2024: £3.1 billion).
Retail Finance grew 8.0%, as the business continued to leverage the strength
of its retail distribution network. Business Finance grew by 8.1%, driven by
Real Estate Finance which grew by 9.4% and continued momentum in Commercial
Finance, delivering 3.2% growth in net lending balances. Strong pricing
discipline across the Group in a falling rate environment contributed to
stable net interest margin ('NIM') of 4.7% (2024: 4.7%).
Customer deposits increased 8.2% year on year to £3.5 billion (2024: £3.2
billion), supporting growth in the lending book, and remaining stable relative
to the half year. The rundown of the Vehicle Finance portfolio reduced the
need for additional funding in the second half of the year. The Group fully
repaid its Bank of England Term Funding Scheme with additional incentives for
SMEs ('TFSME') balances in 2025 (2024: £230.0 million). The Group has £201.2
million (2024: £125.7 million) of funding through sale and repurchase
arrangements.
Cost income ratio improved to 45.2% (2024: 47.4%) reflecting strong income
growth and effective cost management in an inflationary environment, and the
delivery of operational efficiencies through our cost optimisation programme,
Project Fusion(3). In 2025, operating expenses included £2.5 million of
non-recurring costs relating to changes in senior leadership; excluding these
items, the cost income ratio would have been 43.7%.
Cost of risk increased to 1.0% (2024: 0.8%). This reflects the impact of three
specific cases in Business Finance and a normalisation of impairment charges
in Retail Finance, following the impact of one-off model benefits.
The Group was capital accretive in 2025 and strengthened its capital position
in the year, improving the CET 1 ratio by 60 bps to 12.9% (2024: 12.3%). The
sale of the Consumer Vehicle Finance business, which completed on 25 February
2026, further increases the CET 1 ratio on a pro forma basis to 14.7%(2).
Financial Summary(1)
2025 2024 Change
Continuing profit before tax £59.3m £59.4m (0.2)%
Total profit before tax £27.5m £29.2m (5.8)%
Total adjusted(4) profit before tax £51.6m £39.1m 32.0%
Basic earnings per share 238.8 pence 227.7 pence 4.9%
Total basic earnings per share 94.2 pence 103.4 pence (8.9)%
Ordinary dividend per share 35.5 pence 33.8 pence 5.0%
Return on average equity 14.3% 14.6% (30) bps
Net interest margin 4.7% 4.7% -
Cost of risk 1.0% 0.8% 20 bps
Cost income ratio 45.2% 47.4% (220) bps
Net lending balances £3,295.8m £3,050.2m 8.1%
Customer deposits £3,509.6m £3,244.9m 8.2%
Tangible book value per share £19.73 £18.64 5.8%
CET 1 ratio 12.9% 12.3% 60 bps
Total capital ratio 15.2% 14.6% 60 bps
Execution against strategic priorities
We continued to make strong progress against the four strategic priorities set
out in 2023: simplify, leverage networks, enhance customer experience and
enabled by technology.
• Sale of Consumer Vehicle Finance business further simplifies Group structure
• Completion of Project Fusion, which has delivered c.£8 million of annualised
cost savings(3)
• Strong levels of new lending across Business and Retail Finance, reflecting
strength of deep customer and partner relationships
• Surpassed 475,000 Retail Finance app registrations and re-launched an updated
Savings app
• Gains in Retail Finance new business market share to 15.5%(5) (2024: 13.6%)
Regulatory and legal developments
In October 2025, and in response to the proposed FCA approach, we increased
our provision for motor finance consumer redress and related costs by £16.4
million. As at the 31 December 2025 the provision held was £21.5 million
(2024: £6.4 million).
Dividend
The Board recommends the payment of a final dividend for 2025 of 23.7 pence
per share, which together with the interim dividend of 11.8 pence per share,
represents a total dividend for the year of 35.5 pence per share (2024: 33.8
pence per share). This will be payable on 21 May 2026 to shareholders on the
register at the close of business on 24 April 2026 and is in line with the
Group's progressive dividend policy.
Updated strategic priorities and medium-term targets
2025 strategic pivot
In the first half of 2025, the Group underwent a strategic review and
identified opportunities to increase ROAE over time. As a result, the Group
took decisive actions to streamline the business during 2025, including
announcing its decision to stop new Vehicle Finance lending and subsequently
agreeing the sale of the Consumer Vehicle Finance business.
We have now simplified to two lending divisions, Retail Finance and Business
Finance, supported by our Savings division. This new structure reflects the
way that we manage and evaluate our businesses through a product lens. We have
profitable growth opportunities across our divisions, all with an established
track record of value creation. Our proven specialist market capabilities,
combined with the operating leverage now embedded within our businesses,
enable us to pursue growth opportunities at minimal incremental cost.
Refreshed strategy - Targeted growth for higher returns
Secure Trust Bank's refreshed strategy is "targeted growth for higher
returns". This will be delivered though three strategic priorities:
• Product expansion: The Group will build on its existing strengths while
broadening its product portfolio, including expansion into complementary
offerings that enhance overall returns.
• Effective digital solutions: The Group will use scalable, flexible technology
to enable further efficiencies, widen distribution and enhance the customer
journey.
• Capital discipline: Capital allocation decisions will be informed by business
credit expertise and data insights. The deployment of capital will support
growth and value creation.
Medium-term targets
Secure Trust Bank also announces new medium-term targets.
Measure Medium-term target
Annual growth in net lending c.10%
ROAE >16%
Our target ROAE of above 16% will be driven by a disciplined focus on key
drivers and underpinned by our ambitions to:
• target c.10% annual net lending growth in Retail Finance and Business Finance
divisions, whilst maintaining risk adjusted margins through credit discipline
and utilising data insights;
• expand our products into areas that share similar characteristics to our
current offering where we have proven capability;
• deliver high operating leverage by maintaining a disciplined approach to cost
management and delivery of efficiencies;
• improve cost income ratio over time, with an ambition to be 35-40% in the
medium-term; and
• support predictable and stable returns through a balanced risk-weighted asset
mix.
Optimising capital management
Maintaining a strong capital base is pivotal to the delivery of our
medium-term targets.
Our capital allocation framework is designed to optimise capital deployment
for growth and value creation, whilst managing capital buffers. Our ambition
is to maintain the CET 1 ratio at c.13.0%. We aim to deploy any surplus
capital in the highest returning opportunities or return capital to
shareholders, so as to enable us to deploy capital in organic product driven
growth opportunities and enhance distributions to shareholders. Subject to
regulatory approval and no material changes in prevailing market conditions,
we will be committing surplus capital to initiate a share buyback programme
with £10 million intended to be delivered in tranches over the next 12
months, as well as reaffirming our commitment to a progressive dividend
policy. The Group is capital accretive and can support both further growth in
net lending and dividends.
These choices are possible due to the sale of the Consumer Vehicle Finance
business which has released capital ahead of schedule. This also accelerates
our removal of costs from the Group. In our 2025 Interim Results, we indicated
that the exit from Vehicle Finance would release £25 million of costs by
2030, involving incurring costs of £5 million. We are reaffirming our target
to remove £25 million of run-rate costs but will do so by 2028, incurring
additional costs of £12 million. We intend to support our medium-term target
of more than 16% ROAE in this way through material improvements in the cost
income ratio.
2026 Guidance
Having taken decisive strategic actions in 2025, 2026 will be a transitional
year to launch new products and reduce cost. Accordingly, we provide the
following guidance on 2026 expected performance.
Net lending 8-10% growth
Risk Adjusted Margin c.10 bps improvement
Costs Cost income ratio c.47%
Capital CET 1 ratio c. 13.5%
Distributions Progressive dividend policy maintained
Intention to launch £10 million buy-back programme, subject to regulatory
approval
Discontinued activities Break even profit before tax pre-exceptionals
CEO, Ian Corfield said:
"Our strategy is simple. We will grow in large investable scale markets, where
there are product driven opportunities that leverage our proven capabilities,
and we will do this with operating leverage that will deliver an improved cost
income ratio in the medium-term. We have a clear trajectory to higher returns,
delivered at a reduced cost of risk. We are well capitalised and intend to
deliver value back to shareholders through a share buyback programme. In
combination this will allow us to deliver targeted growth at higher returns."
Footnotes
1. Performance metrics relate to continuing operations, unless otherwise
stated. The term 'Total' refers to statutory continuing and discontinued
operations. Further details of the metrics can be found in the Appendix to the
2025 Annual Report and Accounts.
2. The revised pro forma CET 1 ratio at 31 December 2025 reflects 1) the
Consumer Vehicle Finance portfolio had credit risk weighted assets of £293.2
million at that time and 2) the Vehicle Finance business sale generated a
one-off net gain on sale on completion which increased CET 1.
3. £5.0 million cost savings relative to operating expenses for the 12 months
ended December 2021. The additional £3.0 million savings (of the £8.0
million) are relative to annualised operating expenses for the six months
ended 30 June 2024.
4. Adjusted metrics exclude exceptional items of £24.1 million (2024: £9.9
million). Details can be found in Note 8 to the Financial Statements.
5. Source: Finance & Leasing Association: New business values within
retail store and online credit: 2025: 15.5% (2024: 13.6%). FLA total and
Retail Finance new business of £9,094.8 million (2024: £9,476.0 million) and
£1,407.0 million (2024: £1,289.7 million). As published at 31 December 2025.
Enquiries:
Secure Trust Bank PLC
Ian Corfield, Chief Executive Officer
Rachel Lawrence, Chief Financial Officer
Phil Deakin, Strategy and Corporate Development Director
Tel: 0121 693 9100
Investec Bank plc (Joint Broker)
Christopher Baird
David Anderson
Maria Gomez de Olea
Tel: +44 (0) 20 7597 5970
Shore Capital Stockbrokers (Joint Broker)
Mark Percy / Sophie Collins (Corporate Advisory)
Oliver Jackson / Ansh Batura (Corporate Broking)
Tel: +44 (0) 20 7408 4090
Camarco
Geoffrey Pelham-Lane, Amrith Uppuluri
securetrustbank@camarco.co.uk (mailto:securetrustbank@camarco.co.uk)
Tel: +44 (0) 7733 124 226, +44 (0) 7763 083 058
Forward looking statements
This announcement contains forward-looking statements about the business,
strategy and plans of STB and its current objectives, targets and expectations
relating to its future financial condition and performance. Statements that
are not historical facts, including statements about STB's or management's
beliefs and expectations, are forward-looking statements. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. STB's actual
future results may differ materially from the results expressed or implied in
these forward-looking statements as a result of a variety of factors. These
include economic and business conditions, risks from failure of clients,
customers and counterparties, market related risks including interest rate
risk, risks regarding market conditions outside STB's control, expected credit
losses in certain scenarios involving forward looking data, operational risks,
legal, regulatory, or governmental developments, and other factors. The
forward-looking statements contained in this announcement are made as of the
date of this announcement, and (except as required by law or regulation) STB
undertakes no obligation to update any of its forward-looking statements.
About STB
STB is an established, well‐funded and capitalised UK retail bank with a
72‐year trading track record. STB operates principally from its head office
in Solihull, West Midlands. The Group's diversified lending portfolio
currently focuses on two sectors:
(i) Business Finance through its Real Estate Finance and Commercial Finance
divisions; and
(ii) Consumer Finance through its V12 Retail Finance division,
supported by its Savings division.
Secure Trust Bank PLC is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation
Authority.
Secure Trust Bank PLC, Yorke House, Arleston Way, Solihull, B90 4LH.
Group at a glance
Our strategic progress against 2025 priorities
Simplify
· Streamlined Group: Accelerated exit of Vehicle Finance business has focused
capital deployment on higher returning businesses
· Delivered cost efficiencies: Project Fusion, our cost optimisation programme
has delivered c. £8 million(1) of annualised savings
· Workplace optimisation: Consolidation of office spaces, driving operational
efficiencies and contributing to our ESG strategy
Enhance customer experience
· Improved speed of credit decisions: 90% of Retail Finance applications
auto-decisioned in 6 seconds (2024: 6 seconds)
· Upgraded user experience through digital applications: New Savings app
launched in December streamlines the customer journey and enhances digital
capabilities
· Sustained client satisfaction: Internal surveys recorded strong scores across
Business Finance, and Retail Finance and Savings Trustpilot score maintained
at 4.8 stars(2) (2024: 4.8)
Leverage networks
· Sustained strong growth in new business lending: Supported by high levels of
client retention and repeat business in Business Finance, and depth of
relationships in Retail Finance
· Breadth of partnerships: Partnering with c.900 retailers across thousands of
outlets to drive £1.5 billion of net lending in Retail Finance
· Increased market reach: Strong network of partners and retailers achieved 8.1%
growth in Business Finance and new business market share of 15.5%(3) in Retail
Finance
Enabled by technology
· Digital-first operating model: Over 99% customers registered for online
banking in Savings and over 91% opting for online account management in Retail
Finance
· New platforms and partners in Retail Finance: Integration of additional
platforms and partners has enhanced the Group's scalability and strengthened
key controls
· Seamless customer experience: Over 475,000 customers registered for the Retail
Finance V12 app, where they are able to access the full product suite
available
Updating our strategic priorities for 2026 and beyond
Our refreshed strategic ambitions will position the Group for long‑term,
sustainable growth
Refer to Chief Executive statement for further information.
Notes:
1. £5.0 million cost savings relative to operating expenses for the 12 months
ended December 2021. The additional £3.0 million savings (of the total £8.0
million) are relative to annualised operating expenses for the six months
ending 30 June 2024.
2. Mark out of 5 based on star rating from 11,220 reviews (2024: 15,527).
3. Source: Finance & Leasing Association: New business values within
retail store and online credit: 2025 15.5% (2024: 13.6%). FLA total and Retail
Finance new business of £9,094.8m (2024: £9,476.6m) and £1,407.0m (2024:
£1,289.7m) respectively. As published at 31 December 2025.
Chair's statement
It has been a year of change at Secure Trust Bank, with the Board having taken
decisive action to strengthen the business and to lay the foundations for
enhanced shareholder returns.
In June, we appointed a new Chief Executive Officer ('CEO'), Ian Corfield, to
lead the Group through the next phase of its growth strategy, to accelerate
the pace of change across the Group and help drive improved performance. The
Board is pleased with the progress he has made since his appointment.
In July, we made the difficult decision to cease lending in our Vehicle
Finance business, which had been loss making, and with additional recent
operational challenges and increased loan impairments, was materially
impacting our Group performance. In December, we announced the sale of the
Consumer Vehicle Finance business, which completed in February 2026. This was
an important strategic milestone and will help to accelerate further our
strategic progress by releasing capital to invest in our higher returning
business areas.
I would like to take this opportunity to thank all of our Vehicle Finance
colleagues, who helped grow the business despite the increasingly challenging
operating environment, and to wish them all the very best for the future.
We have refreshed our strategy and simplified our medium-term targets ensuring
the business is focused on delivering growth and driving improved returns for
our shareholders. Under our revised strategy we will deploy capital, with
discipline, into our three higher returning business units; Retail Finance,
Commercial Finance and Real Estate Finance, supported by funding through our
Savings business. We are focused on developing adjacent products where we have
expertise, can add value to our customers and business partners, and leverage
technology to ensure our services can be delivered effectively and
efficiently. We will continue to have a rigorous approach to cost management,
as we right-size the business following the sale of Consumer Vehicle Finance,
and further improve our cost income ratio.
We are confident that the strategic decisions taken will support the
sustainable growth of our business, deliver improved performance and increased
return on equity.
Business performance
Adjusted(1) total profit before tax for the year ended 31 December 2025
increased by 32.0% to £51.6 million (2024: £39.1 million). This was strong
year-on-year growth, however, it was below our expectations for the year with
performance once again impacted by the volatility in impairments within our
legacy Vehicle Finance business.
Total statutory profit before tax decreased slightly to £27.5 million (2024:
£29.2 million). Statutory profit was negatively impacted by exceptional costs
incurred due to the decision to cease lending within our Vehicle Finance
business and the additional provision booked following the publication of the
FCA's consultation on the proposed redress scheme for motor finance
commissions.
Whilst we appreciate the additional certainty the FCA's redress scheme will
bring, we believe the proposed scheme is not aligned with the Supreme Court
judgment in Johnson v FirstRand. If implemented in the form proposed, we
believe the scheme will result in redress also being paid to customers who
received competitive finance and were not harmed and will unfairly impact
lenders, particularly those providing near prime financing through specialist
brokers operating competitive panels of lenders. We provided a robust response
(supported by analysis of our data) to the consultation, including setting out
how customers who received competitive finance were not harmed.
Capital and shareholder returns
On a total basis, adjusted(1) return on average equity was 10.4% (2024: 8.0%);
however, if the legacy Vehicle Finance business is excluded, the adjusted(1)
return on average equity for the continuing business was 14.3% (2024: 15.0%).
The returns generated by the continuing business, and the plans to increase
these further, are positive indicators for the Group's ability to deliver a
return on average equity of over 16% in line with our revised medium-term
targets.
We have a strong capital position, which has increased during 2025 and, as at
31 December 2025, the Group's Common Equity Tier 1 ratio was 12.9% (2024:
12.3%). This ratio includes the additional provision booked for the estimated
redress and costs associated with the FCA's redress scheme for historic motor
finance commissions.
It is pleasing to see the progress being made across the business, starting to
be reflected in the Company's share price, which increased by 244% over the
course of 2025. However, the share price as at 31 December 2025 was £12.45,
which is still materially below the Group's tangible book value of £19.73.
In accordance with the Group's progressive dividend policy, the Board has
proposed a final dividend payment of 23.7 pence per share (2024: 22.5 pence
per share), which if approved by shareholders at the Company's 2026 Annual
General Meeting, will be paid on 21 May 2026 to those shareholders on the
register on 24 April 2026.
Governance
There have been several changes to the Board this year. David McCreadie, our
former CEO, retired in August 2025 and I would like to thank David on behalf
of the Board, employees and all stakeholders for the progress he drove during
his tenure as CEO. He oversaw material increases in our lending balances and
helped simplify and refocus the Group, providing us with a strong platform for
growth.
Our Senior Independent Director and Chair of the Audit Committee, Ann
Berresford, who had served on the Board for nine years, stepped down as a
Non-Executive Director on 30 December 2025. Ann was appointed to the Board in
November 2016 and as Audit Committee Chair in September 2017, and has overseen
significant change across the organisation and enhanced the operation of the
Audit Committee. In her role as Senior Independent Director, she led the
recruitment for the Chair role, which concluded in 2024. I would like to
extend our thanks and best wishes to Ann.
Steve Colsell was appointed to the Board on 12 June 2025 and was appointed
Chair of the Audit Committee with effect from 30 December 2025. Steve brings
extensive financial and accounting experience, particularly within financial
services, and is already making a strong contribution to the Board.
In August, Victoria Mitchell was appointed our designated Non-Executive
Director for employee engagement, taking over from Paul Myers. We were also
delighted to appoint Julie Hopes, who joined the Board in October 2024, as our
new Senior Independent Director and Deputy Chair with effect from 30 December
2025.
There have been some changes to our Executive Committee during the year
(further information on which can be found in the Chief Executive's
statement). I would like to thank all former colleagues for their contribution
to Secure Trust Bank and wish all those commencing new roles every success.
Outlook
The macroeconomic outlook remains uncertain with muted growth across the UK
and significant geopolitical uncertainty. We will need to remain agile to
adapt to market conditions and continue to focus on delivering good outcomes
for our customers, in the specialist areas we operate.
The strategic changes we have implemented during the year position us well to
drive improved performance and accelerate our growth and returns for the
benefit of our shareholders and other stakeholders. Across the Group we look
forward with optimism and renewed energy.
I would like to thank our customers, business partners and shareholders for
their continued support and all of our employees who have worked tirelessly to
deliver for our customers and the business.
Note:
1. Adjusted metrics exclude exceptional items of £24.1 million, all relating
to Vehicle Finance (2024: £9.9 million, of which £8.4 million relating to
Vehicle Finance). Details can be found in Note 8 to the Financial Statements.
Chief Executive's statement
Our 2025 results reflect a year of decisive strategic execution to improve
financial performance. While there have been challenges, I believe the actions
taken in 2025 to refresh the leadership team, streamline the Group to operate
as one business and to deploy resources into higher returning business units
will position us to deliver higher returns and enhanced long-term value
creation.
I was delighted to join Secure Trust Bank as Chief Executive Officer at the
mid-year. During my first six months I have observed the many strengths of the
Group: deep specialist credit and financial expertise, strong partner
relationships and flexible platforms. Above all, I have been struck by the
commitment of my new colleagues to do the right thing for the business and our
customers. I am pleased with the way they have managed a period of significant
change with resilience. With a renewed focus on in-office collaboration, I
look forward to further progress in 2026 and beyond.
We have grown our continuing businesses, with net lending growth of 8.1% to
£3.3 billion (2024: £3.1 billion). Our capital position has strengthened
with a significant improvement in the Common Equity Tier 1 ('CET 1') ratio of
60 bps in the year to 12.9% (2024: 12.3%). Customer deposits grew in line with
the loan book during the year, supporting robust lending.
These results signal that, despite the need to guide the market to a lower
profit number during the year, the Group has solid foundations for the next
phase of its development.
Strategic pivot
In July, we made the decision to stop new lending in our Vehicle Finance
business. In December, we announced the sale of
the Consumer Vehicle Finance business, which completed as planned on 25
February 2026. The decision to stop new lending was made following a Groupwide
strategic review in the first half of the year and reflects the historical
financial performance, as well as the medium-term outlook, of the Vehicle
Finance business. The sale means the Group can now accelerate its strategic
plans. Exiting the Vehicle Finance business will unlock capital to reinvest
into higher returning opportunities, supporting long-term growth ambitions and
enable consideration of enhanced shareholder distributions.
As a result of the first half strategic review, we identified an optimised
model for the Group to significantly improve shareholder returns over the
medium-term. We have profitable organic growth opportunities across our
Retail Finance and Business Finance businesses which have an established
track record of value creation. We are also well placed to leverage the
operational improvements and will be disciplined in our approach to
investment for growth.
All key performance indicators are presented on a continuing basis,
unless otherwise stated.
Financial results - continuing business
The Group delivered a robust set of financial results in 2025. Notably, we
delivered profit before tax of £59.3 million (2024: £59.4 million), with
stable net interest margin ('NIM') of 4.7% (2024: 4.7%), reflecting strong
pricing discipline in a falling rate environment.
Our cost income ratio improved by 220 bps to 45.2% (2024: 47.4%) reflecting
continued income growth and disciplined cost management following the success
of our cost optimisation programme, Project Fusion.
The Group's operating expenses included non-recurring costs relating to
changes in senior leadership, with the underlying cost base stable
year-on-year, despite inflationary pressures. We will maintain our focused
approach to cost management, and optimise the cost base as we enter into the
next phase of our strategic ambitions.
Growth across our continuing businesses was driven by continued strong levels
of new business written across all markets, whilst navigating a year of modest
economic growth.
Increased lending balances were supported by an 8.2% increase in customer
deposits to £3.5 billion (2024: £3.2 billion), where our product mix
remained focused on fixed-term offerings. We raised c. £1.8 billion of new
deposits in the year, and over 97% of deposits (by value) are protected by the
Financial Services Compensation Scheme.
The Group was capital accretive in 2025, and at the end of the period the
Group's CET 1 ratio increased to 12.9% (2024: 12.3%). This remains comfortably
above the regulatory requirements and supports the Group's growth ambitions.
The sale of the Consumer Vehicle Finance business further strengthens this
position, and improves our CET 1 ratio on a proforma basis by 180 bps to
14.7%, enabling reinvestment into our continuing businesses.
Cost of risk increased to 1.0% (2024: 0.8%). This was driven by impairment
charges related to a few specific cases in Business Finance and a
normalisation of impairment charges in Retail Finance, following one-off model
benefits in 2024.
Total profit before tax was £27.5 million (2024: £29.2 million), impacted
by the additional £16.4 million provision relating to motor finance
commissions redress provisions. The Group also recognised £5.0 million of
exceptional costs relating to the decision to exit Vehicle Finance.
Total adjusted¹ return on average equity ('ROAE') was 10.4% (2024: 8.0%).
Excluding Vehicle Finance, adjusted¹ ROAE was 14.3% (2024: 15.0%). These
measures indicate that the right decisions have been implemented to set the
Group on a stronger trajectory for higher returns.
Note:
1. Adjusted metrics exclude exceptional items of £24.1 million, all relating
to Vehicle Finance (2024: £9.9 million, of which £8.4 million relating to
Vehicle Finance). Details can be found in Note 8 to the Financial Statements.
We made solid progress against the medium-term targets set in 2023, increasing
net lending, improving cost income ratio, and maintaining stable NIM, while
preserving robust capital ratios. However, market conditions have required a
reset of strategic ambitions. Vehicle Finance continued to weigh on NIM and
ROAE, and although our decision to exit this business will initially reduce
lending balances and NIM, it will improve both the cost income ratio and ROAE
over time. Given these changes, it is the right time to establish new
medium-term targets focused on higher returning growth. Looking ahead, we are
targeting c.10% annual growth in our continuing businesses and an ROAE of
more than 16% in the medium-term. Whilst we acknowledge risk adjusted margins,
pricing for capital requirements, and effective cost management are important
to delivering high returns we do not intend to set individual targets for
these measures and will balance these drivers to deliver against the target
ROAE.
Capital and funding
As previously announced, we repaid our Term Funding Scheme with additional
incentives for SMEs ('TFSME') funding in the first half of 2025 ahead of
contractual maturity. The Group continued to make use of sale and repurchase
agreements as part of its funding strategy, ending the period with an
outstanding balance of £200.0 million (2024: £125.0 million).
The PRA is to introduce the Basel 3.1 standards in January 2027. At the same
time, it will implement the Strong and Simple capital regime for Small
Domestic Deposit Taker ('SDDT') firms, providing an alternative to smaller
banks to the full Basel 3.1 standards. The Group has been approved as an SDDT,
and is making good progress in its preparations for transfer to the new
regime. The Group has factored the anticipated requirements from the Basel 3.1
and SDDT regimes into its capital management; these transitions are not
expected to materially impact the Group.
Strategic priorities
In 2023 we established four strategic priorities to guide the Group: simplify,
leverage networks, enhance customer experience and enabled by technology.
These priorities underpinned the medium-term targets for the Group first
established in 2021. During 2025, we continued to make good progress against
these.
Our commitment to simplification was most clearly demonstrated by the sale of
our Consumer Vehicle Finance business, allowing capital deployment to be
focused in higher performing businesses. Project Fusion, our cost optimisation
programme, has concluded, delivering total annualised savings of c.£8
million¹ through changes to our organisational design, streamlining legacy
operational processes and simplifying the Group. These efficiencies support
the next phase of our growth ambitions. Across the Group, we have streamlined
operations, including the consolidation of our office footprint which has
generated cost savings and contributed to our climate commitments.
Our customers are at the core of what we do, and we continue to use our
digital platforms to enhance customer experience. In December, we launched our
upgraded Savings app, providing a more streamlined journey and additional
capabilities for self-service. High‑quality client interactions remain core
to our relationship‑led model in Business Finance, as evidenced by the
consistently strong customer satisfaction scores in our internal surveys.
Leveraging our networks remains central to our business model. The depth of
relationships we hold with retailers and other business partners, and
customers across our markets enable growth. Our relationships with
approximately 900 retail partners supported £1.5 billion (2024: £1.4
billion) of net lending across a diverse range of retailers, both in sector
and size. This supported an increase in Retail Finance's market share of new
business to 15.5%² (2024: 13.6%). In Business Finance, high levels of repeat
business and client retention reflect the strength of our regional footprint
and the relationships we build with local advisory teams to deliver bespoke
solutions.
Technology has been a key enabler of our strategic objectives. The Retail
Finance app has surpassed 475,000 registrations, offering a seamless customer
experience and direct access to our full product suite. Integration of new
platforms and partners has enhanced the Group's scalability and strengthened
key controls. We have made continued progress in our digital-first approach,
with over 99% of customers registered for online banking for Savings and over
91% opting for online account management in Retail Finance. This provides
customers with greater control and a more efficient journey, enhancing their
overall customer experience.
Notes:
1. £5.0 million cost savings relative to operating expenses for the 12 months
ended December 2021. The additional £3.0 million savings (of the £8.0
million) are relative to annualised operating expenses for the six months
ending 30 June 2024.
2. Source: Finance & Leasing Association ('FLA'): New business values
within retail store and online credit: 2025: 15.5% (2024: 13.6%). FLA total
and Retail Finance new business of £9,094.8m (2024: £9,476.6m) and
£1,407.0m (2024: £1,289.7m) respectively. As published at 31 December 2025.
Regulatory and legal interventions
In October 2025, the FCA released a consultation paper on an industry-wide
compensation scheme relating to motor finance commissions. The FCA is now
working through an extensive range of responses to the consultation and has
indicated it will publish redress scheme rules by the end of March 2026. The
current proposed redress scheme is towards the extreme end of outcomes
previously expected, however, these proposals are subject to consultation and
therefore remain uncertain. As a result of the FCA proposals, the Group
increased its provision for motor finance consumer redress and related costs
by £16.4 million. As at 31 December 2025 we held a provision of
£21.5 million (2024: £6.4 million. See Note 31 to the Financial Statements
for further information).
To calculate the provision, we updated our range of probability-weighted
scenarios, including a high probability of the FCA scheme being implemented as
proposed. If the FCA scheme was implemented entirely in its current form, the
Group would expect to increase the provision for redress by a further £6
million.
Following the FCA's review of Borrowers in Financial Difficulty ('BiFD') in
2023, we identified that it was appropriate to pay £2.2 million to customers
where we could have supported them better due to their individual
circumstances. We have now completed this programme of work. During 2025 we
have recognised an additional £2.1 million (2024: £1.5 million) charge, as
an exceptional item, which largely relates to costs to manage and conclude the
programme (See Note 8 to the Financial Statements).
As a result of the BiFD review, we had an elevated stock of defaulted Vehicle
Finance loans at the end of 2024. During the year, we agreed several debt
sales, which reduced the level of defaulted balances, and entered into a
forward flow arrangement for newly terminated accounts.
Environmental, Social and Governance ('ESG')
Following a period of organisational transformation, we are reviewing our ESG
strategy to ensure it aligns fully with our renewed strategic ambitions.
Our employees have worked hard to make 2025 an exceptional year for
fundraising. The Group raised over £126,000 for important causes in the year
(2024: £99,800) supporting our partners at Birmingham Children's Hospital,
Tŷ Hafan, Mind, Go Beyond and Bone Cancer Research.
Building on our 2024 achievement of reducing direct CO2 emissions by 50% ahead
of schedule, we implemented further reductions in 2025, through energy
efficiency initiatives, further reducing our office footprint, and
accelerating our paper-to-digital transition via enhanced self-service
journeys in Retail Finance and Savings.
I am proud that we appear on the 2025 lists for Great Place to Work(®),
including accolades for UK Best Workplaces™ and UK Best Workplaces for
Women™. However, 2025 was also a year of significant transition. The
strategic decision to exit Vehicle Finance and then sell the Consumer Vehicle
Finance business resulted in many roles being made redundant. With increased
clarity on the timing of the forthcoming changes, the Group is committed to
supporting all those who have been impacted. As a result, our employee
engagement Trust Index score fell to 64% (2024: 74%) and we are taking actions
to rebuild trust and engagement in 2026. I acknowledge the significant impact
strategic decisions have had on all colleagues as we have navigated this
period and thank all employees for their hard work and resilience.
Executive Committee and Senior Leadership
During the second half of 2025, there were several changes to what had been a
relatively long-standing Executive team. Katie Docherty, former Chief
Operating Officer ('COO'), left the Group after four years. I was pleased to
welcome Jim Appleby, who has extensive experience in UK and international
financial service operations, as COO.
Chris Harper, Chief Risk Officer ('CRO'), also left the Group after nearly
five years of service. Uwe Seedorf has joined as Interim CRO, bringing a
wealth of experience in risk leadership, including in his previous role as CRO
at Allied Irish Bank UK.
Following the departure of Anne Mckenning, Vicki Baker joined the Group as
Chief People Officer in February 2026. With over 20 years' experience in HR,
transformation and strategy, Vicki brings valuable commercial insight and a
strong people-first approach.
Finally, I was pleased that Rajat Mehta joined the Group as Savings Director,
taking over from Julian Hartley, former Managing Director of Vehicle Finance
and Savings, who left the Group in 2025. With over 20 years of leadership
experience in retail banking, savings strategy and digital innovation, Rajat's
expertise in delivering innovative solutions and driving growth will be
invaluable.
I would like to thank Anne, Katie, Chris and Julian for their contribution and
dedication to the success of the Group over several years. I am confident that
the new additions to the Executive Committee and senior leadership mean we
have the right leadership team in place to support delivery of the next phase
of the Group's growth.
Outlook
Despite signs of improving confidence across our markets, we recognise that
recent developments in global conflict bring heightened uncertainty,
particularly their potential effects on inflation and interest rates. However,
with a clear strategy, strong foundations, and a long term outlook, we remain
well positioned to navigate these challenges and deliver sustained value for
customers and shareholders. The conclusion of regulatory interventions into
the motor finance sector would also provide much needed certainty
in 2026.
I am confident that the strategic decisions we have taken should enable the
Group to begin building a track record as a sustainable high returning
business. The Board and I believe that Secure Trust Bank is positioned for
value creation and enhanced shareholder returns.
Key performance indicators
The following key performance indicators are the primary measures used by
management to assess the performance of the Group.
Financial
Loans and advances to customers (£bn)
2023 2024 2025
2.8 3.1 3.3
Why we measure this
Shows the growth in the Group's lending balances, which generate income
Common Equity Tier 1 ('CET 1') ratio (%)
2023 2024 2025
12.7 12.3 12.9
Why we measure this
The CET 1 ratio demonstrates the Group's capital strength
Return on average equity (%)
2023 2024 2025
Statutory 10.0 14.6 14.3
Adjusted(1) 10.6 15.0 14.3
Why we measure this
Measures the Group's ability to generate profit from the equity available
to it
Cost to income ratio (%)
2023 2024 2025
Statutory 51.5 46.4 45.2
Adjusted(1) 52.8 47.4 45.2
Why we measure this
Measures how efficiently the Group uses its cost base to produce income
Net interest margin (%)
2023 2024 2025
4.6 4.7 4.7
Why we measure this
Shows the interest margin earned on the Group's lending balances, net of
funding costs
Cost of risk (%)
2023 2024 2025
1.1 0.8 1.0
Why we measure this
Measures how effectively the Group manages the credit risk of its lending
portfolios
Non-financial
Customer Trustpilot ratings (Stars)(2)
2023 2024 2025
4.8 4.8 4.8
Why we measure this
Indicator of customer satisfaction with the Group's products and services
Employee survey trust index score (%)
2023 2024 2025
83.0 74.0 64.0
Why we measure this
Indicator of employee engagement and satisfaction
Environmental intensity indicator(3)
2023 2024 2025
2.0 1.5 1.2
Why we measure this
Indicator of the Group's impact on the environment
Note:
1. Adjusted figures exclude exceptional items. For further information see
Note 8 to the Financial Statements.
2. Mark out of 5 based on star rating from 11,220 reviews (2024: 15,527, 2023:
4,776)
3. Total Scope 1, 2 and certain Scope 3 emissions per £million Group
operating income. See page 60 of the 2025 Annual Report and Accounts for
further details
Certain key performance indicators represent alternative performance measures
that are not defined or specified under International Financial Reporting
Standards ('IFRS').
Definitions of the financial key performance indicators, their calculation and
an explanation of the reasons for their use can be found in the Appendix to
the 2025 Annual Report and Accounts.
All key performance indicators are presented on a continuing basis, unless
otherwise stated.
Further information on discontinued operations are included in Note 10 to the
Financial Statements. Further explanation of the financial key performance
indicators is discussed in the narrative of the Financial review. Further
explanation of the non-financial key performance indicators is provided in the
Managing our business responsibly and Climate-related financial
disclosures sections of the 2025 Annual Report and Accounts.
The Directors' Remuneration report in the 2025 Annual Report and Accounts,
sets out how executive pay is linked to the assessment of key financial and
non-financial performance indicators.
Financial review
Income statement
2025 2024
Continuing Discontinued Total Continuing Discontinued Total
£million
£million
Group
£million
£million
Group
£million
£million
Interest income 301.8 70.2 372.0 296.8 69.2 366.0
Interest expense (150.7) (22.7) (173.4) (159.5) (21.6) (181.1)
Net interest income 151.1 47.5 198.6 137.3 47.6 184.9
Net fee and commission income 14.1 0.8 14.9 18.2 0.8 19.0
Operating income 165.2 48.3 213.5 155.5 48.4 203.9
Impairment charge (31.4) (26.6) (58.0) (23.2) (38.7) (61.9)
Other gains/(losses) 0.1 0.1 0.2 (0.4) 0.1 (0.3)
Fair value gains on financial instruments 0.1 - 0.1 1.2 - 1.2
Operating expenses (74.7) (29.5) (104.2) (72.2) (31.6) (103.8)
Profit/(loss) before income tax before exceptional items 59.3 (7.7) 51.6 60.9 (21.8) 39.1
Exceptional items - (24.1) (24.1) (1.5) (8.4) (9.9)
Profit/(loss) before 59.3 (31.8) 27.5 59.4 (30.2) 29.2
income tax
Income tax (expense)/credit (14.7) 4.8 (9.9) (16.0) 6.5 (9.5)
Profit/(loss) for the year 44.6 (27.0) 17.6 43.4 (23.7) 19.7
Basic earnings per ordinary share 238.8 (144.5) 94.2 227.7 (124.3) 103.4
Basic earnings per ordinary share - adjusted 238.8 (31.1) 207.7 233.5 (83.4) 150.1
Selected key performance indicators and performance metrics: (Continuing) 2025 2024 Percentage
%
%
point
movement
Net interest margin 4.7 4.7 -
Net revenue margin 5.2 5.3 (0.1)
Yield 9.5 10.2 (0.7)
Cost of funds 4.7 5.5 (0.8)
Adjusted cost to income ratio 45.2 46.4 (1.2)
Statutory cost to income ratio 45.2 47.4 (2.2)
Cost of risk 1.0 0.8 0.2
Adjusted return on average equity 14.3 15.0 (0.7)
Return on average equity 14.3 14.6 (0.3)
Common Equity Tier 1 ratio 12.9 12.3 0.6
Total capital ratio 15.2 14.6 0.6
Certain key performance indicators and performance metrics represent
alternative performance measures that are not defined or specified under
International Financial Reporting Standards ('IFRS'). Definitions of these
alternative performance measures, their calculation and an explanation of the
reasons for their use can be found in the Appendix to the 2025 Annual Report
and Accounts.
All key performance indicators are presented on a continuing basis, unless
otherwise stated. Adjusted metrics exclude exceptional items. Further
information on exceptional items are included in Note 8 of Financial
Statements and discontinued operations are included in Note 10 to the
Financial Statements.
The Directors' Remuneration report the 2025 Annual Report and Accounts, sets
out how executive pay is linked to the assessment of key financial and
non-financial performance metrics.
The Group achieved a continuing profit before tax of £59.3 million (2024:
£59.4 million), maintaining a net interest margin ('NIM') of 4.7% (2024:
4.7%) with growth in lending balances of 8.1% to £3,295.8 million (2024:
£3,050.2 million). 2025 saw a further improvement in effective
cost management, achieving an adjusted cost income ratio of 45.2% (2024:
46.4%). Cost of risk increased to 1.0% (2024: 0.8%), with the Group being
impacted by three specific cases within Business Finance. Common Equity Tier
1 ('CET 1') ratio at the end the year increased to 12.9% (2024: 12.3%).
Adjusted return on average equity decreased from 15.0% in 2024 to 14.3% in the
year. Return on average equity decreased from 14.6% in 2024 to 14.3% in the
year.
Adjusted earnings per share ('EPS') increased to 238.8 pence per share (2024:
233.5 pence per share). EPS increased to 238.8 pence per share (2024: 227.7
pence per share). Detailed disclosures of EPS are shown in Note 11 to the
Financial Statements. The components of the Group's profit are analysed in
more detail in the following sections.
Total adjusted profit before tax increased by 32.0% to £51.6 million (2024:
£39.1 million). Total profit before tax decreased by £1.7 million to £27.5
million (2024: £29.2 million), being most significantly impacted by an
exceptional item relating to an additional charge for the motor finance
compensation scheme of £16.4 million (2024: £6.9 million) (see Note 31 to
the Financial Statements for further information).
Continuing operations
Operating income
The Group's operating income increased by 6.2% to £165.2 million (2024:
£155.5 million). Net interest income on the Group's lending assets continues
to be the largest component of operating income. This increased by 10.1% to
£151.1 million (2024: £137.3 million), driven by a growth in average lending
balances of 9.5% to £3,184.3 million (2024: £2,908.4 million).
The Group's net interest margin was maintained at 4.7% (2024: 4.7%) by
actively managing the reduction in gross yields in light of the reductions in
the Bank of England Base Rate and lower cost of funds.
Other income, which relates to net fee and commission income, reduced by 22.5%
to £14.1 million (2024: £18.2 million) due to lower one-off termination fees
within Commercial Finance.
Impairment charge
Impairment charges increased by £8.2 million year on year resulting in the
cost of risk for increasing to 1.0% (2024: 0.8%), which included the impact of
higher impairments on a few specific cases within Business Finance.
The impairment charge within Retail Finance of £19.2 million, was £5.9
million higher than the prior year (2024: £13.3 million), however, 2024
included the impact of IFRS 9 model enhancements.
During the year, the Group refreshed macroeconomic inputs to its IFRS 9
Expected Credit Loss ('ECL') models, incorporating its external economic
adviser's latest UK economic outlook. The forecast economic assumptions within
each IFRS 9 scenario, and the weightings applied, are set out in more detail
in Note 17 to the Financial Statements. The overall impact of the updates to
macroeconomic inputs in 2025 was an additional impairment charge of £1.0
million (2024: £1.2 million release).
The Group has applied Expert Credit Judgements ('ECJs') overlays totalling
£1.6 million (2024: £5.7 million underlay), where management believes the
IFRS 9 modelled output is not accurately reflecting current risks in the loan
portfolios. The most significant underlay of £2.7 million relates primarily
to specific Commercial Finance cases, where the model does not reflect the
full value of the security held. During 2025, the 2024 ECJ underlay relating
to the Vehicle Finance lending portfolios LGD stage 1 and 2 recovery
assumptions were incorporated into the IFRS 9 model (2024: £4.5 million).
Fair value gains on financial instruments
The Group has highly effective hedge accounting relationships, and, as a
result, did not recognise a hedging ineffectiveness gain or loss in 2025
(2024: £0.1 million gain) and £0.5 million loss (2024: £0.6 million gain)
relating to hedge accounting inception and amortisation adjustments (see Note
5 to the Financial Statements). The Group recognised a gain of £0.6 million
(2024: £0.5 million gain) relating to interest rate swaps being entered into
ahead of hedge accounting becoming available, which will reverse to the income
statement over the remaining life of the swaps.
Operating expenses
The cost base increased by £2.5 million to £74.7 million (2024: £72.2
million), having been impacted by the changes in senior leadership and
increases in employers national insurance.
The adjusted cost to income ratio improved by 120 basis points to 45.2% (2024:
46.4%). Statutory cost income ratio was 45.2% (2024: 47.4%).
Exceptional items
Following an organisational redesign in 2024, £1.5 million was incurred for
restructuring costs.
Discontinued operations
At the year-end, the Vehicle Finance business was classified as discontinued.
Further information on the performance of the business can be found in the
Business Review. Details of exceptional items relating to this activity are
described below.
Exceptional items
The Group recognised charges for exceptional items of £24.1 million during
the year, which all related to the Vehicle Finance business (2024: £9.9
million, of which £8.4 million related to the Vehicle Finance business).
In respect of the FCA's consultation on the motor finance redress scheme, a
further charge of £16.4 million was recognised in the second half of the year
as a consequence of the publication of the FCA's consultation paper. (2024:
£6.9 million). Further information can be found in Note 31 to the Financial
Statements.
Following the decision to exit the Vehicle Finance market in July, an
organisation and business restructure was undertaken incurring a charge of
£5.0 million, which included redundancy costs and the write-down of
associated assets.
Further costs of £2.1 million, (2024: £1.5 million) were recognised in
relation to the FCA's review of Borrower's in Financial Difficulty across the
industry in 2023. These primarily related to costs to complete the programme
of work.
In respect of the sale of the Consumer Vehicle Finance book announced in
December 2025, £0.6 million of transaction costs were recognised, with the
remainder of costs to be recognised in 2026.
Further details on all Exceptional items are included in Note 8 to the
Financial Statements.
Taxation
The effective tax rate was 24.8% (2024: 26.9%), which was broadly in line with
the statutory rate.
Distributions to shareholders
The Board recommended the payment of a final dividend for 2025 of 23.7 pence
per share, which together with the interim dividend of 11.8 pence per share,
represents a total dividend for the year of 35.5 pence per share (2024: 33.8
pence per share). This is in line with the Group's progressive dividend
policy.
Summarised balance sheet
Assets 2025 2024
£million £million
Cash and Bank of England reserve account 528.1 445.0
Loans and advances to banks and debt securities 37.8 24.0
Loans and advances to customers 3,295.8 3,050.2
Loans and advances to customers - Discontinued(1) 390.8 558.3
Fair value adjustment for portfolio hedged risk 7.3 (6.8)
Derivative financial instruments 0.2 14.3
Other assets 56.0 31.7
4,316.0 4,116.7
Liabilities
Due to banks 205.9 365.8
Deposits from customers 3,509.6 3,244.9
Fair value adjustment for portfolio hedged risk 4.7 (3.4)
Derivative financial instruments 0.1 10.0
Tier 2 subordinated liabilities 93.5 93.3
Other liabilities 127.9 45.6
3,941.7 3,756.2
1. Vehicle Finance portfolio classified as 'Held for Sale' in 2025, and 'Loans
and Advances to Customers' in 2024.
New business volumes
£2,526.2m
2024: £2,331.9m
Retail Finance Real Estate Finance Commercial Finance Continuing businesses Vehicle Finance Total
£1,407.0m £451.0m £287.5m £2,145.5m £380.7m £2,526.2m
Loans and advances to customers
£3,686.6m
2024: £3,608.5m
Retail Finance Real Estate Finance Commercial Finance Continuing businesses Vehicle Finance Total
£1,466.5m £1,466.9m £362.4m £3,295.8m £390.8m £3,686.6m
New business
2025 was another strong year for new business with new lending for continuing
businesses of £2,145.5 million, up 20.6% year on year (2024: £1,779.0
million).
Business Finance increased by 50.9% to £738.5 million (2024: £489.3 million)
with strong growth in both divisions. Retail Finance was 9.1% higher at
£1,407.0 million (2024: £1,289.7 million) as the business continued to grow
its retail distribution network and develop its strategic relationships.
Customer lending and deposits
Net lending from continuing operations grew by 8.1% to £3,295.8 million
(2024: £3,050.2 million) with Retail Finance up by 8.0%, Real Estate Finance
by 9.4% and Commercial Finance by 3.2%.
Further analysis of loans and advances to customers, including a breakdown of
the arrears profile of the Group's loan books, is provided in Note 17 to the
Financial Statements.
Customer deposits include Fixed-term bonds, ISAs, Notice and Access accounts.
Customer deposits increased by 8.2% to £3,509.6 million (2024: £3,244.9
million) in order to fund the growth in lending. This growth in deposits has
come from ISAs.
Investments and wholesale funding
The Bank of England Term Funding Scheme with additional incentives for SMEs
('TFSME') facility was fully paid off during 2025 (2024: £230.0 million) and
the Group increased its drawings under sale and repurchase agreements to
£201.2 million at 31 December 2025 (2024: £125.7 million).
Total funding ratio of 113.3% increased slightly from 31 December 2024
(112.4%).
Tier 2 subordinated liabilities
In the current and prior year Tier 2 subordinated liabilities comprise £90.0
million of 10.5-year 13.0% Fixed-Rate Callable Subordinated Notes, which
qualify as Tier 2 capital.
Capital
Management of capital
Our capital management policy is focused on optimising shareholder value over
the long term. Capital is allocated to achieve targeted risk adjusted returns
whilst ensuring appropriate surpluses are held above the minimum regulatory
requirements.
Key factors influencing the management of capital include:
· The level of buffers and the capital requirement set by the Prudential
Regulation Authority ('PRA');
· Estimated credit losses calculated using IFRS 9 methodology and the applicable
transitional rules;
· New business volumes; and
· The product mix of new business.
Capital resources
Capital resources increased over the period from £415.7 million to £428.4
million. CET 1 capital increased by £13.4 million, primarily driven by a
total profit for the period of £17.6 million, offset by the 2025 final
dividend of £4.4 million.
Capital 2025 2024
£million £million
CET 1 capital, excluding IFRS 9 transitional adjustment 364.8 351.3
IFRS 9 transitional adjustment - 0.1
CET 1 capital 364.8 351.4
Tier 2 capital(1) 63.6 64.3
Total capital 428.4 415.7
Total risk exposure 2,827.5 2,855.7
1. Tier 2 capital, which is solely subordinated debt net of unamortised issue
costs, is capped at 25% of total Pillar 1 and Pillar 2A requirements.
Capital ratios 2025 2024
%
%
CET 1 capital ratio 12.9 12.3
Total capital ratio 15.2 14.6
CET 1 capital ratio (excluding IFRS 9 transitional adjustment) 12.9 12.3
Total capital ratio (excluding IFRS 9 transitional adjustment) 15.2 14.6
Leverage ratio 9.4 9.5
Capital requirements
The Total Capital Requirement, set by the PRA, includes both the calculated
requirement derived using the standardised approach and the additional capital
derived in conjunction with the Internal Capital Adequacy Assessment Process
('ICAAP'). In addition, capital is held to cover generic buffers set at a
macroeconomic level by the PRA.
2025 2024
£million £million
Total Capital Requirement 254.5 257.0
Capital conservation buffer 70.7 71.4
Countercyclical buffer 56.6 57.1
Total 381.8 385.5
The total risk exposure decreased from £2,855.7 million to £2,827.5 million,
as a consequence of a change in the balance sheet mix at the end of the year,
which included the impact of the Vehicle Finance loan book being in run-off.
Liquidity
Management of liquidity
The Group uses a number of measures to manage liquidity risk. These include:
· The Overall Liquidity Adequacy Requirement ('OLAR'), which is the Board's view
of the Group's liquidity needs, as set out in the Board-approved Internal
Liquidity Adequacy Assessment Process ('ILAAP');
· The Liquidity Coverage Ratio ('LCR'), which is a regulatory measure that
assesses net 30-day cash outflows as a proportion of High Quality Liquid
Assets ('HQLA');
· Total funding ratio, as defined in the Appendix to the Annual Report; and
· 'HQLA' are held in the Bank of England Reserve Account and gilts. For LCR
purposes, the HQLA excludes gilts that are pledged as collateral.
The Group was above the LCR minimum threshold (100%) throughout the year,
with the Group's average LCR being 190.4% (2024: 219.6%) based on a rolling
12-month-end average.
Liquid assets
We continued to hold significant surplus liquidity over the minimum
requirements throughout 2025, managing liquidity by holding HQLA and utilising
funding (predominantly from retail funding) to support lending. Total liquid
assets increased to £560.8 million (2024: £469.0 million). This includes the
receipt of a deposit of £45.8 million as part of the sale of the Consumer
Vehicle Finance business.
The Group has drawn £201.2 million under sale and repurchase agreements
(2024: £125.0 million). The Group maintains access to the Bank of England's
Sterling Monetary Framework, including a reserves account. Amounts drawn under
the TFSME scheme were repaid during the year. The Group has no liquid asset
exposures outside the United Kingdom and no amounts that are either past due
or impaired.
Liquid assets 2025 2024
£million £million
Aaa-Aa3 529.1 445.0
A1-A2 31.7 24.0
Total 560.8 469.0
We continue to attract customer deposits to support balance sheet growth. The
composition of customer deposits is shown in the table below:
Customer deposits 2025 2024
% %
Fixed term bonds 43 47
ISAs 34 26
Access accounts 22 25
Notice accounts 1 2
Total 100 100
Business review
Consumer Finance
Retail Finance
We provide quick and easy finance options at the point of purchase.
Performance history
New business (£m)
2023 2024 2025
1,185.4 1,289.7 1,407.0
Loans and advances to customers (£m)
2023 2024 2025
1,223.2 1,357.8 1,466.5
Net interest margin (%)
2023 2024 2025
6.4 6.8 6.9
Risk adjusted margin (%)
2023 2024 2025
5.3 6.0 5.8
What we do
· We provide a market-leading online e-commerce service to retailers, providing
unsecured, interest-free and interest-bearing prime lending products to UK
customers to facilitate the purchase of a wide range of consumer products,
including furniture, jewellery, dental, leisure items and football season
tickets. These retailers include a large number of household names.
· Products are available to purchase in store or online, using our
market-leading origination platform, which provides fast decision making, with
90% of applications agreed in an average of six seconds.
· The customer proposition and the integrated platform support the growth of UK
retailers and the real economy.
2025 performance
· New business lending increased 9.1% (2024: 8.8%), contributing to record
lending balances. Retail Finance continued to hold a strong market position,
with market share of new business at 15.5%(1) (2024: 13.6%).
· Growth was focused in high‑quality sectors such as furniture, and we
continued to serve a diverse retailer mix across sectors and sizes.
· Improved net interest margin to 6.9% (2024: 6.8%) reflects disciplined pricing
in a competitive environment. Risk adjusted margin fell to 5.8% (2024: 6.0%)
reflecting the benefit of model enhancements in 2024.
· The portfolio remained focused on interest‑free lending, which accounted for
86.1% of balances (2024: 86.7%).
· Over 475,000 mobile app registrations, enabling greater self-service and
access to our full product and retailer offering.
· We anticipate further growth with both new and existing retailers in 2026,
with a focus on expansion within the Home improvement sector.
Note:
1. Source: Finance & Leasing Association ('FLA'): New business values
within retail store and online credit: 2025: 15.5% (2024: 13.6%). FLA total
and Retail Finance new business of £9,094.8m (2024: £9,476.6m) and
£1,407.0m (2024: £1,289.7m). As published at 31 December 2025.
Business Finance
Real Estate Finance
We lend money against residential properties to professional landlords and
property developers.
Performance history
New business (£m)
2023 2024 2025
434.0 383.5 451.0
Loans and advances to customers (£m)
2023 2024 2025
1,243.8 1,341.4 1,466.9
Net interest margin (%)
2023 2024 2025
2.6 2.6 2.4
Risk adjusted margin (%)
2023 2024 2025
2.2 2.3 1.8
What we do
· We provide non-regulated first charge secured lending to specialist real
estate markets, lending to professional landlords
to enable them to improve and grow their portfolio and provide development
facilities to property developers and SME housebuilders to help build new
homes for sale or letting.
· Due to our specialist relationship-led business model, we offer through the
cycle tailored underwriting and cash flow led debt structuring.
· Finance opportunities are sourced and supported on a relationship basis
directly and via introducers and brokers.
2025 performance
· Record levels of new lending, with £451.0 million of new business written
throughout the year, despite a subdued market.
· The slight reduction in net revenue margin reflects increased lending in
lower‑risk residential investment, which represents 92.4% of the book (2024:
88.1%). The remainder comprises development, commercial investment and
bridging exposures.
· Impairment charges of £8.8 million (2024: £4.0 million) due to the impact of
two cases. This largely relates to one legacy development case which is now
materially resolved.
· The average loan-to-value remains low at 57.3% (2024: 56.0%), below our
maximum 70% offering.
· We enter 2026 with strong positive momentum, with growth supported by
expansion into our new Bridging product, which enables us to offer full
lifecycle funding.
Business Finance
Commercial Finance
Supporting the growth of UK businesses by providing flexible, asset-based
financing solutions
Performance history
New business (£m)
2023 2024 2025
214.8 105.8 287.5
Loans and advances to customers (£m)
2023 2024 2025
381.1 351.0 362.4
Net revenue margin (%)
2023 2024 2025
7.0 7.6 6.1
Risk adjusted margin (%)
2023 2024 2025
4.7 5.9 5.2
What we do
· We offer a full suite of asset-based lending solutions to SMEs and some larger
corporates who need bespoke working capital solutions for their business.
· We operate a high-touch relationship-led model throughout the life of a
facility, where partners and clients have direct access to decision-makers.
· Our lending remains predominantly against receivables, releasing funds of up
to 90% of qualifying invoices under invoice discounting facilities.
· Business is sourced and supported directly from clients via private equity
houses and professional introducers but is not reliant on the broker market.
2025 performance
· New business more than doubled year-on-year, and low client attrition saw net
lending balances rise to £362.4 million.
· Growth in spot lending balances in line with average lending balances,
reflecting controlled and stable growth.
· Income from one‑off termination fees was lower than in 2024, reducing net
revenue margin and risk adjusted margin, but contributes to a more stable and
higher‑quality earnings profile over time.
· Cost of risk of 0.9% (2024: 1.7%), whilst improved, reflects the impact of one
specific case within the business.
· In 2026, we look forward to supporting businesses across our core product
suite, whilst also expanding our offering to include selective Speciality
Finance (lending to non‑bank lenders). This represents a natural extension
of our current proposition.
Consumer Finance
Vehicle Finance
We provided quick and easy used car finance options at the point of purchase.
We ceased lending in the Vehicle Finance portfolio in July 2025 to improve
returns at Group level.
In February 2026 we completed the sale of the Consumer Vehicle Finance
business, reflecting an acceleration of our strategic plans.
Performance history
New business (£m)
2023 2024 2025
471.2 552.9 380.7
Loans and advances to customers (£m)
2023 2024 2025
467.2 558.3 390.8
Net interest margin (%)
2023 2024 2025
10.3 9.4 9.1
Risk adjusted margin (%)
2023 2024 2025
7.3 1.9 4.2
What we do
· We provided consumer lending products, secured against the second hand vehicle
being financed.
· We provided a vehicle stock funding product, which was secured against dealer
forecourt used car stock; sourced from auctions,
part exchanges or trade sources.
· Finance was provided via technology platforms, allowing us to receive
applications online from introducers; provide an automated decision;
facilitate document production through to pay-out to dealer; and manage
in-life loan accounts.
2025 performance
· As a result of the decision to exit Vehicle Finance, the portfolio has
run-down in the second half of the year, with lending balances reducing to
£390.8 million by the end of 2025.
· The sale was made at a premium to book value and was completed in February
2026. Further information will be included in the Group's Interim Report for
the six months ended 30 June 2026.
· The book saw an improved risk adjusted margin to 4.2% (2024: 1.9%), with 2025
benefitting from a more consistent collections delivery without the adverse
impact of the Borrowers in Financial Difficulty review that occurred in 2024.
Further details can be found in Note 8 to the Financial Statements.
· In October, the FCA published a consultation paper on its proposed redress
scheme. As a result, the Group increased its provision. Further details can be
found in Note 31 to the Financial Statements.
Savings
We look after our customers' savings and provide a competitive return.
Performance history
Total deposits (£m)
2023 2024 2025
2,871.8 3,244.9 3,509.6
Total funds raised (£m)
2023 2024 2025
1,719.1 1,604.2 1,797.9
2024 Total deposits (£m)
£3,244.9m
Term ISA Access Notice Total
£1,510.0m £857.3m £805.2m £72.4m £3,244.9m
2025 Term deposits (£m)
£3,509.6m
Term ISA Access Notice Total
£1,518.9m £1,181.2m £770.2m £39.3m £3,509.6m
What we do
· We offer a range of savings accounts that are purposely simple in design, with
a choice of products from Access to 180-day notice, and six month to
seven-year fixed terms across both Bonds and ISAs.
· Our range of savings products enables us to access the majority of the UK
personal savings markets and compete for significant liquidity pools,
achieving a lower marginal cost with the volume, mix and the competitive rates
offered; optimised to the demand of our funding needs.
2025 performance
· In 2025 we delivered strong deposit growth increasing total balances by
8.2% to £3.5 billion (2024: £3.2 billion). This expansion has provided a
stable source of funding to support lending book growth.
· The Bank of England lowered the Base Rate four times during the year to 3.75%
by year-end.
· The Financial Services Compensation Scheme increased to cover 97.6% (2024:
95.1%) of total deposits, providing additional security and confidence for our
customers.
· We re-launched our Savings app at the end of 2025 improving customer
experience and strengthening our digital service offering.
· In 2026 we will continue with our focus of building a strong savings
franchise with differentiated products and diversified distribution.
Market review
The Group operates exclusively within the UK, and its revenue is derived
almost entirely from customers operating in the UK. The Group is therefore
particularly exposed to the condition of the UK economy. Customers' borrowing
demands are variously influenced by, among other things, UK property markets,
employment levels, inflation, interest rates and customer confidence. The
economic environment and outlook affect demand for the Group's products,
margins that can be earned on lending assets and the levels of loan impairment
provisions.
As a financial services firm, the Group is subject to extensive and
comprehensive regulation by governmental and regulatory bodies in the UK. The
Group conducts its business subject to ongoing regulation by the Financial
Conduct Authority ('FCA') and the Prudential Regulation Authority ('PRA'). The
Group must comply with the regulatory regime across many aspects of its
activities, including: the training, authorisation and supervision of
personnel; systems; processes; product design; customer journey and
documentation.
Economic review
Growth in the UK economy, measured by real annual Gross Domestic Product
('GDP') was estimated at 1.3%(1) in 2025 (2024: 1.1%). Following the Autumn
Budget, and marginally more favourable economic forecasts than anticipated,
analysts have adjusted UK growth estimates to 1.0%(2) GDP growth in 2026 and
1.4%(2) in 2027. This reflects an outlook that remains challenged, and slow
underlying momentum. Global growth in 2026 is projected at 2.7%(2), bolstered
by China's strengthening fiscal outlook. However, global stability faces
escalating geopolitical risks, from conflict in Iran and the wider Middle
East, heightened international interventions and ongoing tariff‑related
pressures by the US. Broader global conflicts further add to the overall
uncertainty. The technology sector, led by AI, continues to serve as the
fundamental engine for global investment and expansion. However, concerns in
overvaluation of technology leaders and the complex relationships that exist
in the supply chain could create waves in global markets, should a correction
occur.
Inflation was higher than anticipated in 2025, ending the year at 3.4%(1)
(2024: 2.5%). Consequently, the Bank of England took a more measured approach
to rate reductions than expected, reducing the Base Rate four times in 2025 to
3.75% by December. Inflation had been expected to gradually decline towards
the Bank of England's 2% target, driven by anticipated falls in the prices of
energy and food. However, the extent to which recent developments in the
conflict in Iran and the wider Middle East may increase energy prices, and in
turn add to inflationary pressures, remains uncertain. The timing and quantum
of future interest rate cuts is currently hard to predict.
The rate of employment stood at 75.0%(1) in December 2025 (2024: 74.9%), with
unemployment rising to 5.2%(1) (2024: 4.4%), its highest level since 2021.
Vacancies continued to decline, ending the year at 0.7 million(1) (2024: 0.8
million). Economists anticipate unemployment levels to rise further in 2026
due to higher employment cost pressures. Unemployment is expected to gradually
ease towards 4%(2) by 2032, more slowly than previously forecast.
Despite higher borrowing costs and subdued buyer confidence, the housing
market remained resilient during 2025. House prices grew by 2.4%(3), with
modest growth improving buyer affordability. Lower interest rates and steady
levels of mortgage approval levels through 2025, leads to optimism in the
housing market for 2026.
The Autumn Budget delivered historic tax increases (albeit coming into effect
from 2028 and beyond) to fund public spending and strengthen fiscal headroom.
UK productivity is expected to remain subdued due to structural challenges.
However, rising investment in AI, technology infrastructure and supply‑chain
capabilities are expected to generate new opportunities for growth.
2025 was marked by uncertainty, and yet UK banks performed strongly, with
robust earnings and share price gains across the sector. This resilience was
further underlined by the reduction of required Tier 1 Capital by the Bank of
England, from 14% to 13%. UK banks have continued to see net interest income
trending upwards, although competition in the savings market has put pressure
on banks to increase savings rates following reductions in the Base Rate.
Large banks are also enjoying a tailwind from structural hedges than will
unwind over coming years.
Consumer Finance
2025 was a year of adjustment for UK retail. With businesses navigating
inflation, shifting customer expectations and tighter operating conditions,
many found new ways to adapt. Retailers leaned into AI opportunities,
sustainability initiatives, and more connected omnichannel journeys to
maintain demand. Physical stores continued to evolve, focusing on immersive
experiences that complement the growing popularity of online shopping.
Amidst this change, demand remained resilient. New business volumes rose 6%(4)
in the year to November, with several months delivering mid‑ to
high‑single‑digit growth.
Business Finance
In 2025, UK businesses proved remarkably resilient in times of economic
uncertainty. In Real Estate, rising construction and operational costs weighed
on the sector and commercial businesses were sensitive to inflationary
pressures and shifting fiscal policies.
Reflecting this resilience, new Buy‑to‑Let lending increased by 11%(5)
compared with 2024. Gross SME lending also maintained its upward trajectory
through 2025, with higher lending in Q3 marking the seventh consecutive
quarterly increase since early 2024(5). These trends indicate positive
momentum across Business Finance heading into 2026.
Looking ahead to 2026, pressures will remain from rising labour costs and
stretched household budgets. While confidence across Consumer and Business
Finance markets had been strengthening, the evolving Middle East conflict
creates uncertainty regarding upward inflationary pressure and subsequent
interest rate movements. Technology and innovation will remain vital in
helping retailers and businesses deliver smoother, more personalised
experiences.
Notes:
1. Source: Office for National Statistics, data as at 31 December
2025, unless otherwise stated.
2. Source: Oxford Economics.
3. Source: UK Parliament House of Commons Library.
4. Source: FLA.
5. Source: UK Finance.
Government and regulatory
This has been another eventful year for Government and regulatory
announcements that impact the Group and/or the markets in which it operates.
The key announcements in the year are set out below.
Prudential regulation
At the beginning of the year, the PRA announced delaying Basel 3.1
implementation by one year to 1 January 2027, shortening the transitional
period for full implementation which remains 31 January 2030. It was later
confirmed in October 2025 that the Interim Capital Regime was being revoked as
the Small Domestic Deposit Takers ('SDDTs') implementation date would align to
the Basel 3.1 effective date.
During the second half of 2025, the PRA issued a number of publications,
providing clarity to the simplified capital regime and the near final
proposals for SDDT firms. PS20/25 'The strong and simple framework: The
simplified capital regime for Small Domestic Deposit Takers SDDTs near-final',
confirmed no significant changes to the Pillar 1 capital treatment to the
consultation proposals. The Policy Statement changed areas of the Pillar 2A
capital and included details on the Pillar 2A lending adjustment. It also
confirmed the single capital buffer under Pillar 2B and announced a reduction
in frequency of Pillar 2A and Pillar 2B updates to every two years in line
with the ICAAP and ILAAP document production for SDDTs. The final rules were
published in January 2026, with limited further changes. The Group has
assessed the changes announced and expect the impact to be
fairly neutral.
As part of the wider Basel 3.1 regulatory change and implementation of the
SDDT regime, the Group has established a project with involvement from across
the firm to ensure the Group is prepared for implementation on 1 January 2027.
On 1 October 2025, the requirements for Solvent Exit analysis came into force
and the required analysis was approved by the Board in August 2025.
In November 2025 the PRA announced an increase to the FSCS protection limit
from £85,000 to £120,000, effective from 1 December 2025, providing
increased protection to our savers.
Conduct regulation
The FCA's consultation on motor finance commission redress was issued in
October 2025. It is towards the extreme end of outcomes previously expected
from the Supreme Court judgment. On 20 October, the Group updated the market
that it had increased its motor finance redress commission provision as a
result. The Group responded to the consultation on 5 December 2025 and also
contributed to the FLA's response.
Operational readiness arrangements are being progressed in line with the FCA's
expectations set out in their Dear CEO letter. The FCA issued its policy
statement in December on changes to handling rules for motor finance
complaints which fall outside the scope of the proposed redress scheme.
During the year, new rules were introduced by the UK Government to address
concerns around "debanking" and policy statements were issued for a new FCA
regulatory return for credit broking firms, the Appointed Representatives
regime; changes to complaints data reporting requirements; changes to the
interest rates applied to compensation awards issued by FOS; remuneration
reform; and non-financial misconduct guidance. The FCA published outputs from
initiatives focused on the Consumer Duty, and findings from their sustainable
lending project.
There were consultations on reform of the Consumer Credit Act, Senior Managers
and Certification Regime review, redress reform and the Financial Ombudsman
Service case fees, and deferred payment credit regulation. The Data (Use and
Access) Act 2025 came into force with the Information Commissioner's Office
committing to publish guidance over the next year.
Outlook
The near-term environment remains challenged by global geopolitical tensions
and macro uncertainty. Although the outlook had been improving for lower
interest rates and household incomes, recent developments create uncertainty
around how the economy will be impacted. UK growth is expected to be modest;
however, we remain well positioned to deliver value for consumers through our
product proposition and to navigate the evolving environment.
Principal risks and uncertainties
Risk management
The effective management of risk is a key part of the Group's strategy and is
underpinned by its Risk Aware value. This helps to protect the Group's
customers and generate sustainable returns for shareholders. The Group is
focused on maintaining sufficient levels of capital, liquidity, operational
control, and acting in a responsible way.
The Group's Chief Risk Officer is responsible for leading the Group's Risk
function, which is independent from the Group's operational and commercial
teams. The Risk function is responsible for designing and overseeing the
embedding of appropriate risk management frameworks, processes and controls,
to enable key risks to be identified, assessed, monitored, and accepted or
mitigated in line with the Group's risk appetite. The Group's risk management
practices are regularly reviewed and enhanced to reflect changes in its
operating environment. The Chief Risk Officer is responsible for reporting to
the Board on the Group's principal risks and how they are being managed
against agreed risk appetite.
Risk appetite
The Group has identified the risk drivers and major risk categories relevant
to the business, which has enabled it to agree a suite of risk appetite
statements and metrics to underpin the strategy of the Group. The Board
approves the Group's risk appetite statements annually and these define the
level and type of risk that the Group is prepared to accept in the pursuit of
its strategic objectives.
Risk culture
A strong risk-aware culture is integral to the successful delivery of the
Group's strategy and the effective management of risk.
The Group's risk culture is shaped by a range of factors including risk
appetite, risk frameworks and policies, values and behaviours, as well as a
clear tone from the top.
The Group looks to enhance continually its risk culture, and performs an
annual assessment against standards based on industry best practice and
guidance from the Institute of Risk Management.
Risk governance
The Group's approach to managing risk is defined within its Enterprise-Wide
Risk Management Framework. This provides a clear risk taxonomy and an
overarching framework for risk management supported by frameworks and policies
for individual risk disciplines. These frameworks set the standards for risk
identification, assessment, mitigation, monitoring and reporting.
The Group's risk management frameworks, policies and procedures are regularly
reviewed and updated to reflect the evolving risks that the Group faces in its
business activities. They support decision making across the Group and are
designed to ensure that risks are appropriately managed and reported on via
appropriate committees.
An Executive Risk Committee, chaired by the Chief Risk Officer, reviews key
risk management information from across all risk disciplines, with material
issues escalated to the Executive Committee and/or the Risk Committee of the
Board, as required.
The Group operates a 'Three Lines of Defence' model for the management of its
risks. The Three Lines of Defence, when taken together, control and manage
risks in line with the Group's risk appetite. The three lines are:
· First line: all employees within the business units and associated support
functions, including Operations, Finance, Treasury, Human Resources and Legal.
The first line has ownership of, and primary responsibility, for their risks.
· Second line: specialist risk management and compliance teams reporting
directly into the Chief Risk Officer, covering Credit risk, Operational risk,
Information Security, Prudential risk, Compliance and Conduct risk, and
Financial Crime risk. The second line are responsible for developing
frameworks to assist the first line in the management of their risks and
providing oversight and challenge designed to ensure they are managed within
appetite.
· Third line: is the Internal Audit function that provides independent assurance
on the effectiveness of risk management across the Group.
Board and Board Committees
See Corporate Governance section of the 2025 Annual Report and Accounts.
Group Executive Committee
Chair: Chief Executive Officer
Provides executive oversight of the ongoing safe and profitable operation of
the Group. It reports to the Board through the
Chief Executive Officer. Responsible for the execution of the strategy of the
Group at the direction of the Chief Executive Officer.
Executive Risk Committee
Chair: Chief Risk Officer
Responsible for overseeing the Group's risk profile, its adherence to
regulatory compliance and monitoring these against the risk appetite set by
the Board. Monitors the effective implementation of the risk management
framework across the Group.
Assets and Liabilities Committee ('ALCO')
Chair: Chief Financial Officer
Responsible for implementing and controlling the liquidity, and asset and
liability management risk appetite of the Group, providing high-level control
over the Group's balance sheet and associated risks.
Set out controls, capital deployment, treasury strategy guidelines and limits,
and focuses on the effects of future plans and strategy on the Group's assets
and liabilities.
Credit Risk Committees
Responsible for making decisions and providing oversight of credit scorecards,
strategies and modelling.
Model Governance Committee
Responsible for understanding, challenging and assessing risk
and appropriateness of statistical and financial models, to challenge model
assumptions, and to provide oversight of model validation.
Customer and Conduct Risk Committee
Responsible for providing oversight of Operational delivery, conduct and all
other non-financial risks.
Assumptions Committee
Responsible for approving assumptions that have a material impact on the
Group's reporting and/or decision-making processes.
Principal risks
Executive management performs ongoing monitoring and assessment of the
principal risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity.
Further details of the principal risks and the changes to risk profile seen
during the 2025 financial year are set below.
The Group also regularly reviews strategic and emerging risks and analysis has
been included to detail output of these reviews for 2025. Notes 39 to 42 to
the Financial Statements provide further analysis of credit, liquidity, market
and capital risks. Emerging risks are identified in line with the Group's
Enterprise‑Wide Risk Management Framework, using a 'top-down' approach with
Group Executive workshops, and Board discussion, and a 'bottom-up' approach
through the business unit Risk and Control Self-Assessment process.
Further details of the Group's risk management framework, including risk
appetite, can be found on the Group's website:
www.securetrustbank.com/riskmanagement
Description Mitigation Change during the year
Credit risk The Group has a defined Credit risk framework, which sets out how Credit risk The Group's lending portfolios performed satisfactorily in 2025.
The risk of loss to the Group from the failure of clients, customers or is managed and mitigated across the Group.
counterparties to honour fully their obligations to the firm, including the
Arrears levels in Retail Finance have shown a slight reduction over 2025,
whole and timely payment of principal, interest, collateral or other Risk appetite is appropriate, assessed and approved at least annually by the supported by a continued emphasis on robust credit risk management and a
receivables. business, the Risk function and the Board, with the Group focusing on sectors strategic shift toward new business sectors with lower risk profiles.
and products where it has deep experience. Collections performance remains strong, delivering stable roll and cure rates
Progress:
throughout the year.
Specialist Credit teams are in place within each business area to enable new
Stable lending to be originated in line with the Group's risk appetite. Market conditions in Vehicle Finance remained challenging; however, successive
credit risk tightening and a return to normalised collections practices drove
For Business Finance, lending is secured against assets, with Real Estate improved performance among newer customer cohorts during the latter part of
Finance lending, the majority of which is at fixed rates, secured by property 2024 and into 2025. Despite these gains, customer cure rates remain below
at conservative loan-to-value ratios. Short dated Commercial Finance lending historic norms, which continues to impact the overall financial performance of
is secured across a range of assets, including debtors, stock, and plant and the product.
machinery.
Real Estate Finance at a portfolio level is performing well, with continued
For Consumer Finance, Retail Finance is unsecured, however positioned towards strong rental demand supporting performance across the portfolio. Only a small
lower risk sectors. The vast majority of Retail Finance lending is number of cases are in active workout, and where appropriate, specific
interest-free for consumers, with remaining consumer lending at fixed rates, provisions have been taken to cover the risk of loss from these exposures.
which mitigates the direct impact of rising interest rates on affordability.
Historically, security has been taken for Vehicle Finance lending although The Real Estate Finance provisions have increased through the year at a higher
new business is no longer being originated. A strategic decision was taken to than expected rate, however, this is mainly due to existing defaulted balances
withdraw from the market, and the business was sold in February 2026. being held for longer than anticipated, leading to increased non-recovery of
capital and interest.
Consumer Credit risk is assessed through a combination of risk scorecards,
credit and affordability policy rules. The Commercial Finance portfolio is performing satisfactorily, with provisions
at acceptable levels. The economic backdrop in which our clients operated in
Portfolio performance is tracked closely and reported via specialist 2025, remained sluggish with persistent inflationary pressures. Despite this,
management review meetings into the Executive and Board Risk Committees, with the collateral values that underpin our facilities remained robust.
the ability to make changes to policy, affordability assessments or scorecards
on a dynamic basis.
Management monitors and assesses concentration risk for all lending against
control limits. The diversification of lending activities and secured nature
of larger exposures mitigates the exposure of the Group to concentration risk.
During 2025, economic conditions continued to be challenging in the UK,
including cost-of-living pressures for consumers.
Description Mitigation Change during the year
Liquidity and Funding risk Liquidity and Funding risk is managed in line with the Group's Prudential Risk The Group has maintained its liquidity and funding ratios in excess of
Liquidity risk is the risk that the Group is unable to meet its liquidity Management Framework. The Group has a defined set of liquidity and funding regulatory and internal risk appetite requirements throughout the year. A
obligations as they fall due or can only do so at excessive cost. Funding risk risk appetite measures that are monitored and reported, as appropriate. significant level of high-quality liquid assets, held as cash at the Bank of
is the risk that the Group is unable to raise or maintain funds to support
England, continues to be maintained so that there is no material risk that
asset growth, or the risk arising from an unstable funding profile that could The Group manages its liquidity and funding in line with internal and liabilities cannot be met as they fall due.
result in higher funding costs. regulatory requirements, and at least annually assesses its exposure to
liquidity risks and adequacy of its liquidity resources as part of the Group's The Group's outstanding Term Funding Scheme with additional incentives for
Progress: Internal Liquidity Adequacy Assessment Process ('ILAAP'). SMEs ('TFSME') funding was repaid by the end of the first half of 2025. The
Group maintains access to the Bank of England's Sterling Monetary Framework,
Stable In line with the Prudential Regulation Authority's ('PRA's') self-sufficiency including a reserves account.
rule, the Group always seeks to maintain liquid resources that are adequate,
both as to amount and quality, and managed to ensure that there is no
significant risk that its liabilities cannot be met as they fall due under
stressed conditions. The Group defines liquidity adequacy as the:
· ongoing ability to accommodate the refinancing of liabilities upon maturity
and other means of deposit withdrawal at acceptable cost;
· ability to fund asset growth; and
· otherwise, capacity to meet contractual obligations through unconstrained
access to funding at reasonable market rates.
The Group conducts regular and comprehensive liquidity stress testing to
identify sources of potential liquidity strain and to check that the Group's
liquidity position remains within the Board's risk appetite and prudential
regulatory requirements.
Contingency funding plans
The Group maintains a Recovery Plan that sets out how the Group would maintain
sufficient liquidity to remain viable during a severe liquidity stress event.
The Group also maintains access to the Bank of England liquidity schemes,
including the Discount Window Facility.
The Group conducts regular and comprehensive liquidity stress testing to
identify sources of potential liquidity strain and to check that the Group's
liquidity position remains within the Board's risk appetite and prudential
regulatory requirements.
Contingency funding plans
The Group maintains a Recovery Plan that sets out how the Group would maintain
sufficient liquidity to remain viable during a severe liquidity stress event.
The Group also maintains access to the Bank of England liquidity schemes,
including the Discount Window Facility.
The Group has maintained its liquidity and funding ratios in excess of
regulatory and internal risk appetite requirements throughout the year. A
significant level of high-quality liquid assets, held as cash at the Bank of
England, continues to be maintained so that there is no material risk that
liabilities cannot be met as they fall due.
The Group's outstanding Term Funding Scheme with additional incentives for
SMEs ('TFSME') funding was repaid by the end of the first half of 2025. The
Group maintains access to the Bank of England's Sterling Monetary Framework,
including a reserves account.
Description Mitigation Change during the year
Capital risk Capital management is defined as the operational and governance processes by The Group's balance sheet and total risk exposure has reduced since the
Capital risk is the risk that the Group will have insufficient capital which capital requirements are identified and capital resources maintained beginning of the year following the cessation of new Vehicle Finance lending,
resources to meet minimum regulatory requirements and to support planned and allocated, such that regulatory requirements are met, while optimising while the Group continues to grow its continuing businesses organically. The
levels of growth. returns and supporting sustainable growth. Group has continued to maintain adequate capital, and all capital ratio
measures have been exceeded throughout the period. Details of the Common
The Group adopts a conservative approach to managing its capital. It annually The Group manages its capital requirements on a forward-looking basis against Equity Tier 1 ratio, total capital ratio and leverage ratio are included in
assesses the adequacy of the amount and quality of capital held under stress minimum regulatory requirements and the Board's risk appetite set to enable the Financial review.
as part of the Group's Internal Capital Adequacy Assessment Process ('ICAAP'). capital resources to be sufficient to support planned levels of growth. The
Group will take opportunities to increase overall levels of capital and to The 2025 ICAAP showed that the Group can continue to meet its minimum
Progress: optimise its capital stack as and when appropriate. In addition to the ICAAP, regulatory capital requirements, even under extreme stress scenarios.
the Group performs regular budgeting and reforecasting exercises that consider Additionally, the Group has assessed the capital impact in relation to the
Stable a five-year time horizon. exit of Vehicle Finance through an addendum to the 2025 ICAAP, which
demonstrated a more resilient capital position following the change. This
These forecasts are used to plan for future lending growth at a rate that both assessment included an additional stress reflecting our worst-case view of
increases year-on-year profits and maintains a healthy capital surplus, taking potential redress payments related to historical motor commissions (see Note
into consideration the impact of known and anticipated future regulatory 31 to the Financial Statements for further information); the Group is
changes. The Group also models various stressed scenarios looking over a satisfied it could maintain capital adequacy in such a scenario.
five-year time horizon, which consider a range of growth rates over those
years as part of the viability and going concern assessments. The Group has assessed the high-level impact of the Basel 3.1 rules and the
PRA's Small Domestic Deposit Taker ('SDDT') Regime, and has taken this into
Further information on the Group's capital requirement is contained within the consideration as part of its capital planning. Work is underway to ensure the
Pillar 3 disclosures, which are published as a separate document on our Group is compliant with the SDDT Regime by 1 January 2027.
website (www.securetrustbank.com/pillar3).
Description Mitigation Change during the year
Market risk The Group's principal exposure comes from the term structure of interest rate Interest rate risk and foreign exchange risk remain well managed with risk
Market risk is the risk to the Group's earnings and/or value from unfavourable sensitive items and the sensitivity of the Group's current and future earnings exposures actively managed. The Group has worked on enhancing interest rate
market movements, such as interest rates and foreign exchange rates. The and economic value to movements in market interest rates. risk management through the development of its Earnings at Risk methodology.
Group's market risk primarily arises from interest rate risk. Interest rate
In 2025, the Group has also fully implemented central clearing to support
risk refers to the exposure of the Group's financial position, balance sheet The Group does not take significant unmatched positions through the derivative activity, with the majority of the portfolio centrally cleared.
and earnings to movements in interest rates. application of hedging strategies and does not operate a trading book.
The Group's balance sheet is predominantly denominated in GBP, although a The main contributors to interest rate risk are:
small number of transactions are completed in US Dollars, euros and other
· the mismatch, or duration, between repricing dates of assets and
currencies in support of Commercial Finance customers. liabilities; and
· customer optionality, for example, early repayment of loans in advance of
Progress: contractual maturity dates.
Stable
The Group uses an interest rate sensitivity gap analysis that informs the
Group of any significant mismatched interest rate risk positions that require
hedging. This takes into consideration the behavioural assumptions for
optionality as approved by ALCO. Risk positions are managed through the
structural matching of assets and liabilities with similar tenors and the use
of vanilla interest rate derivative instruments to hedge the residual
unmatched position and minimise the Group's exposure to interest rate risk.
The Group has a defined set of market risk appetite measures that are
monitored monthly. Interest rate risk in the banking book is measured from an
internal management and regulatory perspective, taking into consideration both
an economic value and earnings-based approach.
The Group monitors its exposure to basis risk and any residual non-GBP
positions. Processes are in place to review and react to movements of the
Bank of England Base Rate.
The Group has no significant exposures to foreign currencies and hedges any
residual currency risks to sterling.
All such exposures are maintained within the risk appetite set by the Board
and are monitored by ALCO.
The Group uses an interest rate sensitivity gap analysis that informs the
Group of any significant mismatched interest rate risk positions that require
hedging. This takes into consideration the behavioural assumptions for
optionality as approved by ALCO. Risk positions are managed through the
structural matching of assets and liabilities with similar tenors and the use
of vanilla interest rate derivative instruments to hedge the residual
unmatched position and minimise the Group's exposure to interest rate risk.
The Group has a defined set of market risk appetite measures that are
monitored monthly. Interest rate risk in the banking book is measured from an
internal management and regulatory perspective, taking into consideration both
an economic value and earnings-based approach.
The Group monitors its exposure to basis risk and any residual non-GBP
positions. Processes are in place to review and react to movements of the
Bank of England Base Rate.
The Group has no significant exposures to foreign currencies and hedges any
residual currency risks to sterling.
All such exposures are maintained within the risk appetite set by the Board
and are monitored by ALCO.
Interest rate risk and foreign exchange risk remain well managed with risk
exposures actively managed. The Group has worked on enhancing interest rate
risk management through the development of its Earnings at Risk methodology.
In 2025, the Group has also fully implemented central clearing to support
derivative activity, with the majority of the portfolio centrally cleared.
Description Mitigation Change during the year
Operational risk The Group has an Operational Risk Framework designed in accordance with the The Group uses the 'Standardised Approach' for assessing its operational risk
Operational risk is the risk that the Group may be exposed to direct or 'Principles for the Sound Management of Operational Risk' issued by the Basel capital, in recognition of the enhancements made to its framework and
indirect loss arising from inadequate or failed internal processes, personnel Committee on Banking Supervision. The framework is supported by a range of embedding it across the Group. The Group continues to invest in resource,
and succession, technology/ infrastructure, or from external factors. policies, including operational resilience, third party management, expertise and systems to support the effective management of operational risk.
information technology, information security and data management policies. In 2025, the Group has continued to enhance these standards and has introduced
The scope of Operational risk is broad and includes business process,
several improvements to the control frameworks in place across its operational
operational resilience, third party risk, Change management, Human Resources, The Group has well-embedded processes that enable the identification, risks.
Information Security and IT risk. assessment, mitigation and reporting of operational risks. Key processes
include Risk and Control Self-Assessments, risk event management, scenario
Progress: analysis and risk culture assessments.
Stable In addition to the delivery of framework requirements, the Group has focused
on various thematic areas of operational risk in 2025, including operational
resilience where the Group met the March 2025 regulatory deadline and
continued its embedding of operational resilience. Artificial Intelligence
('AI') risk was formally integrated into existing Risk Frameworks and
Policies.
Model risk The Groups approach to Model risk is aligned to the PRA's Supervisory The Group has made progress in strengthening its governance of Model risk in
Model risk is the potential for adverse consequences from model errors or the Statement 1/23 Model risk management principles for banks. The Group has a 2025, through ongoing improvement of independent validation of High and
inappropriate use of modelled outputs to inform business decisions. Model risk policy, inventory, risk-based assessment methodology, model Medium-High risk models, new model developments and monitoring for key IFRS 9
development standards and independent model validation in place. models.
The Group has multiple models that are used, amongst other things, to support
pricing, strategic planning, budgeting, forecasting, regulatory reporting, A full review of the Model Risk Management Policy has been carried out, with
credit risk management and provisioning. increased focus on model monitoring reporting requirements and standardisation
of processes for use of model adjustments.
Progress:
Stable
Description Mitigation Change during the year
Cyber risk* The Group operates a multi-layered model of defence, which includes both During 2025, the Group consolidated its cyber security position. Independent
Cyber Risk is the potential for adverse consequences arising from a Cyber technical and operational measures. The Group's primary defences are tested testing has shown that we have strong front line defences against cyber
Security event that could result in operational disruption, financial loss, regularly by independent third-party specialists to identify and remediate any attacks, whilst work continues on the enhancement of our assessment of our
loss of business-critical data, or other impacts detrimental to the business. weaknesses, and a suite of policies and processes designed to protect the third-party suppliers, as recent cyber attacks have demonstrated that
Group are regularly monitored for compliance and updated on at least an annual attackers now favour indirect approaches by initially compromising vendors to
The Group uses multiple layers of defence, both technical and operational, to basis. The Group also aligns to the Bank of England's ('BOE') CQUEST framework gain access to core systems. Work has also been undertaken on enhancing our
limit the risk of a successful cyber event occurring or, where prevention is and constantly works to improve compliance and reduce the opportunities for Cyber Security Incident Response Plan to better reflect current attack vectors
not possible, to limit the extent of any material impacts on the Group or our external threats to attack the Group. and to incorporate industry best practice.
clients.
Progress:
Stable
* Cyber risk was previously included within Operational Risk
Compliance and Conduct risk The Group manages this risk through its Compliance and Conduct Risk Management The overall heightened rating for the year is driven predominantly by the
The risk that the Group's products and services, and the way they are Framework. The Group takes a principle-based approach, which includes retail developments regarding motor finance commissions redress and its impact on the
delivered, or the Group's failure to be compliant with all relevant regulatory and commercial customers in our definition of 'customer', with coverage across Group. The Financial Conduct Authority ('FCA') consultation paper on its
requirements, result in poor outcomes for customers or markets in which we all business units and both regulated and unregulated activities. proposed redress scheme was published on 7 October 2025. It is towards the
operate, or cause harm to the Group. This could be as a direct result of poor
extreme end of outcomes previously expected from the Supreme Court judgment.
or inappropriate execution Risk management activities follow the Enterprise-Wide Risk Management On 20 October 2025, the Group updated the market on its increased motor
of our business activities or behaviour from our employees. Framework, through identifying, assessing and managing risks, governance finance redress commission provision as a result. The FCA expects to
arrangements and reporting risks against Group risk appetite. Arrangements communicate next steps by the end of March 2026.
Progress: include horizon-scanning of regulatory changes, oversight of regulatory risk
events and assurance activities conducted by the three lines of defence, The other Compliance and Conduct risk key area of focus during the year was on
Heightened including the second line Compliance Monitoring programme. the completion of the final stages of the Group's review of its collections
processes, procedures and policies in Vehicle Finance, following its formal
The Group's horizon-scanning activities track industry and regulatory discussions with the FCA on its Borrowers in Financial Difficulty review.
developments, including the implementation of the Basel 3.1 standards
and the SDDT regime, Consumer Credit product sales data reporting and
regulation of Buy Now Pay Later.
Description Mitigation Change during the year
Financial Crime risk We operate in a constantly developing financial crime environment and are The Group continued to monitor developments during the year. This included the
The risk that the Group's products and services will be used to facilitate exposed to financial crime risks of varying degrees across all areas of the implementation of the Economic Crime and Corporate Transparency Act ('ECCTA'),
financial crime, resulting in harm to its customers, the Group or third Group. The Group is focused on maintaining effective systems and controls, notably the introduction of the failure to prevent fraud offence, further
parties, and the Group fails to protect them by not having effective systems alongside vigilance against all forms of financial crime and meeting reforms to the Money Laundering Regulations, enhanced Companies House
and controls. Financial Crime includes anti-money laundering, terrorist our regulatory obligations. transparency and identity-verification requirements, and the introduction of
financing, proliferation financing, sanctions restrictions, modern slavery,
mandatory reimbursement for authorised push payment ('APP') fraud. We continue
human trafficking, fraud, the failure to prevent fraud and the facilitation of The Group has a Financial Crime Framework designed to meet regulatory and to closely monitor changes to financial crime regulation and guidance and are
tax evasion. legislative obligations, which includes: responding to them accordingly.
· mandatory annual colleague training and awareness initiatives;
The Group may incur significant remediation costs to rectify issues, reimburse · regular reviews of our suite of financial crime policies, standards and
losses incurred by customers and address regulatory censure and penalties. procedures, checking they remain up to date and addressing any
legislative/regulatory change and emerging risks;
Progress: · detection, transaction monitoring and screening technologies;
· extensive recruitment policies to screen potential and existing employees;
Stable · horizon-scanning and regular management information production and analysis
conducted to identify emerging threats, trends and typologies, as well as
preparing for new legislation and regulation;
· financial crime-focused governance with risk committees providing senior
management oversight, challenge and risk escalation; and
· intelligence shared through participating in key industry events such as those
hosted by UK Finance and other networks.
Climate Change risk The Group has established processes to monitor our risk exposure to both the The Group's direct exposure to the physical impacts of climate change remains
Climate change, and society's response to it, present risks to the UK potential 'physical' impacts of climate change and the 'transitional' risks low, given its footprint and areas of operation. However, it has maintained
financial services sector, with some of these only fully crystallising over an from the UK's transition towards a carbon neutral economy. The Group's robust controls and oversight, designed to manage the associated risks and
extended period. The Group is exposed to physical and transition risks arising approach to climate risk is proportionate to its scale and nature of its continues to develop its business plans, as the risks mature. Disclosures are
from climate change. activities. made within the Climate-related financial disclosures section of the Annual
Report and Accounts in line with the guidance from the 'Task Force on
Progress: This has enabled the Group to align both its business and climate objectives. Climate‑Related Financial Disclosures', where we are aligned to current
Climate change and its management are a key part of the Group's Environmental, requirements.
Stable Social and Governance strategy.
Specific detail on each of the key risks identified and mitigation are covered
The Group continues to undertake stress testing aligned to climate change within the Strategy section. The Group continues to actively monitor and
scenarios, individually, across each of our key businesses. prepare for anticipated developments in the evolving climate requirements and
landscape, as well as in regulatory obligation and expectations, including
The tests are focused on the resilience of our portfolios and strategies, to transition planning.
manage the risks and opportunities of climate change. Further detail is
provided within the Climate-related financial disclosures section of the 2025
Annual Report and Accounts.
The Group continued to monitor developments during the year. This included the
implementation of the Economic Crime and Corporate Transparency Act ('ECCTA'),
notably the introduction of the failure to prevent fraud offence, further
reforms to the Money Laundering Regulations, enhanced Companies House
transparency and identity-verification requirements, and the introduction of
mandatory reimbursement for authorised push payment ('APP') fraud. We continue
to closely monitor changes to financial crime regulation and guidance and are
responding to them accordingly.
Climate Change risk
Climate change, and society's response to it, present risks to the UK
financial services sector, with some of these only fully crystallising over an
extended period. The Group is exposed to physical and transition risks arising
from climate change.
Progress:
Stable
The Group has established processes to monitor our risk exposure to both the
potential 'physical' impacts of climate change and the 'transitional' risks
from the UK's transition towards a carbon neutral economy. The Group's
approach to climate risk is proportionate to its scale and nature of its
activities.
This has enabled the Group to align both its business and climate objectives.
Climate change and its management are a key part of the Group's Environmental,
Social and Governance strategy.
The Group continues to undertake stress testing aligned to climate change
scenarios, individually, across each of our key businesses.
The tests are focused on the resilience of our portfolios and strategies, to
manage the risks and opportunities of climate change. Further detail is
provided within the Climate-related financial disclosures section of the 2025
Annual Report and Accounts.
The Group's direct exposure to the physical impacts of climate change remains
low, given its footprint and areas of operation. However, it has maintained
robust controls and oversight, designed to manage the associated risks and
continues to develop its business plans, as the risks mature. Disclosures are
made within the Climate-related financial disclosures section of the Annual
Report and Accounts in line with the guidance from the 'Task Force on
Climate‑Related Financial Disclosures', where we are aligned to current
requirements.
Specific detail on each of the key risks identified and mitigation are covered
within the Strategy section. The Group continues to actively monitor and
prepare for anticipated developments in the evolving climate requirements and
landscape, as well as in regulatory obligation and expectations, including
transition planning.
Strategic and emerging risks
The key strategic risk for the Group remains the macroeconomic, and to a
certain extent the political, environment in the UK. The Group's operational
footprint, lending exposures and funding sources are all in the UK, therefore,
overall performance is influenced by the strength and performance of the UK
economy.
Given the specialist nature of the Group's lending, it is not exposed across
all areas and sectors of the UK economy. However, key areas such as consumer
confidence and affordability, house prices, levels of economic activity
impacting commercial and corporate profitability as well as business
confidence will impact levels of demand for the Group's products and services.
Which in turn influences performance of its credit portfolios and achievable
returns.
Inflation and cost of living have proven elevated in 2025. Unemployment has
started to rise again while economic activity reflected in GDP growth has
remained subdued. While this has been counterbalanced by the Bank of
England's reductions of Base Rate to now 3.75% the outlook for 2026 remains of
cautious optimism at best. Further influences to be considered include the
overall health of the UK economy: Geopolitical risks, US- Tariffs volatility,
government policies, and indebtedness influencing mortgage rates and consumer
behaviour.
Given the prudent approach taken by the Group towards credit risk, these
factors are tracked closely through ongoing portfolio monitoring and required
changes in lending parameters are undertaken on a proactive basis.
The Group monitors the look forward strategic risk via regular analysis of
forecast economic data as part of its review of impairment assumptions and in
its annual ICAAP and ILAAP processes. In addition to direct economic factors,
the Group is also exposed to the general operating environment in the UK for a
regulated business.
The Supreme Court judgment and the subsequent FCA consultation about the motor
finance commissions redress scheme have been the subject of intense scrutiny.
The Group believes it has reflected the risk in its provision. However, the
impact of the final FCA decision, expected by the end of March 2026, needs to
be reviewed once issued.
In addition to these specific industry events, the Group is also tracking the
various consultation papers relating to regulatory change and engaging with
industry bodies to provide input into proposed changes, as well as tracking
potential impacts.
Viability and going concern
Going concern
In assessing the Group as a going concern, the Directors considered the
factors likely to affect its future performance and development, recent
regulatory announcements, the Group's financial position and the principal
risks and uncertainties facing the Group, as set out in the Strategic Report.
The Group uses various short and medium-term forecasts to monitor future
capital and liquidity requirements, and these include stress-testing business
planning assumptions to identify the headroom on regulatory compliance
measures. The details of the forecasts and stress tests are explained in the
Business viability section below.
Accordingly, the Directors conclude that the Company and the Group have
adequate resources to continue in operational existence for a period of at
least 12 months from the date of the approval of the Financial Statements and,
therefore, it is appropriate to continue to adopt the going concern basis in
preparing the accounts.
Business viability
In accordance with provision 31 of the UK Corporate Governance Code, the
Directors have a reasonable expectation that the Company and the Group will be
able to continue in operation and meet their liabilities as they fall due, for
the period up to 31 December 2030. As the Group's financial planning horizon
is five years, the Group considers a five-year period for its viability
assessment.
The Directors are confident of the Group's viability over the longer term
after considering all of the principal risks affecting the Group, including
the following factors.
· The Group has delivered solid trading profits and sound capital management in
2025 and the 2026 annual budget process indicates long-term growth potential.
· Decrease in tail-risks from the cost-of-living crisis that resulted from a
prolonged period of high inflation and high interest rates coupled with a lag
on wage growth.
· Our deposit base is made up of retail customers and 97.6% of total deposits
are fully covered by the Financial Services Compensation Scheme ('FSCS').
· Our stress testing indicates the Group's ability to manage its capital and
liquidity requirements through the regulator's prescribed financial stresses.
· Capital stress testing is conducted after assessing the drivers of credit risk
in the business, specifically the impact of adverse changes in economic
variables that impacts the Group's IFRS 9 Expected Credit Loss ('ECL') models:
unemployment, CPI, and HPI. The Group also considers specific business model
risks that could lead to unexpected credit and operational losses.
· The Group has maintained capital levels in excess of its internal risk
appetites and regulatory requirements throughout the year and is forecast to
continue to do so over the five-year planning horizon.
· The Group increased its motor finance redress provision to reflect the
Financial Conduct Authority's consultation on motor finance commission redress
which closed in December 2025. Additional potential impacts have been
considered through stress testing.
· In the area of climate change, the Board recognises the long-term risks and
launched its Environmental, Social and Governance strategy in 2023. Risks
associated with climate change are considered as part of the annual Internal
Capital Adequacy Assessment Process ('ICAAP'). Material impacts of climate
change on the Group's markets and business model will emerge over the
longer-term horizon and beyond the period of viability assessment.
Notwithstanding this, the Group is mindful of the need to adapt its business
model to changes in the markets it operates in as a result of climate change.
Furthermore, the Board considers that the circumstances required to cause the
Group to fail, as demonstrated by its stress testing procedures, are
sufficiently remote.
The Directors have based their assessment on the results of the following
activities.
· The latest annual budget process, which contains information on the expected
financial and capital positions and performance of the Group over the 2026 to
2030 period.
· The Group monitors its key performance indicators across profit, capital,
liquidity, and different risk categories to mitigate any changes in risk
outside of its risk appetite.
· In addition to the annual budget process, key sensitivities are measured
through other forecasting activity undertaken over the course of the year,
which would impact on capital and liquidity over the planning horizon.
· The Group's ILAAP, approved by the Board in June 2025, provides assurance that
the Group can maintain liquidity resources that are adequate, both as to
amount and quality, to ensure that there is no significant risk that its
liabilities cannot be met as they fall due. This risk was tested under the
financial stresses outlined below. The Group has maintained liquidity levels
in excess of its liquidity risk appetite and regulatory requirements
throughout the year, and is forecast to continue to do so over the ILAAP
planning horizon.
· The Group's ICAAP, which considered the Prudential Regulatory Authority's
('PRA's') published macroeconomic stress and severe scenarios in order to
assess the adequacy of capital resources over the 2025 to 2029 period, was
approved in August 2025. An addendum to the ICAAP considering the impact of
the exit of Vehicle Finance, announced in July 2025, and the increased motor
finance redress provision was subsequently approved by the Board in February
2026. Within the ICAAP, the Group considered the extent of the credit,
operational and market risks it is exposed to, and how such risks affect its
required capital levels. Under the macroeconomic stress, the details of which
are set out below, at no point were minimum regulatory capital requirements
breached, and capital buffers held at the start of the stress were confirmed
to be adequate.
· The latest Group Recovery Plan was approved in October 2025 and confirmed that
the Group has sufficient recovery options available to recover from the severe
combined idiosyncratic and macroeconomic stress scenario modelled over the
2025 to 2029 period. An addendum to the Group Recovery Plan considering the
impact of the exit of Vehicle Finance and the increased motor finance redress
provision has subsequently been prepared. The primary recovery options are to
reduce the level of new lending, and thus slow down the rate of growth to
reduce risk weighted assets, and raise new deposits.
· The Group's first Solvent Exit Analysis ('SEA') was approved by the Board in
August 2025 in compliance with the new regulation which was effective 1
October 2025. This analysis goes beyond the Recovery Plan to consider the
process to achieve an orderly and timely wind-down of the Group's trading
activities and return of customer deposits. The primary actions would be
cessation of new business, run-down and sale of lending portfolios. As part of
this new process the Group assessed indicators for when a Solvent Exit Plan
would be required and executable. The SEA supports the creation of a Solvent
Exit Plan in the event one is required,
· Consideration of the other principal risks, as set out in the Principal risks
and uncertainties section, identify any other severe, but plausible scenarios
that could threaten the Group's business model, future performance, solvency
or liquidity.
A summary of the different financial stresses are set out below:
ILAAP
The Group's 2025 ILAAP included idiosyncratic, market-wide and combined stress
scenarios.
The idiosyncratic liquidity stress test assumed an operational incident within
the deposits operations team leads to adverse media coverage across financial
websites, newspapers and on TV. This leads to a short-term loss in customer
confidence and makes it materially more challenging to retain maturing term
bonds, higher notice being served and customers withdrawing Access deposits.
The market-wide stress is based upon the UK economy entering a severe
recession with rising unemployment and inflation, falling house and equity
prices, subdued wage growth and a contraction in GDP, due to prolonged
economic uncertainty. Higher customer default rates (in line with the Macro
ICAAP stress) and the regulators decision to allow consumer customers to take
payment holidays results in lower payment inflows. Completions on consumer
contracts fall, while requests for refinancing from business customers also
contracts in line with reduced economic activity. The combined stress includes
elements of the idiosyncratic and market stresses, whereby the UK economy
enters a severe recession, and the Group suffers outflows due to poor customer
services at the same time.
A combined stress includes elements of the idiosyncratic and market stresses,
whereby the UK economy enters a severe recession, and the Group suffers
operational issues in the deposits function at the same time.
In addition, the ILAAP includes sensitivity analysis to model the impact of
adverse variances in stress assumptions used in each of these scenarios.
Reverse stress test modelling was also performed to identify the type and
severity of a stress required for the Group to no longer be able to meet its
liquidity requirements. Three scenarios were assessed to consider the impact
of: 1) an extreme retail deposits stress leading to higher attrition and
inability to raise new deposits; 2) a significant reduction in lending inflows
at the same time as a full utilisation of Commercial Finance facilities;
and 3) the impact of Retail Finance loans becoming ineligible for use in
supporting Bank of England liquidity schemes.
ICAAP
The Group's ICAAP considered a combined PRA-published macroeconomic stress and
severe idiosyncratic losses to assess the adequacy of capital resources over
the 2025 to 2029 period. The macroeconomic stress included an unemployment
peak of 9.0% in Q1 2027, a 28.0% property price decline by Q4 2027, and an
economic recovery beginning in 2028. However, unemployment and house prices
were not assumed to return to pre-stress levels before the end of the
five-year scenario. At no point under the stress were the Group's minimum
capital requirements not met, and capital buffers held at the start of the
stress were confirmed to be adequate.
Reverse stress test modelling was also performed to assess the level of stress
required for the Group to no longer be able to meet its capital
requirements. This required a significantly more severe scenario, including
peak unemployment of 12.5%, a sharper decline in house prices to 45.9% and
multiple concurrent idiosyncratic loss events occurring at the start of the
scenario.
The ICAAP also used scenario modelling for elements of the Group's Pillar 2A
capital assessment to support the assessment of operational risk and credit
risk.
Recovery Plan
The Group's latest Recovery Plan confirmed that the Group has sufficient
recovery options available to recover from the severe stress scenarios
modelled over the 2025 to 2029 period.
The combined capital stress test included peak unemployment of 10.8%, a 36.8%
decline in property prices and an increase in operational losses based on the
ICAAP Pillar 2A scenario modelling.
The idiosyncratic liquidity stress test assumed a loss of confidence in the
Group, resulting in a run on the bank with a rapid loss of Access and ISA
deposits and significantly increased Notice account outflows. In addition, it
was assumed that there would be a significant increase in requests to withdraw
funds from fixed term bonds prior to the original maturity date.
At the same time, to reflect a layering of liquidity risks, lending outflows
were increased due to higher levels of pipeline completion.
Solvent Exit Analysis
The first SEA prepared by the Group considers a theoretical combination of
macro and idiosyncratic stresses that would take the Group to a point beyond
the point of recovery, but would allow minimum regulatory capital to be
maintained whilst an orderly wind-down of the business activities was
undertaken with Retail Deposits returned to customers. The SEA considered
financial and operational resources required to achieve an orderly exit.
Quantitative and qualitative indicators were calibrated to ensure a Solvent
Exit Plan is achievable on a timely basis.
In future years the SEA will be updated alongside the Recovery Plan.
Directors' responsibility statement
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each
financial year. Under that law, the Directors are required to prepare the
Group Financial Statements in accordance with UK-adopted international
accounting standards. The Financial Statements also comply with International
Financial Reporting Standards ('IFRSs') as issued by the IASB. The Directors
have also chosen to prepare the Parent Company Financial Statements under
UK-adopted international accounting standards. Under company law, the
Directors must not approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company
and of the profit or loss of the Company for that period.
In preparing these Financial Statements, International Accounting Standard 1
requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific requirements
of the financial reporting framework are insufficient to enable users to
understand the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance; and
· make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of Financial Statements may differ from legislation in other jurisdictions.
Responsibility statement
Each of the Directors who are in office at the date of this report, and whose
names and roles are listed on the Board leadership section of the 2025 Annual
Report and Accounts, confirm that to the best of their knowledge:
· the Financial Statements, prepared in accordance with the relevant financial
reporting framework, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
· the Management Report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· the Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Consolidated statement of comprehensive income
For the year ended 31 December 2025
Note 2025 2024
Continuing Discontinued Total Continuing Discontinued Total
£million
£million
Group
£million
£million
Group
£million
£million
Income statement
Interest income and similar income 4.1 301.8 70.2 372.0 296.8 69.2 366.0
Interest expense and similar charges 4.1 (150.7) (22.7) (173.4) (159.5) (21.6) (181.1)
Net interest income 4.1 151.1 47.5 198.6 137.3 47.6 184.9
Fee and commission income 4.2 14.1 1.0 15.1 18.3 0.9 19.2
Fee and commission expense 4.2 - (0.2) (0.2) (0.1) (0.1) (0.2)
Net fee and commission income 4.2 14.1 0.8 14.9 18.2 0.8 19.0
Operating income 165.2 48.3 213.5 155.5 48.4 203.9
Net impairment charge on loans and advances to customers 17 (31.4) (26.6) (58.0) (23.2) (38.7) (61.9)
Other gains/(losses) 0.1 0.1 0.2 (0.4) 0.1 (0.3)
Fair value gains on financial instruments 5 0.1 - 0.1 1.2 - 1.2
Operating expenses 6 (74.7) (29.5) (104.2) (72.2) (31.6) (103.8)
Profit/(loss) before income tax before exceptional items 59.3 (7.7) 51.6 60.9 (21.8) 39.1
Exceptional items 8 - (24.1) (24.1) (1.5) (8.4) (9.9)
Profit/(loss) before income tax 59.3 (31.8) 27.5 59.4 (30.2) 29.2
Income tax (expense)/credit 9 (14.7) 4.8 (9.9) (16.0) 6.5 (9.5)
Profit/(loss) for the year 44.6 (27.0) 17.6 43.4 (23.7) 19.7
Items that may be reclassified to the income statement
Cash flow hedge reserve movements (1.4) - (1.4) (0.8) - (0.8)
Reclassification to the income statement 1.4 - 1.4 1.3 - 1.3
Taxation - - - (0.2) - (0.2)
Other comprehensive income for the year, net of income tax - - - 0.3 - 0.3
Total comprehensive income/(expense) for the year 44.6 (27.0) 17.6 43.7 (23.7) 20.0
Profit/(loss) attributable to equity holders of the Company 44.6 (27.0) 17.6 43.4 (23.7) 19.7
Total comprehensive income/(expense) attributable to equity holders of the 44.6 (27.0) 17.6 43.7 (23.7) 20.0
Company
Earnings per share for profit attributable to the equity
holders of the Company during the year (pence per share)
Basic earnings per ordinary share 11.1 238.8 (144.5) 94.2 227.7 (124.3) 103.4
Diluted earnings per ordinary share 11.2 225.6 (136.6) 89.0 223.5 (122.1) 101.4
Consolidated and Company statement of financial position
As at 31 December 2025
Group Company
Note 2025 2024 2025 2024
£million
£million
£million
£million
ASSETS
Cash and Bank of England reserve account 528.1 445.0 528.1 445.0
Loans and advances to banks 13 36.8 24.0 36.1 23.6
Debt securities 14 1.0 - 1.0 -
Loans and advances to customers 15,16 3,295.8 3,608.5 3,295.8 3,608.5
Fair value adjustment for portfolio hedged risk 18 7.3 (6.8) 7.3 (6.8)
Derivative financial instruments 18 0.2 14.3 0.2 14.3
Assets held for sale 19,15,16 390.8 - 390.8 -
Investment property 20 24.1 - 0.9 0.9
Property, plant and equipment 21 7.4 9.9 5.9 6.0
Right-of-use assets 22 4.4 1.6 4.2 1.4
Intangible assets 23 5.1 5.0 3.2 2.9
Investment in group undertakings 24 - - 6.3 6.1
Current tax assets 2.6 0.2 2.6 1.0
Deferred tax assets 25 3.6 3.3 3.3 3.3
Other assets 26 8.8 11.7 33.4 13.0
Total assets 4,316.0 4,116.7 4,319.1 4,119.2
LIABILITIES AND EQUITY
Liabilities
Due to banks 27 205.9 365.8 205.9 365.8
Deposits from customers 28 3,509.6 3,244.9 3,509.6 3,244.9
Fair value adjustment for portfolio hedged risk 18 4.7 (3.4) 4.7 (3.4)
Derivative financial instruments 18 0.1 10.0 0.1 10.0
Lease liabilities 29 4.4 1.8 4.2 1.6
Other liabilities 30 98.0 32.5 110.3 41.1
Provisions for liabilities and charges 31 25.5 11.3 25.5 11.3
Subordinated liabilities 32 93.5 93.3 93.5 93.3
Total liabilities 3,941.7 3,756.2 3,953.8 3,764.6
Equity attributable to owners of the parent
Share capital 34 7.6 7.6 7.6 7.6
Share premium 84.2 84.0 84.2 84.0
Other reserves 35 (1.9) (2.2) (1.9) (2.2)
Retained earnings 284.4 271.1 275.4 265.2
Total equity 374.3 360.5 365.3 354.6
Total liabilities and equity 4,316.0 4,116.7 4,319.1 4,119.2
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 to not present the parent company income statement. The
profit for the parent company for the year of £14.6 million is presented in
the Company statement of changes in equity.
Consolidated and Company statement of changes in equity
Group Company
Equity attributable to equity holders of the parent Equity attributable to equity holders of the parent
Other reserves Other reserves
Share Share Cash flow Own Retained Total Share Share Cash flow Own Retained Total
capital
premium
hedge
shares
earnings
£million
capital
premium
hedge
shares
earnings
£million
£million
£million
reserve
£million
£million
£million
£million
reserve
£million
£million
£million
£million
Balance at 1 January 2025 7.6 84.0 - (2.2) 271.1 360.5 7.6 84.0 - (2.2) 265.2 354.6
Profit for 2025 - - - - 17.6 17.6 - - - - 14.6 14.6
Other comprehensive income, net of income tax - - - - - - - - - - - -
Total comprehensive income for the year - - - - 17.6 17.6 - - - - 14.6 14.6
Purchase of own shares - - - (0.2) - (0.2) - - - (0.2) - (0.2)
Sale of own shares - - - 0.5 - 0.5 - - - 0.5 - 0.5
Loss on sale of own shares - - - - (0.5) (0.5) - - - - (0.5) (0.5)
Issue of shares - 0.2 - - - 0.2 - 0.2 - - - 0.2
Dividends - - - - (6.4) (6.4) - - - - (6.4) (6.4)
Share-based payments - - - - 2.6 2.6 - - - - 2.5 2.5
Balance at 31 December 2025 7.6 84.2 - (1.9) 284.4 374.3 7.6 84.2 - (1.9) 275.4 365.3
Balance at 1 January 2024 7.6 83.8 (0.3) (1.4) 254.8 344.5 7.6 83.8 (0.3) (1.4) 248.5 338.2
Profit for 2024 - - - - 19.7 19.7 - - - - 20.1 20.1
Other comprehensive income, net of income tax - - 0.3 - - 0.3 - - 0.3 - - 0.3
Total comprehensive income for the year - - 0.3 - 19.7 20.0 - - 0.3 - 20.1 20.4
Purchase of own shares - - - (1.4) - (1.4) - - - (1.4) - (1.4)
Sale of own shares - - - 0.6 - 0.6 - - - 0.6 - 0.6
Loss on sale of own shares - - - - (0.5) (0.5) - - - - (0.5) (0.5)
Issue of shares - 0.2 - - - 0.2 - 0.2 - - - 0.2
Dividends - - - - (5.2) (5.2) - - - - (5.2) (5.2)
Share-based payments - - - - 2.3 2.3 - - - - 2.3 2.3
Balance at 31 December 2024 7.6 84.0 - (2.2) 271.1 360.5 7.6 84.0 - (2.2) 265.2 354.6
Consolidated statement of cash flows
For the year ended 31 December 2025
Note 2025 2024
£million
£million
Cash flows from operating activities
Profit for the year 17.6 19.7
Adjustments for:
Income tax expense 9 9.9 9.5
Depreciation of property, plant and equipment 21 0.8 1.0
Depreciation of right-of-use assets 22 1.1 1.0
Amortisation of intangible assets 23 1.2 1.4
Impairment charge on loans and advances to customers 17 58.0 61.9
Share-based compensation 36 2.0 2.3
Provisions for liabilities and charges - charge to income statement 31 21.7 9.8
Other non-cash items included in profit before tax 0.2 (0.6)
Cash flows from operating profits before changes in operating assets and 112.5 106.0
liabilities
Changes in operating assets and liabilities:
- loans and advances to customers (159.0) (354.8)
- loans and advances to banks and balances at central banks (5.1) 5.0
- other assets 2.8 1.4
- deposits from customers 264.7 373.1
- provisions for liabilities and charges (7.6) (4.7)
- other liabilities 60.7 (5.5)
Income tax paid (12.0) (8.8)
Net cash inflow from operating activities 257.0 111.7
Cash flows from investing activities
Purchase of investment property 20 (1.1) -
Purchase of debt securities 14 (1.0) -
Purchase of property, plant and equipment and intangible assets 21,23 (1.6) (1.0)
Sale of property, plant and equipment 21 1.9 -
Net cash outflow from investing activities (1.8) (1.0)
Cash flows from financing activities
(Repayment)/drawdown of amounts due to banks (1.7) 0.8
Drawdown of sale and repurchase agreements 250.0 125.0
Repayment of sale and repurchase agreements (175.0) -
Repayment of Term Funding Scheme with additional incentives for SMEs (230.0) (160.0)
Purchase of own shares (0.2) (1.4)
Issue of shares 0.2 0.2
Dividends paid 12 (6.4) (5.2)
Repayment of lease liabilities 29 (1.3) (1.4)
Net cash outflow from financing activities (164.4) (42.0)
Net increase in cash and cash equivalents 90.8 68.7
Cash and cash equivalents at 1 January 469.0 400.3
Cash and cash equivalents at 31 December 37 559.8 469.0
Interest received was £227.0 million (2024: £246.1 million) and interest
paid was £65.2 million (2024: £70.6 million).
Company statement of cash flows
For the year ended 31 December 2025
Note 2025 2024
£million
£million
Cash flows from operating activities
Profit for the year 14.6 20.1
Adjustments for:
Income tax expense 9 5.3 6.2
Depreciation of property, plant and equipment 21 0.5 0.6
Depreciation of right-of-use assets 22 1.0 0.8
Amortisation of intangible assets 23 0.9 1.1
Impairment charge on loans and advances to customers 58.0 62.0
Share-based compensation 36 1.8 2.1
Dividends received from subsidiaries (10.8) (9.5)
Provisions for liabilities and charges - charge to the income statement 31 21.7 10.1
Other non-cash items included in profit before tax 0.1 (1.2)
Cash flows from operating profits before changes in operating assets and 93.1 92.3
liabilities
Changes in operating assets and liabilities:
- loans and advances to customers (136.0) (354.9)
- loans and advances to banks and balances at central banks (5.1) 5.0
- other assets (9.7) 11.3
- deposits from customers 264.7 373.1
- provisions for liabilities and charges (7.6) (4.6)
- other liabilities 64.4 (3.9)
Income tax paid (6.4) (6.7)
Net cash inflow from operating activities 257.4 111.6
Cash flows from investing activities
Purchase of debt securities 14 (1.0) -
Purchase of property, plant and equipment and intangible assets 21,23 (1.6) (0.8)
Net cash outflow from investing activities (2.6) (0.8)
Cash flows from financing activities
(Repayment)/drawdown of amounts due to banks (1.7) 0.8
Drawdown of sale and repurchase agreements 250.0 125.0
Repayment of sale and repurchase agreements (175.0) -
Repayment of Term Funding Scheme with additional incentives for SMEs (230.0) (160.0)
Purchase of own shares (0.2) (1.4)
Issue of shares 0.2 0.2
Dividends paid 12 (6.4) (5.2)
Repayment of lease liabilities 29 (1.2) (1.2)
Net cash outflow from financing activities (164.3) (41.8)
Net increase in cash and cash equivalents 90.5 69.0
Cash and cash equivalents at 1 January 468.6 399.6
Cash and cash equivalents at 31 December 37 559.1 468.6
Notes to the consolidated financial statements
1. Accounting policies
The material accounting policies applied in the preparation of these
consolidated financial statements are set out below, and if applicable,
directly under the relevant note to the consolidated financial statements.
These policies have been consistently applied to all of the years presented,
unless otherwise stated.
1.1. Reporting entity
Secure Trust Bank PLC is a public limited company incorporated in England and
Wales in the United Kingdom (referred to as the 'Company') and is limited by
shares. The Company is registered in England and Wales and has the registered
number 00541132. The registered address of the Company is Yorke House,
Arleston Way, Solihull B90 4LH. The consolidated financial statements of the
Company as at, and for, the year ended 31 December 2025 comprise Secure Trust
Bank PLC and its subsidiaries (together referred to as the 'Group' and
individually as 'subsidiaries'). The Group is primarily involved in the
provision of banking and financial services.
1.2. Basis of presentation
The figures shown for the year ended 31 December 2025 are not statutory
accounts within the meaning of section 435 of the Companies Act 2006. The
statutory accounts for the year ended 31 December 2025 on which the auditors
have given an unqualified audit report and did not contain an adverse
statement under section 498(2) or 498(3) of the Companies Act 2006 will be
delivered to the Registrar of Companies after the Annual General Meeting. The
figures shown for the year ended 31 December 2024 are not statutory accounts.
A copy of the statutory accounts has been delivered to the Registrar of
Companies, which contained an unqualified audit report and did not contain an
adverse statement under section 498(2) or 498(3) of the Companies Act 2006.
This announcement has been agreed with the Company's auditors for release.
1.3. Consolidation
Subsidiaries
Subsidiaries are all investees controlled by the Group. The Group controls an
investee when it is exposed, or has rights, to variable returns from its
involvement with the investee, and has the ability to affect those returns
through its power over the investee. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly attributable
to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the
extent of any non-controlling interest. The excess of the cost of acquisition,
excluding directly attributable costs, over the fair value of the Group's
share of the identifiable net assets acquired is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
The parent company's investments in subsidiaries are recorded at cost less,
where appropriate, provision for impairment. The fair value of the underlying
business of the Company's only material investment was significantly higher
than carrying value, and, therefore, no impairment was required.
Intercompany transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated.
The accounting policies adopted by subsidiaries are generally consistent with
those adopted by the Group with minor exceptions.
Subsidiaries are de-consolidated from the date that control ceases.
Discontinued operations
Discontinued operations are a component of an entity that has been disposed of
and represents a major line of business and/or is part of a single
co-ordinated disposal plan. For further information please see Note 10.
1.4. Financial assets and financial liabilities accounting policy
Financial assets (with the exception of derivative financial instruments) accounting policy
The Group classifies its financial assets at inception into three measurement
categories; 'amortised cost', 'Fair Value Through Other Comprehensive Income'
('FVOCI') and 'Fair Value Through Profit or Loss' ('FVTPL'). A financial asset
is measured at amortised cost if both the following conditions are met and it
has not been designated as at FVTPL:
· the asset is held within a business model whose objective is to hold the asset
to collect its contractual cash flows; and
· the contractual terms of the financial asset give rise to cash flows on
specified dates that are Solely Payments of Principal and Interest ('SPPI').
The Group's current business model for all financial assets, with the
exception of derivative financial instruments, is to hold to collect
contractual cash flows, and all assets held give rise to cash flows on
specified dates that represent SPPI on the outstanding principal amount. All
of the Group's financial assets are, therefore, currently classified as
amortised cost, except for derivative financial instruments which are held at
FVTPL. Loans are recognised when funds are advanced to customers and are
carried at amortised cost using the Effective Interest Rate ('EIR') method.
A debt instrument would be measured at FVOCI only if both the below conditions
are met and it has not been designated as FVTPL:
· the asset is held within a business model whose objective is achieved by both
collecting its contractual cash flows and selling the financial asset; and
· the contractual terms of the financial asset give rise to cash flows on
specified dates that represent SPPI on the outstanding principal amount.
The Group currently has no financial instruments classified as FVOCI.
See below for further details of the business model assessment and the SPPI
test.
On initial recognition of an equity investment that is not held for trading,
the Group may irrevocably elect to present subsequent changes in fair value in
other comprehensive income. This election would be made on an
investment-by-investment basis. The Group currently holds no such investments.
All other assets are classified as FVTPL.
Financial assets are not reclassified subsequent to their initial recognition,
except in the period after the Group changes its business model for managing
financial assets. The Group has not reclassified any financial assets during
the reporting period.
Assessment whether contractual cash flows are SPPI
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the cost of funds and for the credit risk associated with
the principal amount outstanding during a particular period of time and for
other basic lending risks and costs (e.g. administrative costs), as well as
profit margin.
In assessing whether the contractual cash flows are SPPI, the Group considers
the contractual terms of the instrument. This includes assessing whether the
financial asset contains a contractual term that could change the timing or
amount of contractual cash flows such that it would not meet the condition.
In making the assessment, the Group considers:
· contingent events that would change the amount and timing of cash flows;
· prepayments and extension terms;
· terms that limit the Group's claim to cash flows from specific assets (e.g.
non-recourse asset arrangements); and
· features that modify consideration of the time value of money (e.g. periodical
reset of interest rate).
The SPPI assessment of loans with ESG-linked features ('green loans') is
judgmental. These are loans where the interest cash flows are linked to
certain ESG performance metrics and where analysis of the loans needs to be
undertaken to assess whether the cash flows represent solely payments of
principal and interest. In May 2024, the IASB issued amendments to IFRS 9
which included amendments impacting loans that contain ESG targets. The new
requirements have been endorsed by the UK Endorsement Board and apply to
accounting periods beginning on or after 1 January 2026. The Group has early
adopted these requirements and as a result continues to hold these loans at
amortised cost. Prior to the issue of the new amendments, including for the
year ended 31 December 2024, the loans may have met the criteria to be
recorded at fair value, however this would not have been material in the
context of the overall value of loans and advances to customers.
Business model assessment
The Group makes an assessment of the objective of a business model in which an
asset is held at a portfolio level because this best reflects the way the
business is managed and information is provided to management. The information
considered includes:
· the stated policies and objectives for the portfolio and the operation of
those policies in practice. In particular, whether management's strategy
focuses on managing the portfolio in order to collect contractual cash flows
or whether it is managed in order to trade to realise fair value changes;
· how the performance of the portfolio is evaluated and reports to management;
· the risks that affect the performance of the business model (and the financial
assets held within that business model) and how those risks are managed; and
· the frequency, volume and timing of sales in prior periods, the reasons for
such sales and its expectations about future sales activity. However,
information about sales activity is not considered in isolation, but as part
of an overall assessment of how the Group's stated objective for managing the
financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading or managed and whose performance is
evaluated on a fair value basis are classified as FVTPL because they are
neither held to collect contractual cash flows nor held both to collect
contractual cash flows and to sell financial assets.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount
at which the financial asset or financial liability is measured at initial
recognition, plus or minus the cumulative amortisation using the EIR, which is
the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument, minus any reduction for
impairment.
Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or where the Group has transferred
substantially all of the risks and rewards of ownership or in the event of a
substantial modification. There have not been any instances where assets have
only been partially derecognised.
Modification of loans
A customer's account may be modified to assist customers who are in, or have
recently overcome, financial difficulties and have demonstrated both the
ability and willingness to meet the current or modified loan contractual
payments. Substantial loan modifications result in the derecognition of the
existing loan, and the recognition of a new loan at the new origination EIR
based on the expected future cash flows at origination. Determination of the
origination Probability of Default ('PD') for the new loan is required, based
on the PD as at the date of the modification, which is used for the
calculation of the impairment provision against the new loan. Any deferred
fees or deferred interest, and any difference between the carrying value of
the derecognised loan and the new loan, is written-off to the income
statement on recognition of the new loan.
Where the modification is not considered to be substantial, neither the
origination EIR nor the origination probability of default for the modified
loan changes. The net present value of changes to the future contractual cash
flows adjusts the carrying amount of the original asset with the difference
immediately being recognised in profit or loss. The adjusted carrying amount
is then amortised over the remaining term of the modified loan using the
original EIR.
Financial liabilities (with the exception of derivative financial instruments)
The Group classifies its financial liabilities as measured at amortised cost.
Such financial liabilities are recognised when cash is received from
depositors and carried at amortised cost using the EIR method. Financial
liabilities are derecognised when they are extinguished (i.e. when the
obligation specified in the contract is discharged, cancelled or expires).
Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are not offset in the consolidated
financial statements unless the Group has both a legally enforceable right and
intention to offset.
1.5. Foreign currencies
Transactions in foreign currencies are initially recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are retranslated into the
Company's functional currency at the rates prevailing on the consolidated
statement of financial position date. Exchange differences arising on the
settlement of monetary items, and on the retranslation of monetary items, are
included in the income statement for the period.
2. Critical accounting judgements and key sources of estimation uncertainty
2.1. Judgements
No critical judgements have been identified.
2.2. Key sources of estimation uncertainty
Estimations that could have a material impact on the Group's financial
results, and, are therefore, considered to be key sources of estimation
uncertainty. Key sources of estimation can be found in:
· Note 17.1. Allowances for impairment of loans and advances to customers;
· Note 31.1. Provisions for liabilities and charges.
3. Operating segments
The Group is organised into four operating segments, which consist of the
different products available, as disclosed below.
Consumer Finance
· Retail Finance: a market-leading online e-commerce service to retailers,
providing unsecured lending products to prime UK customers to facilitate the
purchase of a wide range of consumer products, including furniture, jewellery,
dental, leisure items and football season tickets.
· Vehicle Finance: hire purchase lending for used cars to prime and near-prime
customers and Personal Contract Purchase lending into the consumer prime
credit market, both secured against the vehicle financed. In addition, a
Stocking Funding product was also offered, whereby funds are advanced and
secured against dealer forecourt used car stock, sourced from auctions, part
exchanges or trade sources. In December 2025, this segment was classified as
discontinued. For further information please see Note 10.
Business Finance
· Real Estate Finance: non-regulated first charge secured lending to specialist
real estate markets, lending to professional landlords to enable them to
improve and grow their portfolio and provide development facilities to
property developers and SME housebuilders to help build new homes for sale or
letting.
· Commercial Finance: asset-based lending solutions to SMEs and some larger
corporates who need bespoke working capital solutions for their business.
Lending is predominantly against receivables, releasing funds of up to 90% of
qualifying invoices under invoice discounting facilities.
Other
This principally includes interest receivable from central banks, interest
receivable and payable on derivatives and interest payable on deposits from
customers, amounts due to banks and subordinated liabilities, and operating
expenses, which are not recharged to the operating segments.
The Group's chief operating decision maker, the Executive Committee, regularly
reviews these segments by looking at the operating income, size of the loan
books and impairments.
Interest expense is charged to the operating segments in accordance with the
Group's internal funds transfer pricing policy. Operating expenses reflect
costs incurred directly, and costs incurred centrally that are reallocated to
the operating segment to which they can be directly attributed.
Additionally, no balance sheet items are allocated to segments other than
loans and advances to customers.
All of the Group's operations are conducted wholly within the United Kingdom
and geographical information is, therefore, not presented.
31 December 2025 Retail Real Estate Commercial Other Total Discontinued Total
Finance
Finance
Finance
£million
Continuing
Vehicle
Group
£million
£million
£million
operations
Finance
£million
£million
£million
Interest income and similar income 157.2 92.2 27.6 24.8 301.8 70.2 372.0
Interest expense and similar charges (59.7) (58.0) (15.5) (17.5) (150.7) (22.7) (173.4)
Net interest income 97.5 34.2 12.1 7.3 151.1 47.5 198.6
Fee and commission income 3.7 0.3 10.1 - 14.1 1.0 15.1
Fee and commission expense - - - - - (0.2) (0.2)
Net fee and commission income 3.7 0.3 10.1 - 14.1 0.8 14.9
Operating income 101.2 34.5 22.2 7.3 165.2 48.3 213.5
Net impairment charge on loans and advances to customers (19.2) (8.8) (3.4) - (31.4) (26.6) (58.0)
Other gains/(losses) - 0.2 - (0.1) 0.1 0.1 0.2
Fair value gains on financial instruments - - - 0.1 0.1 - 0.1
Operating expenses (24.3) (10.4) (7.8) (32.2) (74.7) (29.5) (104.2)
Profit/(loss) before income tax before exceptional items 57.7 15.5 11.0 (24.9) 59.3 (7.7) 51.6
Exceptional items - - - - - (24.1) (24.1)
Profit/(loss) before income tax 57.7 15.5 11.0 (24.9) 59.3 (31.8) 27.5
Loans and advances to customers 1,466.5 1,466.9 362.4 - 3,295.8 390.8 3,686.6
Exceptional items have been reallocated out to the respective operating
segments for prior year to aid comparability.
31 December 2024 Retail Real Estate Commercial Other Total Continuing operations Discontinued Total
Finance
Finance
Finance
£million
£million
Vehicle
Group
£million
£million
£million
Finance
£million
£million
Interest income and similar income 140.7 87.1 29.8 39.2 296.8 69.2 366.0
Interest expense and similar charges (53.9) (54.5) (17.6) (33.5) (159.5) (21.6) (181.1)
Net interest income 86.8 32.6 12.2 5.7 137.3 47.6 184.9
Fee and commission income 3.2 0.4 14.6 0.1 18.3 0.9 19.2
Fee and commission expense - - (0.1) - (0.1) (0.1) (0.2)
Net fee and commission income 3.2 0.4 14.5 0.1 18.2 0.8 19.0
Operating income 90.0 33.0 26.7 5.8 155.5 48.4 203.9
Net impairment charge on loans and advances to customers (13.3) (4.0) (5.9) - (23.2) (38.7) (61.9)
Other (losses)/gains - - - (0.4) (0.4) 0.1 (0.3)
Fair value gains on financial instruments - 0.3 - 0.9 1.2 - 1.2
Operating expenses (26.1) (10.0) (8.1) (28.0) (72.2) (31.6) (103.8)
Profit/(loss) before income tax before exceptional items 50.6 19.3 12.7 (21.7) 60.9 (21.8) 39.1
Exceptional items - - - (1.5) (1.5) (8.4) (9.9)
Profit/(loss) before income tax 50.6 19.3 12.7 (23.2) 59.4 (30.2) 29.2
Loans and advances to customers 1,357.8 1,341.4 351.0 - 3,050.2 558.3 3,608.5
4. Operating income
All items below arise from financial instruments measured at amortised cost
unless otherwise stated.
4.1. Net interest income
2025 2024
£million
£million
Loans and advances to customers 347.2 326.7
Cash and Bank of England reserve account 19.6 22.5
366.8 349.2
Income on financial instruments hedging assets 5.2 16.8
Interest income and similar income 372.0 366.0
Of which:
Continuing 301.8 296.8
Discontinued (Note 10) 70.2 69.2
Deposits from customers (146.7) (136.0)
Due to banks (12.1) (18.5)
Subordinated liabilities (11.9) (11.9)
Other (0.1) (0.1)
(170.8) (166.5)
Expense on financial instruments hedging liabilities (2.6) (14.6)
Interest expense and similar charges (173.4) (181.1)
Of which:
Continuing (150.7) (159.5)
Discontinued (Note 10) (22.7) (21.6)
Interest income and expense accounting policy
For all financial instruments measured at amortised cost, the EIR method is
used to measure the carrying value and allocate interest income or expense.
The EIR is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument to:
· the gross carrying amount of the financial asset; or
· the amortised cost of the financial liability.
In calculating the EIR for financial instruments, other than assets that were
credit impaired on initial recognition, the Group estimates cash flows
considering all contractual terms of the financial instrument (for example,
early redemption penalty charges and broker commissions) and anticipated
customer behaviour but does not consider future credit losses.
The calculation of the EIR includes all fees received and paid that are an
integral part of the loan, transaction costs and all other premiums or
discounts. Transaction costs include incremental costs that are directly
attributable to the acquisition or issue of a financial instrument.
For financial assets that are not considered to be credit-impaired ('Stage 1'
and 'Stage 2' assets), interest income is recognised by applying the EIR to
the gross carrying amount of the financial asset. For financial assets that
become credit-impaired subsequent to initial recognition ('Stage 3' assets),
from the next reporting period onwards interest income is recognised by
applying the EIR to the amortised cost of the financial asset. The credit risk
of financial assets that become credit-impaired are not expected to improve
such that they are no longer considered credit-impaired, however, if this were
to occur, the calculation of interest income would revert back to the gross
basis. The Group's definition of Stage 1, Stage 2 and Stage 3 assets is set
out in Note 17.
For financial assets that were credit-impaired on initial recognition ('POCI'
assets), income is calculated by applying the credit adjusted EIR to the
amortised cost of the asset. Collection activity costs are not included in the
amortised cost of the assets, but are included in operating expenses in the
income statement, and are recognised as incurred, in common with other
businesses in the sector. For such financial assets the calculation of
interest income will never revert to a gross basis, even if the credit risk of
the asset improves.
Further details regarding when an asset becomes credit-impaired subsequent to
initial recognition is provided within Note 17.
4.2. Net fee and commission income
2025 2024
£million
£million
Fee and disbursement income 14.0 18.1
Commission income 1.1 1.1
Fee and commission income 15.1 19.2
Of which:
Continuing 14.1 18.3
Discontinued (Note 10) 1.0 0.9
Other expenses (0.2) (0.2)
Fee and commission expense (0.2) (0.2)
Of which:
Continuing - (0.1)
Discontinued (Note 10) (0.2) (0.1)
Fees and commission income is all recognised under IFRS 15 Revenue from
contracts to customers and consists principally of the following:
· Commercial Finance - discounting, service and arrangement fees.
· Retail Finance - principally comprises of account management fees received
from customers and referral fees received from third parties.
· Vehicle Finance - primarily relates to vehicle collection and damage charges
made to customers and loan administration fees charged to dealers in respect
of the Stock Funding product.
Fee and commission accounting policy
Fees and commission income that is not considered an integral part of the EIR
of a financial instrument are recognised under IFRS 15 when the Group
satisfies performance obligations by transferring promised services to
customers and presented in the income statement as fee and commission income.
All of the Group's fees and commissions relate to performance obligations that
are recognised at a point in time.
Fees and commission income and expenses that are an integral part of the EIR
of a financial instrument are included in the EIR and presented in the income
statement as interest income or expense.
No significant judgements are made in evaluating when a customer obtains
control of promised goods or services.
5. Fair value gains on financial instruments
2025 2024
£million
£million
Fair value movement during the year - Interest rate derivatives (6.4) 1.6
Fair value movement during the year - Hedged items 6.4 (1.5)
Hedge ineffectiveness recognised in the income statement - 0.1
Inception and amortisation adjustment¹ (0.5) 0.6
Losses recognised on hedges not in hedge relationships 0.6 0.5
0.1 1.2
Note:
1. The inception and amortisation adjustment relates to amortisation of macro
fair value hedge accounting relationships derecognised and the amortisation of
the fair value adjustment of underlying hedged items at the time hedge
accounting relationships commenced or were redesignated. Over the life of the
hedged items these adjustments are expected to off-set gains/losses on
derivatives taken for hedging purposes before and after they are designated in
hedge relationships.
As a part of its risk management strategy, the Group uses derivatives to
economically hedge financial assets and liabilities. For further information
on the Group's risk management strategy for market risk see the Group's
Strategic Report in the 2025 Annual Report and Accounts.
Hedge accounting is employed by the Group to minimise the accounting
volatility associated with the change in fair value of derivative financial
instruments. This volatility does not reflect the economic reality of the
Group's hedging strategy, the Group only uses derivatives for the hedging of
risks.
5.1. Fair value gain recognised in other comprehensive income
2025 2024
£million
£million
Cash flow hedges
Fair value movement during the year - Interest rate derivatives (1.4) (0.8)
Interest reclassified to the income statement during the year 1.4 1.3
Fair value gain recognised in other comprehensive income - 0.5
Although the Group uses interest rate derivatives exclusively to hedge
interest rate risk exposures, income statement volatility can still arise due
to hedge accounting ineffectiveness or because hedge accounting is not
achievable. Where such volatility arises, it will net to zero over the life of
the hedging relationship. All derivatives held by the Group have been highly
effective in the year, resulting in minimal hedge accounting ineffectiveness
recognised in the income statement. Future ineffectiveness may arise as a
result of:
· differences between the expected and actual volume of prepayments, as the
Group hedges to the expected repayment date taking into account expected
prepayments based on past experience; or
· differences in the timing of cash flows for the hedged item and the hedging
instrument.
How fair value and cash flow hedge accounting affect the consolidated
financial statements and the main sources of the residual hedge
ineffectiveness remaining in the income statement are set out as follows.
Further information on the current derivative portfolio and the allocation to
hedge accounting types is included in Note 18.
Derivative financial instruments accounting policy
The Group enters into derivatives to manage exposures to fluctuations in
interest rates. Derivatives are not used for speculative purposes. Derivatives
are carried at fair value, with movements in fair value recognised in the
income statement or other comprehensive income. Derivatives are valued by
discounted cash flow models using yield curves based on Overnight Indexed Swap
('OIS') rates. Derivatives are carried as assets where fair value is positive
and as liabilities when fair value is negative where they are not offset.
Derivatives are offset in the consolidated financial statements where the
Group has both a legally enforceable right and intention to offset.
The Group does not hold contracts containing embedded derivatives.
Where cash collateral is received, to mitigate the risk inherent in the
amounts due to the Group, it is included as a liability within the due to
banks line within the statement of financial position. Where cash collateral
is given, to mitigate the risk inherent in amounts due from the Group, it is
included as an asset in the loans and advances to banks line within the
statement of financial position. Where cash collateral meets the requirements
of offsetting, it is included within derivatives.
Hedge accounting
Following the implementation of IFRS 9, the Group elected to apply IAS 39 for
all of its hedge accounting requirements. When transactions meet specified
criteria the Group can apply two types of hedge accounting:
· hedges of the fair value of recognised assets or liabilities or firm
commitments (fair value hedges); and
· hedges of highly probable future cash flows attributable to a recognised asset
or liability (cash flow hedges).
The Group does not have hedges of net investments.
At inception of a hedge, the Group formally documents the relationship between
the hedged items and hedging instruments, as well as its risk management
objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing
basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values of the hedged items
(i.e. the fair value offset between the hedged item and hedging instrument is
within the 80-125% range).
When the European Union adopted IAS 39 in 2004, it removed certain hedge
accounting requirements, commonly referred to as the EU carve-out. The relaxed
requirements under the carve-out allow the Group to apply the 'bottom up'
method when calculating macro‑hedge ineffectiveness. This option is not
allowed under full IFRS. The Group has applied this carve-out, which is
permitted under UK-adopted IAS 39, accordingly.
Fair value hedge accounting
Fair value hedge accounting results in the carrying value of the hedged item
being adjusted to reflect changes in fair value attributable to the hedged
risk, thereby offsetting the effect of the related movement in the fair value
of the derivative. Changes in the fair value of derivatives and hedged items
that are designated and qualify as fair value hedges are recorded in the
income statement.
In a one-to-one hedging relationship, in which a single derivative hedges a
single hedged item, the carrying value of the underlying asset or liability
(the hedged item) is adjusted for the hedged risk to offset the fair value
movement of the related derivative. In the case of a portfolio hedge, an
adjustment is included in the fair value adjustments for portfolio hedged risk
line in the statement of financial position to offset the fair value movements
in the related derivative. The Group currently only designates portfolio
hedges.
If the hedge no longer meets the criteria for hedge accounting, expires or is
terminated, the cumulative fair value adjustment to the carrying amount of a
hedged item is amortised to the income statement over the period to maturity
of the previously designated hedge relationship and recorded as net interest
income. If the underlying item is sold or repaid, the unamortised fair value
adjustment is immediately recognised in the income statement.
Cash flow hedge accounting
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges are recognised in other
comprehensive income and presented in the cash flow hedge reserve in equity.
Any ineffective portion of changes in the fair value of the derivative is
recognised immediately in the income statement. Amounts recognised in the cash
flow hedge reserve are subsequently reclassified to the income statement when
the underlying asset or liability being hedged impacts the income statement,
for example, when interest payments are recognised, and are recorded in the
same income statement line in which the income or expense associated with the
related hedged item is reported.
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time remains in equity and is recognised in the periods when
the hedged item affects the income statement. When a forecast transaction is
no longer expected to occur (for example, the recognised hedged item is
disposed of), the cumulative gain or loss previously recognised in other
comprehensive income is immediately reclassified to the income statement.
The cash flow hedge reserve represents the cumulative amount of gains and
losses on hedging instruments deemed effective in cash flow hedges. The
cumulative deferred gain or loss on the hedging instrument is recognised in
profit or loss only when the hedged transaction impacts the profit or loss, or
is included directly in the initial cost or other carrying amount of the
hedged non-financial items (basis adjustment).
6. Operating expenses
2025 2024
£million
£million
Employee costs, including those of Directors:
Wages and salaries 51.0 52.5
Social security costs 7.8 5.7
Pension costs 2.0 2.0
Share-based payment transactions 2.1 2.3
Depreciation of property, plant and equipment (Note 21) 0.8 1.0
Depreciation of lease right-of-use assets (Note 22) 1.1 1.0
Amortisation of intangible assets (Note 23) 1.2 1.4
Operating lease rentals 0.8 0.8
Other administrative expenses 37.4 37.1
Total operating expenses 104.2 103.8
Of which:
Continuing 74.7 72.2
Discontinued 29.5 31.6
Post-retirement obligations accounting policy
The Group contributes to defined contribution schemes for the benefit of
certain employees. The schemes are funded through payments to insurance
companies or trustee-administered funds at the contribution rates agreed with
individual employees. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee
benefit expense when they are due. There are no post-retirement benefits other
than pensions.
Remuneration of the Auditor and its associates, excluding VAT, was as follows:
2025 2024
£million
£million
Fees payable to the Company's Auditor for the audit of the Company's annual 1.4 1.3
accounts
Fees payable to the Company's Auditor for other services:
Other assurance services 0.2 0.1
1.6 1.4
Other assurance services related to the interim independent review report and
profit certifications (2024: interim independent review report and profit
certification).
7. Average number of employees
2025 2024
Number
Number
Directors 2 2
Other senior management 26 23
Other employees 832 890
860 915
8. Exceptional items
2025 2024
£million
£million
Motor Finance commissions
- Redress 11.3 5.2
- Cost 5.1 1.7
16.4 6.9
BiFD Vehicle Finance collections review
- Redress - 0.2
- Cost 2.1 1.3
2.1 1.5
Exit from Vehicle Finance 5.0 -
Sale of Consumer Vehicle Finance 0.6 -
Organisational redesign - 1.5
Total exceptional items 24.1 9.9
Costs associated with these activities are outside the normal course of
business and are treated as exceptional.
Motor Finance commissions
During 2025, the Group updated its range of probability weighted scenarios
resulting in estimated costs of £16.4 million (2024: £6.9 million, of which
£6.4 million was recognised as a provision) following the release of the
FCA's consultation paper in October 2025. Further details about the provision
can be found in Note 31.
Borrowers in Financial Difficulty ('BiFD') Vehicle Finance collections review
As previously described, following the FCA's review of BiFD across the
industry and, in response to the specific feedback we received on our own
collections activities, we incurred costs relating to implementing enhanced
processes, procedures and policies in our Vehicle Finance collections
operations of £2.1 million (2024: £1.5 million). This work has now been
completed.
Exit from Vehicle Finance business
In July 2025, the Group announced the decision to cease lending in the Vehicle
Finance business. Exceptional costs arising in relation to this decision
include redundancy costs, write down of the value of Cloud software
development costs and costs in respect of onerous contracts.
Sale of Consumer Vehicle Finance business
In respect of the sale of the Consumer Vehicle Finance business announced in
December 2025, £0.6 million of transaction costs were recognised, with the
remainder of costs to be recognised in 2026.
Organisational redesign
During 2024, the Group undertook an organisational redesign where
product-specific teams were amalgamated under a single management structure
resulting in the Group incurring redundancy costs of £1.5 million.
Income tax on exceptional items
Income tax on exceptional items amount to £2.9 million credit (2024: £1.0
million credit).
Exceptional items accounting policy
Exceptional items are expenses that do not relate to the Group's core
activities, which are material in the context of the Group's performance.
9. Income tax expense
2025 2024
£million
£million
Current taxation
Corporation tax charge - current year 9.6 8.4
Corporation tax charge - adjustments in respect of prior years 0.1 0.3
9.7 8.7
Deferred taxation
Deferred tax charge - current year 0.4 1.2
Deferred tax credit - adjustments in respect of prior years (0.2) (0.4)
0.2 0.8
Income tax expense 9.9 9.5
Of which:
Continuing 14.7 16.0
Discontinued (Note 10) (4.8) (6.5)
Tax reconciliation
Profit before tax 27.5 29.2
Tax at 25.0% (2024: 25.0%) 6.9 7.3
Permanent differences on exceptional items 3.0 1.5
Other permanent differences 0.2 0.1
Rate change on deferred tax assets - 0.5
Other adjustments including prior year adjustments (0.2) 0.1
Income tax expense for the year 9.9 9.5
The tax has been calculated at the current statutory rate, which is 25.0% for
the year ended 31 December 2025 (2024: 25.0%).
Income tax accounting policy
Current income tax, which is payable on taxable profits, is recognised as an
expense in the period in which the profits arise.
Deferred tax is provided in full on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax is determined using tax rates
and laws that have been enacted or substantially enacted by the statement of
financial position date and are expected to apply when the related deferred
tax asset is realised or the deferred tax liability is settled.
The Group is currently outside the scope of Pillar 2 (for tax purposes).
10. Discontinued operations
On 24 December 2025, the Group announced the sale of the Consumer Vehicle
Finance business, which represents the majority of the Vehicle Finance
business. This meets the criteria, under IFRS 5 Non‑current Assets held for
sale and discontinued operations, to be classified as held for sale and
disclosed as a discontinued operation. The consolidated statement of
comprehensive income and Note 3 Operating segments presents the information
required to be disclosed under IFRS 5 including:
· (i) the post-tax profit or loss of discontinued operations;
· (ii) the revenue, expenses and pre-tax profit or loss of discontinued
operations; and
· (iii) the related income tax expense.
As at 31 December 2025, a net cash inflow from operating activities of £45.8
million in relation to the sale of the Consumer Vehicle Finance business was
attributed to discontinued operations.
IFRS 5 measurement requires that assets that meet the criteria to be
classified as held for sale are measured at the lower of carrying amount and
fair value less costs to sell. This results in no change to the year end
valuation at 31 December 2025 as the purchase price exceeded the carrying
value.
11. Earnings per ordinary share
11.1. Basic
Basic earnings per ordinary share are calculated by dividing the profit
attributable to equity holders of the parent by the weighted average number of
ordinary shares as follows:
2025 2024
Profit attributable to equity holders of the parent (£million) 17.6 19.7
Weighted average number of ordinary shares (number) 18,678,740 19,057,161
Earnings per share (pence) 94.2 103.4
11.2. Diluted
Diluted earnings per ordinary share are calculated by dividing the profit
attributable to equity holders of the parent by the weighted average number of
ordinary shares in issue during the year, as noted above, as well as the
number of dilutive share options in issue during the year, as follows:
2025 2024
Weighted average number of ordinary shares 18,678,740 19,057,161
Number of dilutive shares in issue at the period-end 1,089,891 363,751
Fully diluted weighted average number of ordinary shares 19,768,631 19,420,912
Dilutive shares being based on:
Number of options outstanding at the period-end 1,688,791 1,395,045
Weighted average exercise price (pence) 162 215
Average share price during the period (pence) 804 525
Diluted earnings per share (pence) 89.0 101.4
12. Dividends
Paid 2025 2024
£million
£million
2025 interim dividend - 11.8 pence per share Sep−25 2.2 -
2024 final dividend - 22.5 pence per share May−25 4.2 -
2024 interim dividend - 11.3 pence per share Sep−24 - 2.1
2023 final dividend - 16.2 pence per share May−24 - 3.1
6.4 5.2
The Directors recommend the payment of a final dividend of 23.7 pence per
share (2024: 22.5 pence per share). The final dividend, if approved by
members at the Annual General Meeting, will be paid on 21 May 2026, with an
associated record date of 24 April 2026.
The Employee Benefit Trust ('EBT') has waived its right to receive future
dividends on shares held in the trust. Dividends waived on shares held in the
EBT in 2025 were £0.1 million (2024: £0.1 million).
Dividends accounting policy
Final dividends on ordinary shares are recognised in equity in the period in
which they are approved by shareholders. Interim dividends on ordinary shares
are recognised in equity in the period in which they are paid.
13. Loans and advances to banks
Moody's long-term ratings are as follows:
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Aaa - Aa3 5.1 - 5.1 -
A1 31.7 24.0 31.0 23.6
36.8 24.0 36.1 23.6
None of the loans and advances to banks are either past due or impaired.
Loans and advances to banks includes £5.1 million (2024: £nil), which the
Group and Company does not have access to, and are therefore excluded from
cash and cash equivalents. See Note 37.1 for a reconciliation to cash and cash
equivalents.
14. Debt securities
Group and Company
Debt securities consisted solely of sterling UK Government securities
('gilts'). The Group holds gilts from time to time for liquidity risk
management purposes. The Group's intention is to hold the asset to collect its
contractual cash flows of principal and interest and, therefore, they are
stated in the statement of financial position at amortised cost. During 2025,
the Group transacted £1.0 million of gilts (2024: £nil).
15. Loans and advances to customers
Group and Company
31 December 2025 Loans and Assets held Total
advances to
for sale
£million
customers
£million
£million
Gross loans and advances 3,341.3 434.8 3,776.1
Less: allowances for impairment of loans and advances (Note 17) (45.5) (44.0) (89.5)
3,295.8 390.8 3,686.6
31 December 2024 Loans and Assets held Total
advances to
for sale
£million
customers
£million
£million
Gross loans and advances 3,720.3 - 3,720.3
Less: allowances for impairment of loans and advances (Note 17) (111.8) - (111.8)
3,608.5 - 3,608.5
The fair value of loans and advances to customers is shown in Note 43. Loans
and advances to customers includes finance lease receivables of £411.5
million (2024: £548.4 million). See Note 16 for further details.
Retail Finance assets of £1,023.8 million (2024: £1,088.2 million) were
pre-positioned for use under sale and repurchase agreements (2024: Sale and
repurchase agreements and Term Funding Scheme with additional incentives for
SMEs) and are available for use as collateral.
The Real Estate Finance loan book of £1,466.9 million (2024: £1,341.4
million) is secured upon real estate, which had a loan-to-value of 57% at 31
December 2025 (2024: 56%).
Under its credit policy, the Real Estate Finance business lends to a maximum
loan-to-value of:
· 70% for investment loans;
· 60% for residential development loans1;
· 65% for certain residential higher leveraged development loans1, which is
subject to an overall cap on such lending agreed by management according to
risk appetite; and
· 65% for commercial development loans1.
Note:
1. based on gross development value.
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.
Of cash collateral, £0.3 million has been received as at 31 December 2025 in
respect of certain loans and advances
(2024: £0.3 million).
The accounting policy for loans and advances to customers is included in Note
1.4 Financial assets and financial liabilities accounting policy.
16. Finance lease receivables
Group and Company
Loans and advances to customers include finance lease receivables as follows:
2025 2024
£million
£million
Gross investment in finance lease receivables:
- Not more than one year 191.4 228.1
- Later than one year and no later than five years 358.6 535.4
550.0 763.5
Unearned future finance income on finance leases (138.5) (215.1)
Net investment in finance leases 411.5 548.4
The net investment in finance leases may be analysed as follows:
- Not more than one year 123.6 135.3
- Later than one year and no later than five years 287.9 413.1
411.5 548.4
Finance lease receivables include Vehicle Finance loans to consumers.
Lessor accounting policy
The present value of the lease payments on assets leased to customers under
agreements that transfer substantially all the risks and rewards of ownership,
with or without ultimate legal title, are recognised as a receivable. The
difference between the gross receivable and the present value of the
receivable is recognised as unearned finance income. Lease income
is recognised over the term of the lease using the net investment method,
which reflects a constant periodic rate of return.
17. Allowances for impairment of loans and advances
Group and Company
Not credit-impaired Credit-
impaired
31 December 2025 Stage 1: Stage 2: Stage 3: Total Gross Provision
Subject to
Subject to
Subject to
provision
loans and
coverage
12-month
lifetime
lifetime
£million
advances to
%
ECL
ECL
ECL
customers
£million
£million
£million
£million
Consumer Finance:
Retail Finance 13.5 8.0 11.6 33.1 1,499.6 2.2
Business Finance:
Real Estate Finance 0.4 - 8.0 8.4 1,475.3 0.6
Commercial Finance 0.6 3.2 0.2 4.0 366.4 1.1
14.5 11.2 19.8 45.5 3,341.3 1.4
Assets held for sale: Vehicle Finance:
Voluntary termination provision 3.8 1.5 - 5.3
Other impairment 6.9 8.6 23.2 38.7
10.7 10.1 23.2 44.0 434.8 10.1
25.2 21.3 43.0 89.5 3,776.1 2.4
Not credit-impaired Credit-impaired
31 December 2024 Stage 1: Stage 2: Stage 3: Total Gross Provision
Subject to
Subject to
Subject to
provision
loans and
coverage
12-month
lifetime
lifetime
£million
advances to
%
ECL
ECL
ECL
customers
£million
£million
£million
£million
Consumer Finance:
Retail Finance 13.5 6.5 10.1 30.1 1,387.9 2.2
Business Finance:
Real Estate Finance 0.4 0.3 11.8 12.5 1,353.9 0.9
Commercial Finance 0.5 0.2 0.1 0.8 351.8 0.2
14.4 7.0 22.0 43.4 3,093.6 1.4
Vehicle Finance:
Voluntary termination provision 5.4 1.5 - 6.9
Other impairment 9.8 7.4 44.3 61.5
15.2 8.9 44.3 68.4 626.7 10.9
29.6 15.9 66.3 111.8 3,720.3 3.0
The impairment charge disclosed in the income statement can be analysed as
follows:
2025 2024
£million
£million
Expected credit losses: impairment charge 58.3 61.9
Charge in respect of off balance sheet loan commitments 0.1 0.1
Loans written off directly to the income statement 0.8 0.7
Unwind of discount (1.2) (0.8)
58.0 61.9
Of which:
Continuing 31.4 23.2
Discontinued (Note 10) 26.6 38.7
Total provisions include expert credit judgements as follows:
2025 2024
£million
£million
Specific overlays/(underlays) held against credit-impaired secured assets held 1.9 (0.7)
within the Business Finance portfolio
Management judgement in respect of:
Vehicle Finance LGD - (4.5)
Other (0.3) (0.5)
Expert credit judgements over the IFRS 9 model results 1.6 (5.7)
The specific overlays/(underlays) for Business Finance have been estimated on
an individual basis by assessing the recoverability and condition of the
secured asset, along with any other recoveries that may be made.
Vehicle Finance LGD underlay has been released in 2025 reflecting recoveries
and model changes.
Reconciliations of the opening to closing allowance for impairment of loans
and advances are presented below:
Not credit-impaired Credit-impaired
Stage 1: Stage 2: Stage 3: Total
Subject to
Subject to
Subject to
£million
12-month ECL
lifetime ECL
lifetime ECL
£million
£million
£million
At 1 January 2025 29.6 15.9 66.3 111.8
(Decrease)/increase due to change in credit risk
- Transfer to stage 2 (13.7) 40.0 (2.4) 23.9
- Transfer to stage 3 (0.2) (24.2) 48.9 24.5
- Transfer to stage 1 6.8 (16.5) - (9.7)
Passage of time (11.0) 3.6 5.2 (2.2)
New loans originated 15.6 - - 15.6
Matured and derecognised loans (2.6) (1.6) (3.0) (7.2)
Changes to credit risk parameters 2.2 4.0 2.1 8.3
Other adjustments 5.0 0.1 - 5.1
Charge to income statement 2.1 5.4 50.8 58.3
Allowance utilised in respect of write-offs (6.5) - (74.1) (80.6)
31 December 2025 25.2 21.3 43.0 89.5
Not credit-impaired Credit-impaired
Stage 1: Stage 2: Stage 3: Total
Subject to
Subject to
Subject to
£million
12-month ECL
lifetime ECL
lifetime ECL
£million
£million
£million
At 1 January 2024 29.5 18.2 40.4 88.1
(Decrease)/increase due to change in credit risk
- Transfer to stage 2 (11.7) 38.6 (1.4) 25.5
- Transfer to stage 3 (0.2) (24.1) 48.8 24.5
- Transfer to stage 1 7.8 (20.8) - (13.0)
Passage of time (6.3) 4.6 14.8 13.1
New loans originated 16.2 - - 16.2
Matured and derecognised loans (2.1) (1.6) (0.5) (4.2)
Changes to credit risk parameters (2.3) (0.5) (2.9) (5.7)
Other adjustments 4.0 1.5 - 5.5
Charge/(credit) to income statement 5.4 (2.3) 58.8 61.9
Allowance utilised in respect of write-offs (5.3) - (32.9) (38.2)
31 December 2024 29.6 15.9 66.3 111.8
These tables have been prepared based on monthly movements in the ECL.
Passage of time represents the impact of accounts maturing through their
contractual life, the associated reduction in PDs and the unwind of the
discount applied in calculating the ECL.
Changes to credit risk parameters represent movements that have occurred due
to the Group updating model inputs. This would include the impact of, for
example, updating the macroeconomic scenarios applied to the models.
Other adjustments represents the movement in the Vehicle Finance voluntary
termination provision.
Stage 1 write-offs arise on Vehicle Finance accounts where borrowers have
exercised their right to voluntarily terminate their agreements.
Reconciliations of the opening to closing gross loans and advances are
presented below:
Not credit impaired Credit- impaired
Stage 1: Subject to 12 month ECL Stage 2: Subject to lifetime ECL Stage 3: Subject to lifetime ECL Total
£million
£million
£million
£million
At 1 January 2025 3,204.6 329.0 186.7 3,720.3
- Transfer to stage 2 (668.7) 651.7 (3.2) (20.2)
- Transfer to stage 3 (9.0) (136.7) 143.4 (2.3)
- Transfer to stage 1 391.2 (407.9) - (16.7)
Passage of time (1,407.7) (18.7) (73.3) (1,499.7)
New loans originated 2,526.2 - - 2,526.2
Matured and derecognised loans (689.4) (149.9) (92.2) (931.5)
31 December 2025 3,347.2 267.5 161.4 3,776.1
A breakdown of the gross receivable by internal credit risk rating is shown
below:
2025
Stage 1 Stage 2 Stage 3 Total
£million
£million
£million
£million
Business Finance:
Strong 84.9 - - 84.9
Good 1,166.6 46.4 1.2 1,214.2
Satisfactory 348.2 51.3 25.0 424.5
Weak - 31.0 87.1 118.1
1,599.7 128.7 113.3 1,841.7
2024
Stage 1 Stage 2 Stage 3 Total
£million
£million
£million
£million
Business Finance:
Strong 29.6 - - 29.6
Good 1,051.5 54.2 1.4 1,107.1
Satisfactory 298.6 141.5 25.8 465.9
Weak - 20.1 83.0 103.1
1,379.7 215.8 110.2 1,705.7
2025
Stage 1 Stage 2 Stage 3 Total
£million
£million
£million
£million
Consumer Finance:
Good 1,008.7 1.2 - 1,010.0
Satisfactory 632.5 51.8 - 684.3
Weak 106.3 85.8 48.1 240.2
1,747.5 138.8 48.1 1,934.4
2024
Stage 1 Stage 2 Stage 3 Total
£million
£million
£million
£million
Consumer Finance:
Good 921.6 4.9 - 926.5
Satisfactory 768.1 32.4 - 800.5
Weak 135.2 75.9 76.5 287.6
1,824.9 113.2 76.5 2,014.6
Impairment of financial assets and loan commitments accounting policy
The Group recognises loss allowances for Expected Credit Losses ('ECL') on all
financial assets carried at amortised cost, including lease receivables and
loan commitments. Credit loss allowances on Stage 1 assets are measured as an
amount equal to 12-month ECL and credit loss allowances on Stage 2, and Stage
3 assets are measured as an amount equal to lifetime ECL.
Stage 1 assets
Stage 1 assets comprise of the following.
· Financial assets determined to have low credit risk at the reporting date.
· Financial assets that have not experienced a significant increase in credit
risk since their initial recognition.
· Financial assets that have experienced a significant increase in credit risk
since their initial recognition, but have subsequently met the Group's cure
policy, as set out below.
A low credit risk asset is considered to have low credit risk when its credit
risk rating is equivalent to the widely understood definition of 'investment
grade' assets. This is not applicable to loans and advances to customers, but
the Group has assessed all its debt securities, which represents gilts, to be
low credit risk.
Stage 2 assets
Loans and advances to customers that have experienced a significant increase
in credit risk since their initial recognition and have not subsequently met
the Group's cure policy are classified as Stage 2 assets.
The Group's definitions of a significant increase in credit risk and default
are set out below.
For Consumer Finance, the credit risk of a financial asset is considered to
have experienced a significant increase in credit risk since initial
recognition where there has been a significant increase in the remaining
lifetime probability of default of the asset. The Group may also use its
expert credit judgement, and where possible, relevant historical and current
performance data, including bureau data, to determine that an exposure has
undergone a significant increase in credit risk.
For Business Finance, the credit risk of a financial asset is considered to
have experienced a significant increase in credit risk where certain early
warning indicators apply. These indicators may include notification of county
court judgements or, specifically for the Real Estate Finance portfolio, cost
over-runs and timing delays experienced by borrowers.
As a backstop, the Group considers that a significant increase in credit risk
occurs no later than when an asset is more than 30 days past due for all
portfolios.
Stage 3 assets
At each reporting date, the Group assesses whether financial assets carried at
amortised cost are credit-impaired or defaulted (Stage 3). A financial asset
is considered to be credit-impaired when an event or events that have a
detrimental impact on estimated future cash flows have occurred, or have other
specific unlikeliness to pay indicators. Evidence that a financial asset is
credit‑impaired includes the following observable data.
· Initiation of bankruptcy proceedings.
· Notification of bereavement.
· Identification of loan meeting debt sale criteria.
· Initiation of repossession proceedings.
· Customer on an Individual Voluntary Arrangement or Debt Management Plan.
· A material covenant breach that has remained unremedied for more than 90 days.
In addition, a loan that is 90 days or more past due is considered
credit-impaired for all portfolios. The credit risk of financial assets that
become credit-impaired will be monitored in line with the curing policy.
For Commercial Finance facilities that do not have a fixed-term or repayment
structure, evidence that a financial asset is credit-impaired includes:
· the client ceasing to trade; or
· unpaid debtor balances that are dated at least six months past their normal
recourse period.
Cure policy
The credit risk of a financial asset may improve such that it is no longer
considered to have experienced a significant increase in credit risk if it
meets the Group's cure policy. The Group's cure policy from stage 2 to stage 1
for all portfolios requires sufficient payments to be made to bring an account
back within less than 30 days past due and such payments need to be maintained
for six consecutive months in Vehicle Finance and three months in Retail
Finance. In addition, an account can cure from stage 2 to stage 1 if the
significant increase in credit risk since their initial recognition is not
triggered anymore due to improvement in their credit quality (e.g. loan credit
bureau score).
The Group's cure policy from stage 3 to 2 for all portfolios requires
sufficient payments to be made to bring an account back within less than 30
days past due. For Vehicle Finance and Retail Finance, such non-defaulted
status need to be maintained for three consecutive months. For Real Estate
Finance such payments need to be maintained for 12 consecutive months.
Calculation of expected credit loss ('ECL')
ECL are probability weighted estimates of credit losses that are measured as
the present value of all cash shortfalls. Specifically, this is the difference
between the contractual cash flows due and the cash flows expected to be
received, discounted at the original effective interest rate. For undrawn loan
commitments, ECL is measured as the difference between the contractual cash
flows due if the commitment is drawn and the cash flows expected to be
received.
Lifetime ECL is the ECL that results from all possible default events over the
expected life of a financial asset.
12-month ECL is the portion of lifetime ECL that results from default events
on a financial asset that are possible within 12 months after the reporting
date.
ECL are calculated by multiplying three main components: the Probability of
Default ('PD'), Exposure At Default ('EAD') and Loss Given Default ('LGD')
discounted at the original effective interest rate of an asset. These
variables are derived from internally developed statistical models and
historical data, adjusted to reflect forward-looking information and are
discussed in turn further below. Management adjustments are made to modelled
output to account for situations, where known, or expected risk factors that
have not been reflected in the modelled outcome.
Probability of Default ('PD') and credit risk grades
Credit risk grades are a primary input into the determination of the PD for
exposures. The Group allocates each exposure to a credit risk grade at
origination and at each reporting period to predict the risk of default.
Credit risk grades are determined using qualitative and quantitative factors
that are indicative of the risk of default e.g. arrears status and loan credit
bureau score. These factors vary for each loan portfolio. Exposures are
subject to ongoing monitoring, which may result in an exposure being moved to
a different credit risk grade. In monitoring exposures information, such as
payment records and forecast changes in economic conditions are considered for
Consumer Finance. Additionally, for Business Finance portfolios information
obtained during periodic client reviews, for example, audited financial
statements, management accounts, budgets and projections are considered,
with particular focus on key ratios, compliance with covenants and changes in
senior management teams.
Emergence curves modelling is used in the production of forward-looking
lifetime PDs. This method defines the way that debt emerges for differing
quality accounts and their time on the books creating a clean relationship to
best demonstrate the movement in default rates as macroeconomic variables are
changed. These models are extrapolated to provide PD estimates for the future,
based on forecasted economic scenarios.
Exposure at Default ('EAD')
EAD represents the expected exposure in the event of a default. EAD is derived
from the current exposure and potential changes to the current amount allowed
under the terms of the contract, including amortisation overpayments and early
terminations. The EAD of a financial asset is its gross carrying amount. For
loan commitments, the EAD includes the amount drawn, as well as potential
future amounts that may be drawn under the terms of the contract, estimated
based on historical observations and forward-looking forecasts.
For Commercial Finance facilities that have no specific term, an assumption is
made that accounts close 36 months after the reporting date for the purposes
of measuring lifetime ECL. This assumption is based on industry experience of
average client life. These facilities do not have a fixed-term or repayment
structure, but are revolving and increase or decrease to reflect the value of
the collateral i.e. receivables or inventory. The Group can cancel the
facilities with immediate effect, although this contractual right is not
enforced in the normal day-to-day management of the facility. Typically,
demand would only be made on the failure of a client business or in the event
of a material event of default, such as a fraud. In the normal course of
events, the Group's exposure is recovered through receipt of remittances from
the client's debtors rather than from the client itself.
The ECL for such facilities is estimated taking into account the credit risk
management actions that the Group expects to take to mitigate against losses.
These include a reduction in advance rate and facility limits or application
of reserves against a facility to improve the likelihood of full recovery of
exposure from the debtors.
Alternative recovery routes mitigating ECL would include refinancing by
another funding provider, taking security over other asset classes or secured
personal guarantees from the client's principals.
Loss Given Default ('LGD')
LGD is the magnitude of the likely loss in the event of default. This takes
into account recoveries either through curing or, where applicable, through
the auction sale of repossessed collateral and debt sale of the residual
shortfall amount. For loans secured by real estate property, loan‑to‑value
ratios are key parameters in determining LGD. LGDs are calculated on a
discounted cash flow basis using the financial instrument's origination
effective interest rate as the discount factor.
Incorporation of forward-looking data
The Group incorporates forward-looking information into both its assessment of
whether the credit risk of a financial asset has increased significantly since
initial recognition and its measurement of ECL. This is achieved by developing
a number of potential economic scenarios and modelling ECLs for each scenario.
To ensure material non-linear relationships between economic factors and
credit losses are reflected in the calculation of ECL, a severe stress
scenario is used as one of these scenarios. The outputs from each scenario are
combined using the estimated likelihood of each scenario occurring to derive a
probability weighted expected credit loss. The four scenarios adopted and
probability weighting applied are set out below.
The Group considers that the key drivers of credit risk and credit losses
included in the macroeconomic scenarios are annual unemployment rate growth,
annual house price index growth, consumer price index ('CPI'), Bank of England
Base Rate, and debt service ratio. Base case assumptions applied for each of
these variables have been sourced from external consensus or Bank of England
forecasts. Further details of the assumptions applied to other scenarios are
presented below.
Expert credit judgements
The impairment charge comprises modelled ECLs and expert credit judgements.
Where the ECL modelled output does not reflect the level of credit risk,
judgement is used to calculate expert credit judgements, which are overlaid
onto the output from the models.
Presentation of loss allowance
Loss allowances for ECLs and expert credit judgements are presented in the
statement of financial position as follows with the loss recognised in the
income statement:
· Financial assets measured at amortised cost: as a deduction from the gross
carrying amount of the assets.
· Other loan commitments: generally, as a provision.
For the Real Estate Finance and Commercial Finance portfolios, where a loan
facility is agreed that includes both drawn and undrawn elements and the Group
cannot identify the ECL on the loan commitment separately, a combined loss
allowance for both drawn and undrawn components of the loan is presented as a
deduction from the gross carrying amount of the drawn component, with any
excess of the loss allowance over the gross drawn amount presented as
a provision.
When a loan is uncollectible, it is written off against the related ECL
allowance. Such loans are written off after all necessary procedures have been
completed and the amount of the loss has been determined.
Vehicle Finance voluntary termination provision
In addition to recognising allowances for ECLs, the Group holds a provision
for Voluntary Terminations ('VT') for all Vehicle Finance financial assets. VT
is a legal right provided to customers who take out hire purchase agreements.
The provision is calculated by multiplying the probability of VT of an asset
by the expected shortfall on VT discounted back at the original effective
interest rate of the asset. VT allowances are not held against loans in
default (Stage 3 loans).
The VT provision is presented in the statement of financial position as a
deduction from the gross carrying amount of Vehicle Finance assets with the
loss recognised in the income statement.
Write-off
Loans and advances to customers are written off partially or in full when the
Group has exhausted all viable recovery options. The majority of write-offs
arise from Debt Relief Orders, insolvencies, Individual Voluntary
Arrangements, deceased customers where there is no estate and vulnerable
customers in certain circumstances. Amounts subsequently recovered on assets
previously written off are recognised in the impairment charge in the income
statement.
Intercompany receivables
The parent company's expected credit loss on amounts due from related
companies is calculated by applying probability of default and loss given
default to the amount outstanding at the year-end. See Note 26 for further
details.
17.1. Key sources of estimation uncertainty
Estimations that could have a material impact on the Group's financial results
and are, therefore, considered to be key sources of estimation uncertainty all
relate to the impairment charge on loans and advances to customers and are,
therefore, set out below. The potential impact of the current macroeconomic
environment has been considered in determining reasonably possible changes in
key sources of estimation uncertainty that may occur in the next 12 months.
The determination of both the PD and LGD require estimation, which is
discussed further below.
17.1.1. Incorporation of forward-looking data
The Group incorporates forward-looking information into both its assessment of
whether the credit risk of a financial asset has increased significantly since
initial recognition and its measurement of expected credit loss by developing
a number of potential economic scenarios and modelling expected credit losses
for each scenario. Further detail on this process is provided above. The
macroeconomic scenarios used were provided by external economic advisers. The
scenarios and weightings applied are summarised below:
December 2025 UK unemployment rate - Annual Average
Scenario Weightings 2026 2027 2028 5-Yr Average
% % % %
Upside 20% 4.6 3.9 3.6 3.9
Base 50% 5.0 4.8 4.5 4.6
Downside 25% 5.8 6.5 6.9 6.5
Severe 5% 6.1 7.2 7.7 7.1
UK HPI - movement from December 2025
Scenario Weightings 2026 2027 2028 5-Yr Average
% % % %
Upside 20% 4.5 10.3 17.9 5.4
Base 50% 2.4 5.8 10.8 4.1
Downside 25% (5.9) (7.5) (7.6) 0.6
Severe 5% (11.6) (17.0) (21.7) (2.3)
UK CPI - movement from December 2025
Scenario Weightings 2026 2027 2028 5-Yr Average
% % % %
Upside 20% 3.5 6.9 9.8 2.8
Base 50% 2.7 5.3 7.6 2.3
Downside 25% 1.6 2.9 4.7 1.7
Severe 5% 0.6 1.1 2.5 1.2
December 2025 (continued) UK Base Rate - Annual Average
Scenario Weightings 2026 2027 2028 5-Yr Average
% % % %
Upside 20% 4.8 4.4 3.7 3.8
Base 50% 3.3 3.0 2.8 2.8
Downside 25% 2.4 1.8 1.8 1.9
Severe 5% 1.4 0.8 0.8 0.9
UK debt service ratio - Annual Average
Scenario Weightings 2026 2027 2028 5-Yr Average
% % % %
Upside 20% 5.1 5.0 4.3 4.5
Base 50% 4.4 4.3 4.1 4.1
Downside 25% 4.1 4.1 4.0 3.9
Severe 5% 3.6 3.2 3.4 3.3
December 2024 UK unemployment rate - Annual Average
Scenario Weightings 2025 2026 2027 5-Yr Average
% % % %
Upside 20% 4.0 3.6 3.6 3.7
Base 50% 4.4 4.3 4.2 4.2
Downside 25% 5.1 6.0 6.7 6.2
Severe 5% 5.5 6.7 7.4 6.8
UK HPI - movement from December 2024
Scenario Weightings 2025 2026 2027 5-Yr Average
% % % %
Upside 20% 3.7 7.8 13.4 4.2
Base 50% 1.7 3.4 6.2 2.9
Downside 25% (6.6) (9.6) (11.7) (0.5)
Severe 5% (12.3) (18.9) (24.7) (3.4)
December 2024 (continued) UK CPI - movement from December 2024
Scenario Weightings 2025 2026 2027 5-Yr Average
% % % %
Upside 20% 3.8 7.3 10.1 2.8
Base 50% 3.0 5.4 7.6 2.3
Downside 25% 1.9 2.9 4.6 1.7
Severe 5% 1.0 1.1 2.6 1.2
UK Bank Rate - Annual Average
Scenario Weightings 2025 2026 2027 5-Yr Average
% % % %
Upside 20% 5.4 4.4 3.4 3.8
Base 50% 3.8 3.1 2.6 2.9
Downside 25% 3.0 1.8 1.8 2.0
Severe 5% 2.0 0.8 0.8 1.0
UK debt service ratio - Annual Average
Scenario Weightings 2025 2026 2027 5-Yr Average
% % % %
Upside 20% 5.6 5.3 4.8 4.9
Base 50% 4.9 4.6 4.5 4.5
Downside 25% 4.6 4.3 4.5 4.3
Severe 5% 4.6 3.6 3.8 3.8
The sensitivity of the ECL allowance to reasonably possible changes in
scenario weighting (an increase in downside case weighting from the upside
case and an increase in severe stress case weighting from the base case) has
been assessed by the Group and computed as not material.
The Group recognised a total impairment charge of £58.0 million (2024: £61.9
million). Were each of the scenarios to be applied at 100%, rather than using
the weightings set out above, the increase/(decrease) in ECL provisions would
be as follows:
2025
Scenario Vehicle Finance £million Retail Finance £million Business Finance £million Total
Group £million
Upside (0.7) (0.3) (1.3) (2.3)
Base (0.4) (0.3) (0.7) (1.4)
Downside 1.6 0.7 1.8 4.1
Severe 2.1 0.7 4.1 6.9
2024
Scenario Vehicle Finance £million Retail Business Finance £million Total
Group £million
Finance £million
Upside (0.6) (0.3) (1.3) (2.2)
Base (0.2) (0.1) (0.8) (1.1)
Downside 0.6 0.4 1.8 2.8
Severe 1.2 0.8 4.1 6.1
17.1.2. ECL modelled output: Estimation of PDs
Sensitivity to reasonably possible changes in PD could potentially result in
material changes in the ECL allowance for Vehicle Finance and Retail Finance.
A 15% change in the PD for Vehicle Finance would immediately impact the ECL
allowance by £3.7 million (2024: a 15% change impacted the ECL allowance by
£4.0 million).
A 15% change in the PD for Retail Finance would immediately impact the ECL
allowance by £4.1 million (2024: a 15% change impacted the ECL allowance by
£3.4 million).
The above sensitivities reflect the levels of defaults observed during the
year.
Due to the relatively low levels of provisions on the Business Finance books,
sensitivity to reasonably possible changes in PD are not considered material.
17.1.3. ECL modelled output: Vehicle Finance recovery rates
With the exception of the Vehicle Finance portfolio, the sensitivity of the
ECL allowance to reasonably possible changes in the LGD is not considered
material. The Vehicle Finance portfolio is particularly sensitive to changes
in LGD due to the range of outcomes that could crystallise, depending on
whether the Group is able to recover the vehicle as security. For the Vehicle
Finance portfolio, a 20% (2024: 20%) change in the recovery rate assumption in
the LGD is considered reasonably possible due to delays in the vehicle
collection process. A 20% (2024: 20%) reduction in the vehicle recovery rate
assumption element of the LGD for Vehicle Finance would increase the ECL by
£1.2 million (2024: £1.7 million). There has been no change in the vehicle
recovery rate assumption in the ECL model in either the current or prior year.
17.1.4. Climate-risk impact
The Group considers the impact of climate-related risks on the financial
statements on an annual basis, in particular, climate change negatively
impacting the value of the Group's Real Estate Finance business' security due
to the increased risk of flooding associated with climate change.
While the effects of climate change represent a source of uncertainty (in
respect of potential transitional risks, such as those that may arise from
changes in future government policy), the impact of all of the climate change
risks is considered to be low. Accordingly, the Group does not consider there
to be a material impact on its judgements and estimates from the physical,
transitional and other climate-related risks in the short term.
18. Derivative financial instruments
Group and Company
Interest rate derivatives are held for risk mitigation purposes. The table
below provides an analysis of the notional amount and fair value of
derivatives by hedge accounting relationship. The amount of ineffectiveness
recognised for each hedge type is shown in Note 5. Notional amount is the
amount on which payment flows are derived and does not represent amounts at
risk.
Notional Assets Liabilities Notional Assets Liabilities
2025
2025
2025
2024
2024
2024
£million
£million
£million
£million
£million
£million
Interest rate derivatives designated in fair value hedges
In less than one year 953.1 3.4 (1.7) 965.5 3.1 (2.5)
More than one year but less than three years 1,179.7 3.4 (7.8) 941.4 10.1 (3.9)
More than three years but less than five years 374.2 1.5 (1.2) 432.9 1.1 (3.3)
2,507.0 8.3 (10.7) 2,339.8 14.3 (9.7)
Interest rate derivatives designated in cash flow hedges
In less than one year - - - 9.4 - (0.1)
More than one year but less than three years 2.4 0.1 - 2.4 - -
More than three years but less than five years 8.7 - - - - -
11.1 0.1 - 11.8 - (0.1)
Interest rate derivatives - not hedged¹
In less than one year - - - 15.0 - -
More than one year but less than three years 95.0 - - 42.5 - -
More than three years but less than five years 8.0 - - - - -
103.0 - - 57.5 - -
Foreign exchange derivatives
In less than one year 17.0 0.1 - 25.7 - (0.2)
17.0 0.1 - 25.7 - (0.2)
Offset - (8.3) 10.6 - - -
2,638.1 0.2 (0.1) 2,434.8 14.3 (10.0)
Note:
1. Derivatives not in hedge relationships at the end of the reporting period
will either enter a hedge relationship in the following month, or be in the
final month of maturity.
In order to manage interest rate risk arising from fixed-rate financial
instruments, the Group monitors its interest rate mismatch regularly
throughout each month, seeking to 'match' assets and liabilities in the first
instance and hedging residual risk using interest rate derivatives to maintain
adherence to risk appetites. Some residual risk remains due to timing
differences. The exposure from the portfolio frequently changes due to the
origination of new instruments, contractual repayments and early prepayments
made in each period. As a result, the Group adopts a dynamic hedging strategy
(sometimes referred to as 'macro' or 'portfolio' hedge) to hedge its exposure
profile by closing and entering into new interest rate derivative agreements.
The Group establishes the hedging ratio by matching the derivatives with the
principal of the portfolio being hedged.
The following table sets out details of the hedged exposures covered by the
Group's hedging strategies:
Carry amount of Accumulated Carry amount of Accumulated
hedged item
amount
hedged item
amount
asset/(liability)
of fair value
asset/(liability)
of fair value
2025
adjustments
2025
adjustments
£million
in the hedged
£million
in the hedged
items
items
asset/(liability)
(liability)/asset
2025
2024
£million
£million
ASSETS
Interest rate fair value hedges
Loans and advances to customers
Fixed rate Real Estate Finance loans 558.8 3.2 519.6 (5.2)
Fixed rate Consumer Finance loans 680.4 4.1 723.4 (1.6)
1,239.2 7.3 1,243.0 (6.8)
Interest rate cash flow hedges
Cash and Bank of England reserve account
Bank of England reserve 11.1 N/A 11.8 N/A
1,250.3 7.3 1,254.8 (6.8)
LIABILITIES
Interest rate fair value hedges
Deposits from customers
Fixed rate customer deposits (1,177.1) (3.7) (1,006.5) 3.1
Subordinated liabilities
Fixed rate Tier 2 regulatory capital (90.0) (1.0) (90.0) 0.3
(1,267.1) (4.7) (1,096.5) 3.4
The following table shows:
· amounts which have been offset, where there is an enforceable master netting
arrangement or similar agreement in place, an unconditional right to offset
exists and there is an intention to settle net ('amounts offset'); and
· amounts which have not been offset, where there is an enforceable master
netting arrangement or similar agreement in place, but the offset criteria are
otherwise not satisfied ('master netting arrangements') and/or where financial
collateral has been paid or received ('financial collateral'). Financial
collateral consists of cash settled, typically daily or weekly, to mitigate
the credit risk on the fair value of derivatives.
31 December 2025 Gross Amounts Net amount Master Financial Net amounts
amount
offset
reported on
netting
collateral
after
recognised
£million
balance sheet
arrange-ments
£million
offsetting
£million
£million
£million
£million
Derivative financial assets
Interest rate derivatives 8.5 (8.3) 0.2 (0.1) (0.1) -
8.5 (8.3) 0.2 (0.1) (0.1) -
Derivative financial liabilities
Interest rate derivatives (10.7) 10.6 (0.1) 0.1 - -
(10.7) 10.6 (0.1) 0.1 - -
Amounts offset for derivative financial assets of £8.3 million include
variation margin netted of £2.3 million at 31 December 2025.
31 December 2024 Gross amount Master Financial Net amounts
reported on
netting
collateral
after
balance sheet
arrange-
£million
offsetting
£million
ments
£million
£million
Derivative financial assets
Interest rate derivatives 14.3 (9.8) (4.1) 0.4
14.3 (9.8) (4.1) 0.4
Derivative financial liabilities
Interest rate derivatives (9.8) 9.8 - -
Foreign exchange derivatives (0.2) - - (0.2)
(10.0) 9.8 - (0.2)
19. Assets held for sale
Under IFRS 5, Non-current Assets Held for Sale and Discontinued Operations,
assets and liabilities are required to be reclassified as 'Held for Sale' on
the face of the statement of financial position if they are expected to be
sold within 12 months of the balance sheet date.
As at 31 December 2025, the Group's Consumer Vehicle Finance business met the
criteria to be classified as Held for Sale. Accordingly, the business's loans
and advances to customers was reclassified in the Consolidated and Company
statement of financial position at its carrying amount (amortised cost) of
£390.8 million to Assets held for sale. This sale was completed in February
2026.
20. Investment property
Group Company
£million
£million
At 1 January 2024 and 31 December 2024 - 0.9
Additions 24.1 -
At 31 December 2025 24.1 0.9
The Group's investment property comprises 100 Violet Road, London E3 3QH,
which was purchased in December 2025. The fair value of the property is £22.5
million.
The Company's investment property comprises 25 and 26 Neptune Court, Vanguard
Way, Cardiff CF24 5PJ, which is occupied by one of the Company's subsidiaries.
The Company's investment property was stated at fair value as at 31 December
2025, based on external valuations performed by professionally qualified
valuers Knight Frank LLP in December 2024.
These valuations were undertaken in accordance with the current editions of
RICS Valuation - Global Standards, which incorporate the International
Valuations Standards, and the RICS UK National Supplement. The valuations were
carried out using the comparative and investment methods, and were arrived at
by reference to market evidence of the transaction prices paid for similar
properties, together with evidence of demand within the vicinity of the
subject properties. In estimating the fair value of the properties, the
valuers consider the highest and best use of the properties. Knight Frank LLP
were paid a fixed fee for the valuations. Knight Frank LLP also undertakes
some professional work in respect of the Group's Real Estate Finance business,
although this is limited in relation to the activities of the Group as a
whole. The Directors assessed the value of the investment property at the
year-end, and concluded the valuation remains appropriate.
Investment property accounting policy
Investment property, which is property held to earn rentals and for capital
appreciation, is measured initially at cost, including transaction costs.
Subsequent to initial recognition, for the Group, investment property is
measured at cost. Depreciation is calculated using the straight-line method to
allocate their cost to their residual values over their estimated useful
lives, which are subject to regular review (see property, plant and equipment
accounting policy for estimated useful lives). This represents a change in
accounting policy for the Group, noting the Group held no investment
properties in the prior year. For the Company investment property is measured
at fair value. External valuations are performed on a triennial basis. Gains
or losses arising from changes in the fair value of investment property are
included in the income statement in the period in which they arise.
An investment property is derecognised upon disposal or when the investment
property is permanently withdrawn from use and no future economic benefits are
expected from the disposal. Any gain or loss arising on derecognition of the
property (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the income statement in the
period in which the property is derecognised.
21. Property, plant and equipment
Group Company
Freehold Computer Total Freehold Computer Total
land and
and other
£million
land and
and other
£million
buildings
equipment
buildings
equipment
£million
£million
£million
£million
Cost or valuation
At 1 January 2024 10.1 7.7 17.8 3.8 7.1 10.9
Additions - 0.5 0.5 - 0.3 0.3
Impairment (0.4) - (0.4) - - -
At 31 December 2024 9.7 8.2 17.9 3.8 7.4 11.2
Additions - 0.3 0.3 0.2 0.2 0.4
Disposals (4.2) (0.3) (4.5) - (0.2) (0.2)
At 31 December 2025 5.5 8.2 13.7 4.0 7.4 11.4
Accumulated depreciation
At 1 January 2024 (2.5) (4.5) (7.0) (0.2) (4.4) (4.6)
Depreciation charge (0.2) (0.8) (1.0) (0.1) (0.5) (0.6)
At 31 December 2024 (2.7) (5.3) (8.0) (0.3) (4.9) (5.2)
Depreciation charge (0.1) (0.7) (0.8) (0.1) (0.4) (0.5)
Disposals 2.2 0.3 2.5 - 0.2 0.2
At 31 December 2025 (0.6) (5.7) (6.3) (0.4) (5.1) (5.5)
Net book amount
At 31 December 2024 7.0 2.9 9.9 3.5 2.5 6.0
At 31 December 2025 4.9 2.5 7.4 3.6 2.3 5.9
The Group's freehold properties, which are occupied by the Group, comprise:
· the Registered Office of the Company;
· 25 and 26 Neptune Court, Vanguard Way, Cardiff CF24 5PJ; and
· One Arleston Way, Solihull B90 4LH, which was sold during 2025.
The Company's freehold property comprises the Registered Office of the
Company.
The carrying value of freehold land, which is included in the total carrying
value of freehold land and buildings, and which is not depreciated at 31
December 2025 was £1.2 million (2024: £1.5 million) for the Group and £1.0
million (2024: £0.8 million) for the Company.
Property, plant and equipment accounting policy
Property, plant and equipment is stated at historical cost less any
accumulated depreciation and any accumulated impairment losses. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items. Pre-installed computer software licences are capitalised as part of
the computer hardware it is installed on. Depreciation is calculated using the
straight-line method to allocate their cost to their residual values over
their estimated useful lives, which are subject to regular review:
Land not depreciated
Freehold buildings 50 years
Leasehold improvements shorter of life of lease or seven years
Computer equipment three to five years
Other equipment five to ten years
The above useful economic lives have not changed since the prior year.
Gains and losses on disposals are determined by comparing proceeds with
carrying amounts. These are included in the income statement.
The Group applies IAS 36 to determine whether property, plant and equipment is
impaired.
22. Right-of-use assets
Group Company
Leasehold Leased Total Leasehold Leased Total
property
motor
£million
property
motor
£million
£million
vehicles
£million
vehicles
£million
£million
Cost
At 1 January 2024 3.9 0.8 4.7 3.9 0.3 4.2
Additions - 0.8 0.8 - 0.6 0.6
At 31 December 2024 3.9 1.6 5.5 3.9 0.9 4.8
Additions 3.4 0.5 3.9 3.5 0.3 3.8
Disposals - (0.5) (0.5) - (0.1) (0.1)
At 31 December 2025 7.3 1.6 8.9 7.4 1.1 8.5
Accumulated depreciation
At 1 January 2024 (2.5) (0.4) (2.9) (2.5) (0.1) (2.6)
Depreciation charge (0.5) (0.5) (1.0) (0.5) (0.3) (0.8)
At 31 December 2024 (3.0) (0.9) (3.9) (3.0) (0.4) (3.4)
Depreciation charge (0.6) (0.5) (1.1) (0.6) (0.4) (1.0)
Disposals - 0.5 0.5 - 0.1 0.1
At 31 December 2025 (3.6) (0.9) (4.5) (3.6) (0.7) (4.3)
Net book amount
At 31 December 2024 0.9 0.7 1.6 0.9 0.5 1.4
At 31 December 2025 3.7 0.7 4.4 3.8 0.4 4.2
Lessee accounting policy
The Group assesses whether a contract is, or contains, a lease at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low-value assets. For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased
assets are consumed.
The lease liability is initially measured at the present value of the future
lease payments, discounted by using the rate implicit in the lease. If this
rate cannot be readily determined, the Group uses its incremental borrowing
rate. It is subsequently measured by increasing the carrying amount to reflect
interest on the lease liability (using the effective interest rate method) and
by reducing the carrying amount to reflect the lease payments made, and is
presented as a separate line in the consolidated statement of financial
position.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at, or before, the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
charges and are depreciated over the shorter of the lease term and useful life
of the underlying asset. The depreciation starts at the commencement date of
the lease. The right-of-use assets are presented as a separate line in the
consolidated statement of financial position. The Group applies IAS 36 to
determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the 'Property, plant and equipment'
policy.
Rentals made under operating leases for less than 12 months in duration, and
operating leases on low-value items, are recognised in the income statement on
a straight-line basis over the term of the lease.
23. Intangible assets
Group Goodwill Computer Other Total
£million
software
intangible
£million
£million
assets
£million
Cost or valuation
At 1 January 2024 1.0 17.7 2.2 20.9
Additions - 0.5 - 0.5
Disposals - (0.1) - (0.1)
At 31 December 2024 1.0 18.1 2.2 21.3
Additions - 1.3 - 1.3
At 31 December 2025 1.0 19.4 2.2 22.6
Accumulated depreciation
At 1 January 2024 - (12.8) (2.2) (15.0)
Amortisation charge - (1.4) - (1.4)
Disposals - 0.1 - 0.1
At 31 December 2024 - (14.1) (2.2) (16.3)
Amortisation charge - (1.2) - (1.2)
At 31 December 2025 - (15.3) (2.2) (17.5)
Net book amount
At 31 December 2024 1.0 4.0 - 5.0
At 31 December 2025 1.0 4.1 - 5.1
Goodwill above relates to the V12 cash-generating unit, which is part of the
Retail Finance operating segment.
The recoverable amount of these cash-generating units are determined on a
value-in-use calculation, which uses cash flow projections based on financial
forecasts covering a three-year period, and a discount rate of 8% (2024: 8%).
Cash flow projections during the forecast period are based on the expected
rate of new business. A zero growth-based scenario is also considered. The
Directors believe that any reasonably possible change in the key assumptions
on which recoverable amount is based would not cause the aggregate carrying
amount to exceed the aggregate recoverable amount of the cash-generating unit.
Hence no impairment has been recognised.
Other intangible assets were recognised as part of the V12 Finance Group
acquisition, which are now fully amortised.
Company
Goodwill Computer Total
£million
software
£million
£million
Cost or valuation
At 1 January 2024 0.3 12.6 12.9
Additions - 0.5 0.5
At 31 December 2024 0.3 13.1 13.4
Additions - 1.2 1.2
At 31 December 2025 0.3 14.3 14.6
Accumulated depreciation
At 1 January 2024 - (9.4) (9.4)
Amortisation charge (1.1) (1.1)
At 31 December 2024 - (10.5) (10.5)
Amortisation charge - (0.9) (0.9)
At 31 December 2025 - (11.4) (11.4)
Net book amount
At 31 December 2024 0.3 2.6 2.9
At 31 December 2025 0.3 2.9 3.2
Goodwill above relates to the Retail Finance operating segment. The
recoverable amount is determined on the same basis as for the Group.
Intangible assets accounting policy
(a) Goodwill
Goodwill represents the excess of the cost of the acquisition over the fair
value of the Group's share of the net identifiable assets acquired at the date
of acquisition. Goodwill is held at cost less accumulated impairment charge
and is deemed to have an infinite life.
The Group reviews the goodwill for impairment at least annually or when events
or changes in economic circumstances indicate that impairment may have taken
place. An impairment charge is recognised in the income statement if the
carrying amount exceeds the recoverable amounts.
(b) Computer software
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software.
Costs associated with developing or maintaining computer software programmes
are recognised as an expense as incurred unless the technical feasibility of
the development has been demonstrated, and it is probable that the expenditure
will enable the asset to generate future economic benefits in excess of its
originally assessed standard of performance, in which case they are
capitalised.
These costs are amortised on a straight-line basis over their expected useful
lives, which are between three to 10 years.
(c) Other intangible assets
The acquisition of subsidiaries has been accounted for in accordance with IFRS
3 'Business Combinations', which requires the recognition of the identifiable
assets acquired and liabilities assumed at their acquisition date fair values.
As part of this process, it was necessary to recognise certain intangible
assets that are separately identifiable and are not included on the acquiree's
balance sheet, which are amortised over their expected useful lives, as set
out above.
The Group applies IAS 36 to determine whether an intangible asset is impaired
24. Investments in Group undertakings
Company
Cost and net book value 2025 2024
£million
£million
At 1 January 6.1 5.9
Equity contributions to subsidiaries in respect of share options 0.2 0.2
At 31 December 6.3 6.1
Shares in subsidiary undertakings of Secure Trust Bank PLC are stated at cost
less any provision for impairment. All subsidiary undertakings are unlisted
and none are banking institutions. The share capital of the subsidiary
undertakings comprises solely of ordinary shares and all are 100% owned by the
Company. 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:
Company number Principal activity
Owned directly
AppToPay Ltd 11204449 Non-trading
Debt Managers (Services) Limited 08092808 Non-trading
Secure Homes Services Limited 01404439 Property rental
STB Leasing Limited 01648384 Non-trading
V12 Finance Group Limited 07498951 Holding company
Owned indirectly via an intermediate holding company
V12 Personal Finance Limited 05418233 Dormant
V12 Retail Finance Limited 04585692 Sourcing and servicing of unsecured loans
The registered office of the Company, and all subsidiary undertakings, is
Yorke House, Arleston Way, Solihull B90 4LH.
AppToPay Ltd, Debt Managers (Services) Limited, Secure Homes Services Limited,
STB Leasing Limited, V12 Finance Group Limited and V12 Personal Finance
Limited are exempt from the requirements of the Companies Act 2006 relating to
the audit of individual accounts by virtue of s479A, and the Company has given
guarantees accordingly under s479C in respect of the year ended 31 December
2025.
25. Deferred taxation
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Deferred tax assets:
Other short-term timing differences 3.6 3.3 3.3 3.3
At 31 December 3.6 3.3 3.3 3.3
Deferred tax assets:
At 1 January 3.3 4.3 3.3 4.3
Income statement (0.2) (0.8) (0.5) (0.8)
Cash flow hedge reserve - (0.2) - (0.2)
Retained earnings - Share-based payments 0.5 - 0.5 -
At 31 December 3.6 3.3 3.3 3.3
Deferred tax accounting policy
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax assets and liabilities, and they
relate to taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, when they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realised simultaneously.
Deferred tax assets are recognised where it is probable that future taxable
profits will be available, against which the temporary differences can be
utilised. The short-term timing differences relate primarily to deferred tax
on IFRS 9 transitional arrangements and on the movement in share options
during the year. Deferred tax has not been recognised on capital losses
arising from the disposal of property during the year (£2.0 million) or in
respect of deductible temporary differences arising on investment properties
held by the Company (£0.1 million).
26. Other assets
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Gross amounts due from related companies - - 27.2 4.2
Less: allowances for impairment of amounts due from related companies - - (1.9) (1.9)
Amounts due from related companies - - 25.3 2.3
Other receivables 1.7 2.0 1.4 1.7
Cloud software development prepayment 0.6 3.6 0.6 3.6
Other prepayments and accrued income 6.5 6.1 6.1 5.4
8.8 11.7 33.4 13.0
Cloud software development costs, principally relating to the Group's Motor
Transformation Programme, do not meet the intangible asset recognition
criteria and are, therefore, classified as a prepayment, which is expensed to
the income statement over the useful economic life of the software.
27. Due to banks
Group and Company
2025 2024
£million
£million
Amounts due under the Bank of England's liquidity support operations
Term Funding Scheme with additional incentives for SMEs ('TFSME') - 230.0
Sale and repurchase agreements 200.0 125.0
Amounts due to other credit institutions 4.7 6.9
TFSME accrued interest - 3.2
Sale and repurchase agreements accrued interest 1.2 0.7
205.9 365.8
Amounts due under sale and repurchase agreements are due for repayment during
2026. Secure Trust Bank maintains access to the Bank of England's Sterling
Monetary Framework, including a reserves account.
The accounting policy for amounts due to banks is included in Note 1.4
Financial assets and financial liabilities accounting policy.
28. Deposits from customers
Group and Company
2025 2024
£million
£million
Access accounts 770.2 805.2
Fixed term bonds 1,518.9 1,510.0
Notice accounts 39.3 72.4
ISAs 1,181.2 857.3
3,509.6 3,244.9
The accounting policy for deposits from customers is included in Note 1.4
Financial assets and financial liabilities accounting policy.
29. Lease liabilities
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
At 1 January 1.8 2.3 1.6 2.1
New leases 3.9 0.8 3.8 0.6
Lease termination (0.1) - (0.1) -
Payments (1.3) (1.4) (1.2) (1.2)
Interest expense 0.1 0.1 0.1 0.1
At 31 December 4.4 1.8 4.2 1.6
Lease liabilities - Gross
- No later than one year 1.1 1.1 0.9 1.0
- Later than one year and no later than five years 2.2 0.8 2.2 0.7
- More than five years 1.8 - 1.8 -
5.1 1.9 4.9 1.7
Less: Future finance expense (0.7) (0.1) (0.7) (0.1)
Lease liabilities - Net 4.4 1.8 4.2 1.6
Lease liabilities - Gross
- No later than one year 0.9 1.1 0.8 0.9
- Later than one year and no later than five years 1.9 0.7 1.8 0.7
- More than five years 1.6 - 1.6 -
4.4 1.8 4.2 1.6
The accounting policy for lease liabilities is included in Note 22 Lessee
accounting policy.
30. Other liabilities
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Other payables 87.0 23.1 85.1 21.1
Amounts due to related companies - - 15.7 12.5
Accruals and deferred income 11.0 9.4 9.5 7.5
98.0 32.5 110.3 41.1
31. Provisions for liabilities and charges
Group
Group
ECL allowance Other Total
on loan
£million
£million
commitments
£million
Balance at 1 January 2024 0.8 5.2 6.0
Charge to income statement 0.1 9.8 9.9
Utilised - (4.6) (4.6)
Balance at 31 December 2024 0.9 10.4 11.3
Charge to income statement 0.1 21.7 21.8
Utilised - (7.6) (7.6)
Balance at 31 December 2025 1.0 24.5 25.5
Company
Company
ECL allowance Other Total
on loan
£million
£million
commitments
£million
Balance at 1 January 2024 0.8 4.8 5.6
Charge to income statement 0.1 10.1 10.2
Utilised - (4.5) (4.5)
Balance at 31 December 2024 0.9 10.4 11.3
Charge to income statement 0.1 21.7 21.8
Utilised - (7.6) (7.6)
Balance at 31 December 2025 1.0 24.5 25.5
ECL allowance on loan commitments
In accordance with the requirements of IFRS 9, the Group holds an ECL
allowance against loans it has committed to lend, but have not yet been drawn.
For the Real Estate Finance and Commercial Finance portfolios, where a loan
facility is agreed that includes both drawn and undrawn elements and the Group
cannot identify the ECL on the loan commitment separately, a combined loss
allowance for both drawn and undrawn components of the loan is presented as a
deduction from the gross carrying amount of the drawn component, with any
excess of the loss allowance over the gross drawn amount presented as a
provision. At 31 December 2025 and 31 December 2024, no provision was held for
losses in excess of drawn amounts.
Other
Other includes:
· costs and redress relating to the BiFD Vehicle Finance collections review (see
Note 8 for further details) and historical motor commissions (see below for
further details);
· provision for redundancy;
· provision for fraud, which relates to cases where the Group has reasonable
evidence of suspected fraud, but further investigation is required before the
cases can be dealt with appropriately;
· s75 Consumer Credit Act 1974 provision.
The Directors expect these provisions to be fully utilised within the next one
to two years.
Provisions for liabilities and charges accounting policy
A provision is recognised where there is a present obligation as a result of a
past event, it is probable that the obligation will be settled and it can be
reliably estimated.
31.1. Key sources of estimation uncertainty
In January 2024, the FCA launched a review of the historical use of
discretionary commission arrangements ('DCAs') in the motor finance industry.
The Vehicle Finance business sometimes operated these arrangements until June
2017, but stopped doing so well ahead of the FCA banning their use in January
2021.
In October 2024, the Court of Appeal gave judgment in the cases of Hopcraft,
Wrench and Johnson, which had wider implications for the legality of both
fixed and DCA historical motor commissions. These were then appealed to the
Supreme Court where, in August 2025, the Hopcraft and Wrench cases were
overturned, however the Johnson case was upheld on the facts of that case.
At 31 December 2024, we undertook scenario analysis using different
assumptions, which were probability weighted to estimate a potential exposure.
In October 2025, the FCA issued a consultation paper providing further detail
on its proposed redress approach, including significantly broadening the scope
of the overall redress scheme, how unfairness would be assessed, the scheme's
period and proposed redress methodology. Based on the FCA proposals in their
current form, the potential impact is towards the extreme end of the range of
previously expected outcomes. As a result, the Group recognised a further
provision of £16.4 million. This comprises further potential goodwill/redress
payments of £11.3 million (2024: £5.2 million), and £5.1 million (2024:
£1.2 million) of associated costs. As at 31 December 2025, the Group held a
provision of £21.5 million (2024: £6.4 million). If the FCA scheme was
implemented entirely in its current form, the Group would expect to increase
the provision for redress by a further £6.0 million.
32. Subordinated liabilities
Group and Company
2025 2024
£million
£million
Notes at par value 90.0 90.0
Unamortised issue costs (0.5) (0.7)
Accrued interest 4.0 4.0
93.5 93.3
The Fixed Rate Reset Callable Subordinated Notes due August 2033 are listed on
the International Securities Market of the London Stock Exchange. This
issuance is in line with the Group's funding strategy and supports the Group's
stated medium-term growth ambitions.
· The notes are redeemable for cash at their principal amount on fixed dates.
· The Company has a call option to redeem the notes early in the event of a 'tax
event' or a 'capital disqualification event', which is at the full discretion
of the Company.
· Interest payments are paid at six-monthly intervals and are mandatory.
· The notes give the holders' rights to the principal amount on the notes, plus
any unpaid interest, on liquidation. Any such claims are subordinated to
senior creditors, but rank pari passu with holders of other subordinated
obligations and in priority to holders of share capital.
The above features provide the issuer with a contractual obligation to deliver
cash or another financial asset to the holders, and, therefore, the notes are
classified as financial liabilities.
Transaction costs that are directly attributable to the issue of the notes and
are deducted from the financial liability and expensed to the income statement
on an effective interest rate basis over the expected life of the notes.
The notes are treated as Tier 2 regulatory capital, which is used to support
the continuing growth of the business taking into account increases in
regulatory capital buffers. The issue of the notes is part of an ongoing
programme to diversify and expand the capital base of the Group.
The Group paid interest of £11.7 million on subordinated liabilities during
the period (2024: £11.7 million), which is included in net cash inflow from
operating activities in the consolidated and company statement of cash flows.
The accounting policy for subordinated liabilities is included in Note 1.4 -
Financial assets and financial liabilities accounting policy.
33. Contingent liabilities and commitments
33.1. Contingent liabilities
31.1.1. Laws and regulations
As a financial services business, the Group must comply with numerous laws and
regulations that significantly affect the way it does business. Whilst the
Group believes there are no material unidentified areas of failure to comply
with these laws and regulations, there can be no guarantee that all issues
have been identified.
33.2. Capital commitments
At 31 December 2025, the Group and Company had no capital commitments (2024:
£nil).
33.3. Credit commitments
Group and Company
Commitments to extend credit to customers were as follows:
2025 2024
£million
£million
Consumer Finance
Retail Finance 115.8 112.2
Vehicle Finance - 1.2
Business Finance
Real Estate Finance 40.4 39.5
Commercial Finance 241.6 110.3
397.8 263.2
34. Share capital
Number £million
At 1 January 2024 19,017,795 7.6
Issued during 2024 53,613 -
At 31 December 2024 19,071,408 7.6
Issued during 2025 25,848 -
At 31 December 2025 19,097,256 7.6
Share capital comprises ordinary shares with a par value of 40 pence each.
Equity instruments accounting policy
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issuance costs. Any amounts received over nominal
value are recorded in the share premium account, net of direct issuance costs.
Costs associated with the listing of shares are expensed immediately.
35. Other reserves
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Own shares (1.9) (2.2) (1.9) (2.2)
(1.9) (2.2) (1.9) (2.2)
35.1. Own shares
Employee Benefit Trust ('EBT') 2025 Nominal 2024 Nominal
value
value
Number
2025 Number
2024
£million £million
At 1 January 434,809 0.2 216,472 0.1
Shares acquired 47,475 - 312,718 0.1
Shares disposed (100,801) - (94,381) -
At 31 December 381,483 0.2 434,809 0.2
Market value (£million) 4.7 1.6
Accounting value (£million) 1.9 2.2
Percentage of called up share capital 2.0% 2.3%
These shares are held in trust for the benefit of employees, who will be
exercising their options under the Group's share options schemes. The
trustee's expenses are included in the operating expenses of the Group. The
maximum number of shares held by the EBT during the year was 480,382 (2024:
434,809), which had a nominal value of £192,000 (2024: £174,000). Shares
were disposed of during the year for consideration of £40,000 (2024:
£37,000).
Own shares accounting policy
The EBT qualifies for 'look-through' accounting, under which the EBT is
treated as, in substance, an extension of the sponsoring entity, which is
Secure Trust Bank PLC. Own shares represent the shares of the parent Company,
Secure Trust Bank PLC, that are held by the EBT. Own shares are recorded at
cost and deducted from equity.
36. Share-based payments
At 31 December 2025 and 31 December 2024, the Group had four share-based
payment schemes in operation:
· 2017 Long-Term Incentive Plan;
· 2017 Sharesave Plan;
· 2017 Deferred Bonus Plan; and
· 'Phantom' Share Option Scheme.
A summary of the movements in share options during the year is set out below:
Outstanding at Granted Forfeited, Exercised Outstanding at Vested and exercisable at 31 December 2025 Vesting Weighted average remaining contractual life of options outstanding at 31 Weighted average exercise price of options outstanding at 31 December 2025 Weighted average exercise price of options outstanding at 31 December
during
lapsed and cancelled
during
December 2025
2024
1 January
the year
during
the year 31 December 2025 Number dates
£
2025
the year
Years £
Number
Number Number
Number Number
Equity settled
2017 Long-Term Incentive Plan 892,621 685,332 (283,660) (60,373) 1,233,920 7,236 2026-2030 2.4 0.21 0.40
2017 Sharesave Plan 416,500 73,931 (94,069) (22,452) 373,910 33,980 2026-2028 1.4 6.61 6.27
2017 Deferred Bonus Plan 85,924 24,714 - (43,644) 66,994 180 2026-2028 1.4 0.25 0.40
1,395,045 783,977 (377,729) (126,469) 1,674,824 41,396 2.1 1.64 2.14
Weighted average exercise price 2.15 0.86 1.92 1.67 1.64 5.72
Cash settled
'Phantom' share option scheme 38,000 - (38,000) - - - 2019 - - 25.00
Group Group Company Company
2025 2024 2025 2024
£million £million £million £million
Expense incurred in relation to share-based payments 2.1 2.3 1.8 2.3
36.1. Long-Term Incentive Plan ('LTIP')
The LTIP was established on 3 May 2017. During the year, a number of awards
were made to participants, as set out below.
36.1.1. LTIP Restricted share award
During the year, 46,483 (2024: 114,281) options were awarded that were not
subject to any performance conditions. The awards will vest three years from
the date of grant. The original grant date valuation was determined using a
Black-Scholes model. Measurement inputs and assumptions used for the grant
date valuation were as follows:
Awarded during 2025 Awarded during 2024
Share price at grant date £6.00 £6.90
Exercise price - £0.40
Expected dividend yield 6.68% 5.10%
Expected stock price volatility 47.86% 36.72%
Risk free interest rate 4.22% 4.35%
Average expected life (years) 3.00 3.00
Original grant date valuation £4.91 £5.57
36.1.2. LTIP
During the year, 638,849 (2024: 308,830) options were awarded that are subject
to four performance conditions. Details of the performance conditions can be
found on pages 107 and 108 of the 2025 Annual Report and Accounts.
The awards have a performance term of three years. The awards will vest on the
date on which the Board determines that these conditions have been met.
The original grant date valuation was determined using a Black-Scholes model
for the return on average equity, earnings per share and risk management
tranches (modified for probability of outturn), and a Monte Carlo model for
the total shareholder return tranche. Measurement inputs and assumptions used
for the grant date valuation were as follows:
Awarded during 2025 Awarded during 2025 Awarded during 2025 Awarded during 2024 Awarded during 2024
No holding period
No holding period
Two year
Two year Two year
holding period
holding holding
period period
Number of shares 131,226 215,776 66,141 136,895 171,935
Share price at grant date £6.00 £6.00 £10.35 £6.90 £6.90
Exercise price £0.40 £0.40 £0.40 £0.40 £0.40
Expected dividend yield 5.10% 5.10% 5.10% 5.10% 5.10%
Expected stock price volatility 45.00% 45.00% 45.00% 35.00% 35.00%
Risk free interest rate 4.30% 4.28% 3.97% 4.51% 4.19%
Average expected life (years) 3.00 5.00 5.00 3.00 5.00
Original grant date valuation £4.04 £4.47 £7.72 £4.40 £3.95
36.2. Sharesave Plan
The Sharesave Plan was established on 3 May 2017. This plan allows all
employees to save for three years, subject to a maximum monthly amount of
£250 (2024: £250), with a maximum savings amount across all schemes of
£500, and the option to buy shares in Secure Trust Bank PLC when the plan
matures. Participants cannot change the amount that they have agreed to save
each month, but they can suspend payments for up to twelve months.
Participants can withdraw their savings at any time but, if they do this
before the completion date, they lose the option to buy shares at the Option
Price, and in most circumstances if participants cease to hold plan-related
employment before the third anniversary of the grant date, then the options
are also lost. The options ordinarily vest approximately three years after
grant date and are exercisable for a period of six months following vesting.
The original grant date valuation was determined using a Black-Scholes model.
Measurement inputs and assumptions used were as follows:
Awarded during 2025 Awarded during 2024
Share price at grant date £11.00 £8.14
Exercise price £9.08 £6.99
Expected stock price volatility 47.62% 37.22%
Expected dividend yield 6.68% 5.10%
Risk free interest rate 4.02% 3.75%
Average expected life (years) 3.00 3.00
Original grant date valuation £3.23 £2.07
36.3. Deferred Bonus Plan
The Deferred Bonus Plan was established on 3 May 2017. In 2025 and 2024,
awards were granted to certain senior managers of the Group. The awards vest
in three equal tranches after one, two and three years following deferral.
Accordingly, the following awards remain outstanding under the plan, entitling
the members of the scheme to purchase shares in the Company:
Awards granted Awards granted Awards granted Awards
Vesting after
Vesting after
Vesting after
granted
one year
two years
three years
Total
Number
Number
Number
At 1 January 2024 25,693 30,434 32,406 88,533
Granted 14,385 14,385 14,392 43,162
Exercised (23,295) (16,179) (6,297) (45,771)
At 31 December 2024 16,783 28,640 40,501 85,924
Granted 8,236 8,236 8,242 24,714
Exercised (16,603) (14,255) (12,786) (43,644)
At 31 December 2025 8,416 22,621 35,957 66,994
Vested and exercisable 180 - - 180
The original grant date valuation was determined using a Black-Scholes model.
Measurement inputs and assumptions used were as follows:
Granted in 2025 Granted in 2025 Granted in 2025
Awards vesting after one year Awards vesting after two years Awards vesting after three years
Share price at grant date £6.00 £6.00 £6.00
Exercise price - - -
Expected dividend yield 9.34% 7.01% 6.68%
Expected stock price volatility 62.33% 49.36% 47.86%
Risk free interest rate 4.11% 4.23% 4.22%
Average expected life (years) 1.00 2.00 3.00
Original grant date valuation £5.46 £5.22 £4.91
Granted in 2024 Granted in 2024 Granted in 2024
Awards vesting after one years
Awards vesting after two years
Awards vesting after three years
Share price at grant date £6.90 £6.90 £6.90
Exercise price £0.40 £0.40 £0.40
Expected dividend yield 5.10% 5.10% 5.10%
Expected stock price volatility 32.51% 38.89% 36.72%
Risk free interest rate 4.78% 4.52% 4.35%
Average expected life (years) 1.00 2.00 3.00
Original grant date valuation £6.18 £5.87 £5.57
36.4. 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 the market in November 2014. The options vested during 2019 and
are exercisable for a period of 10 years after grant date, after which the
options lapse.
As at 31 December 2024, using any reasonable range of inputs and assumptions,
the fair value of the 'phantom' options is £nil. Accordingly, no liability
was recognised in the consolidated financial statements at 31 December 2024.
As at 31 December 2025 the shares had lapsed.
For each award granted during the year, expected volatility was determined by
calculating the historical volatility of the Group's share price over the
period equivalent to the expected term of the options being granted. The
expected life used in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions,
and behavioural considerations.
Share-based compensation accounting policy
The fair value of equity settled share-based payment awards are calculated at
grant date and recognised over the period in which the employees become
unconditionally entitled to the awards (the vesting period). The amount is
recognised in operating expenses in the income statement, with a corresponding
increase in equity. Further details of the valuation methodology are set out
above.
The fair value of cash settled share-based payments is recognised in operating
expenses in the income statement with a corresponding increase in liabilities
over the vesting period. The liability is remeasured at each reporting date
and at the settlement date based on the fair value of the options granted,
with a corresponding adjustment to operating expenses.
37. Cash flow statement
37.1. Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents
comprise the following balances with less than three months' maturity from the
date of acquisition.
Group Group Company Company
2025
2024
2025
2024
£million
£million
£million
£million
Cash and Bank of England reserve account 528.1 445.0 528.1 445.0
Loans and advances to banks 36.8 24.0 36.1 23.6
Less:
Initial margin account (5.1) - (5.1) -
559.8 469.0 559.1 468.6
The Group and Company has no access to the initial margin account, so this
amount does not meet the definition of cash and cash equivalents, and
accordingly, is excluded from cash and cash equivalents.
37.2. Changes in liabilities arising from financing activities
All changes in liabilities arising from financing activities arise from
changes in cash flows, apart from £0.1 million (2024: £0.1 million) of lease
liabilities interest expense, as shown in Note 29, and £0.2 million (2024:
£0.2 million) amortisation of issue costs on subordinated liabilities, as
shown in Note 32.
Cash and cash equivalents accounting policy
For the purpose of the statement of cash flows, cash and cash equivalents
comprise cash in hand and demand deposits, and cash equivalents, being highly
liquid investments, which are convertible into cash with an insignificant risk
of changes in value with a maturity of three months or less at the date of
acquisition, including certain loans and advances to banks and short-term
highly liquid debt securities.
38. Financial risk management strategy
By their nature, the Group's activities are principally related to the use of
financial instruments. The Directors and senior management of the Group have
formally adopted a Group risk appetite statement that sets out the Board's
attitude to risk and internal controls. Key risks identified by the Directors
are formally reviewed and assessed at least once a year by the Board. In
addition, key business risks are identified, evaluated and managed by
operating management on an ongoing basis by means of procedures, such as
physical controls, credit and other authorisation limits and segregation of
duties. The Board also receives regular reports on any risk matters that need
to be brought to its attention. Significant risks identified in connection
with the development of new activities are subject to consideration by the
Board. There are budgeting procedures in place and reports are presented
regularly to the Board detailing the results of each principal business unit,
variances against budget and prior year, and other performance data.
A more detailed description of the risk governance structure is contained in
the Principal risks and uncertainties section.
Included within the principal financial risks inherent in the Group's business
are credit risk (Note 39), market risk (Note 40), liquidity risk (Note 41),
and capital risk (Note 42).
39. Credit risk
The Company and Group take on exposure to credit risk, which is the risk that
a counterparty will be unable to satisfy their debt servicing commitments when
due. Counterparties include the consumers to whom the Group lends on a secured
and unsecured basis and Small and Medium size Enterprises ('SMEs') to whom the
Group primarily lends on a secured basis, as well as the market counterparties
with whom the Group deals.
Impairment provisions are provided for expected credit losses at the statement
of financial position date. Significant changes in the economy could result in
losses that are different from those provided for at the statement of
financial position date. Management, therefore, carefully manages the Group's
exposures to credit risk as it considers this to be the most significant risk
to the business. Disclosures relating to collateral on loans and advances to
customers are disclosed in Note 15.
The Board monitors the ratings of the counterparties in relation to the
Group's loans and advances to banks. Disclosures of these at the year-end
are contained in Note 13. There is no direct exposure to the Eurozone and
peripheral Eurozone countries.
See Principal risks and uncertainties section for further details on the
mitigation and change during the year of credit risk.
Group and Company
With the exception of loans and advances to customers, the carrying amount of
financial assets represents the maximum exposure to credit risk. The maximum
exposure to credit risk for loans and advances to customers by portfolio and
IFRS 9 stage without taking account of any collateral held or other credit
enhancements attached was as follows:
Stage 1 Stage 2 Stage 3
31 December 2025 £million <= 30 days > 30 days Total £million Total gross
past due
past due
£million
loans and
£million
£million
advances to
customers
£million
Consumer Finance
Retail Finance 1,419.1 62.3 4.9 67.2 13.3 1,499.6
Business Finance
Real Estate Finance 1,277.9 85.4 - 85.4 112.0 1,475.3
Commercial Finance 321.8 43.3 - 43.3 1.3 366.4
Total drawn exposure 3,018.8 191.0 4.9 195.9 126.6 3,341.3
Off balance sheet
Loan commitments 386.9 10.9 - 10.9 - 397.8
Total gross exposure 3,405.7 201.9 4.9 206.8 126.6 3,739.1
Less:
Impairment allowance (14.5) (8.7) (2.5) (11.2) (19.8) (45.5)
Provision for loan commitments (1.0) - - - - (1.0)
Total net exposure 3,390.2 193.2 2.4 195.6 106.8 3,692.6
Stage 1 Stage 2 Stage 3
31 December 2025 £million <= 30 days > 30 days Total £million Total gross
past due
past due
£million
loans and
£million
£million
advances to
customers
£million
Assets held for sale: Vehicle Finance
Gross exposure 328.4 53.1 18.5 71.6 34.8 434.8
Less: Impairment allowance (10.7) (5.3) (4.8) (10.1) (23.2) (44.0)
Total net exposure 317.7 47.8 13.7 61.5 11.6 390.8
Of collateral in the form of property, £156.1 million (2024: £110.1 million)
has been pledged as security for Real Estate Finance Stage 3 balances of
£104.0 million (2024: £86.1 million). Of collateral in the form of vehicles,
£21.5 million (2024: £37.4 million) has been pledged as security for
Vehicle Finance Stage 3 balances of £11.6 million (2024: £20.7 million).
Stage 1 Stage 2 Stage 3
31 December 2024 £million <= 30 days > 30 days Total £million Total gross
past due
past due
£million
loans and
£million
£million
advances to
customers
£million
Consumer Finance
Retail Finance 1,324.1 48.1 4.1 52.2 11.6 1,387.9
Vehicle Finance 500.7 40.0 21.0 61.0 65.0 626.7
Business Finance
Real Estate Finance 1,046.9 209.0 0.1 209.1 97.9 1,353.9
Commercial Finance 332.9 6.7 - 6.7 12.2 351.8
Total drawn exposure 3,204.6 303.8 25.2 329.0 186.7 3,720.3
Off balance sheet
Loan commitments 262.4 0.8 - 0.8 - 263.2
Total gross exposure 3,467.0 304.6 25.2 329.8 186.7 3,983.5
Less:
Impairment allowance (29.6) (8.6) (7.3) (15.9) (66.3) (111.8)
Provision for loan commitments (0.9) - - - - (0.9)
Total net exposure 3,436.5 296.0 17.9 313.9 120.4 3,870.8
A reconciliation of opening to closing allowance for impairment of loans and
advances to customers is presented in Note 17.
Company
In addition to the previous tables, counterparties to the Company include
subsidiary undertakings. For the ECL on amounts due from related companies,
see Note 26.
39.1. Concentration risk
Management assesses the potential concentration risk from geographic, product
and individual loan concentration. Due to the nature of the Group's lending
operations, the Directors consider the lending operations of the Group as a
whole to be well diversified. Details of the Group's loans and advances to
customers and loan commitments by product is provided in Notes 3 and 33,
respectively.
Geographical concentration
The Group's Real Estate Finance loan book is secured against UK property only.
The geographical concentration of these business loans and advances to
customers, by location of the security, is as follows:
Group and Company
2025 2024
£million
£million
Central England 134.2 113.2
Greater London 711.2 691.5
Northern England 176.0 124.8
South East England (excl. Greater London) 251.9 273.5
South West England 107.4 54.4
Scotland, Wales and Northern Ireland 94.6 96.5
Gross loans and receivables 1,475.3 1,353.9
Allowance for impairment (8.4) (12.5)
Total 1,466.9 1,341.4
39.2. Forbearance
Consumer Finance
Throughout the year, the Group did not routinely reschedule contractual
arrangements where customers default on their repayments. In cases where it
offered the customer the option to reduce or defer payments for a short
period, in line with our responsibilities from a conduct perspective, the
loans retained the normal contractual payment due dates and were treated the
same as any other defaulting cases for impairment purposes. Arrears tracking
would continue on the account, with any impairment charge being based on the
original contractual due dates for all products.
All forbearance arrangements are formally discussed and agreed with the
customer in accordance with regulatory guidance on the support of customers.
By offering customers in financial difficulty the option of forbearance, the
Group potentially exposes itself to an increased level of risk through
prolonging the period of non-contractual payment. All forbearance arrangements
are reviewed and monitored regularly to assess the ongoing potential risk,
suitability and sustainability to the Group. As at the year end, the Consumer
Finance business approximately had the following cases (by volume) in
forbearance:
· Retail Finance 0.10% (2024: 0.14%); and
· Vehicle Finance: 0.70% (2024: 0.59%).
In respect of Vehicle Finance, where forbearance measures are not possible or
are considered not to be in the customer's best interests, or where such
measures have been tried and the customer has not adhered to the forbearance
terms that have been agreed, the Group will consider realising its security
and taking possession of the vehicle in order to sell it and clear the
outstanding debt. Where the sale of the vehicle does not cover all of the
remaining loan, normal credit collection procedures may be carried out in
order to recover the outstanding debt, or the debt may be sold to a third
party debt recovery agent, or in certain circumstances, the debt may be
written off.
Real Estate Finance
Where clients provided evidence of payment difficulties, they were supported
by the provision of extensions to loan maturity dates. A small number of
clients, who experienced difficulties in meeting their financial commitments,
were offered concessions (facility restructures or amendments) that Real
Estate Finance would not have provided under normal circumstances. As at 31
December 2025, 3.0% of accounts were classed as forborne (2024: 4.9%). Where
forbearance measures are not possible, or are considered not to be in the
client's best interests, or where such measures have been tried and the
customer has not adhered to the forbearance terms that have been agreed, the
Group will consider realising its security.
40. Market risk
The Group's market risk is primarily linked to interest rate risk. Interest
rate risk refers to the exposure of the Group's financial position to adverse
movements in interest rates.
When interest rates change, the present value and timing of future cash flows
change. This, in turn, changes the underlying value of the Group's assets,
liabilities and off-balance sheet instruments, and hence, its economic value.
Changes in interest rates also affect the Group's earnings by altering
interest-sensitive income and expenses, affecting its net interest income.
The principal currency in which the Group operates is Sterling, although a
small number of transactions are completed in US dollars, Euros and other
currencies in the Commercial Finance business. The Group has no significant
exposures to foreign currencies and hedges any residual currency risks to
Sterling. The Group does not operate a trading book.
See Principal risks and uncertainties section for further details on the
mitigation and change during the year of market risk.
Interest rate risk
Group and Company
The Group seeks to 'match' interest rate risk between its assets and
liabilities in the first instance and hedges any material residual risks using
interest rate derivatives in accordance with the Group's risk appetite.
The Group monitors its exposure to interest rate risk on at least a weekly
basis, using market value sensitivity and earnings at risk, which were as
follows at 31 December:
2025 2024
£million
£million
Market value sensitivity
+200bp parallel shift in yield curve 2.9 1.5
-200bp parallel shift in yield curve (3.1) (1.6)
Earnings at risk sensitivity
+100bp parallel shift in yield curve 0.4 1.5
-100bp parallel shift in yield curve (0.6) (1.5)
The Directors consider that 200bps in the case of market value sensitivity and
100bps in the case of earnings at risk are a reasonable approximation of
possible changes.
During the year, the methodology for earnings at risk sensitivity was updated
to a more appropriate calculation based on a constant balance sheet approach
compared to a run off balance sheet approach at 31 December 2024.
41. Liquidity and funding risk
Liquidity and funding risk is the risk that the Group is unable to meet its
obligations as they fall due or can only do so at excessive cost. The Group
maintains adequate liquidity resources and a prudent, stable funding profile
at all times to cover liabilities as they fall due in normal and stressed
conditions.
The Group manages its liquidity in line with internal and regulatory
requirements, and at least annually assesses the robustness of the liquidity
requirements as part of the Group's Internal Liquidity Adequacy Assessment
Process ('ILAAP').
See Principal risks and uncertainties section for further details on the
mitigation and change during the year of liquidity and funding risk.
The tables below analyse the contractual undiscounted cash flows for financial
liabilities into relevant maturity groupings:
At 31 December 2025 Carrying Gross nominal Not more More than More than More than
amount
outflow
than three
three months
one year but
five years
£million
£million
months
but less than
less than five
£million
£million
one year
years
£million
£million
Due to banks 205.9 208.6 30.2 178.4 - -
Deposits from customers 3,509.6 3,624.3 2,379.8 473.4 767.7 3.4
Subordinated liabilities 93.5 125.1 5.9 5.9 113.3 -
Lease liabilities 4.4 5.1 0.3 0.8 2.2 1.8
Other financial liabilities 87.0 87.0 87.0 - - -
3,900.4 4,050.1 2,503.2 658.5 883.2 5.2
Derivative financial liabilities 0.1 0.1 0.1 - - -
3,900.5 4,050.2 2,503.3 658.5 883.2 5.2
At 31 December 2024 Carrying Gross nominal Not more More than More than More than
amount
outflow
than three
three months
one year but
five years
£million
£million
months
but less than
less than five
£million
£million
one year
years
£million
£million
Due to banks 365.8 374.1 52.6 321.5 - -
Deposits from customers 3,244.9 3,336.5 2,058.0 674.8 601.0 2.7
Subordinated liabilities 93.3 136.8 - 11.7 125.1 -
Lease liabilities 1.8 1.9 0.3 0.8 0.8 -
Other financial liabilities 23.1 23.1 23.1 - - -
3,728.9 3,872.4 2,134.0 1,008.8 726.9 2.7
Derivative financial liabilities 10.0 10.2 2.0 3.4 4.8 -
3,738.9 3,882.6 2,136.0 1,012.2 731.7 2.7
Company
The contractual undiscounted cash flows for financial liabilities of the
Company are the same as above except for the following:
At 31 December 2025 Carrying Gross nominal Not more More than More than More than
amount
outflow
than three
three months
one year but
five years
£million
£million
months
but less than
less than five
£million
£million
one year
years
£million
£million
Lease liabilities 4.2 4.9 0.3 0.6 2.2 1.8
Other financial liabilities 100.8 100.8 100.8 - - -
Non-derivative financial liabilities 3,914.0 4,063.7 2,517.0 658.3 883.2 5.2
Total 3,914.1 4,063.8 2,517.1 658.3 883.2 5.2
At 31 December 2024 Carrying Gross nominal Not more More than More than More than
amount
outflow
than three
three months
one year but
five years
£million
£million
months
but less than
less than five
£million
£million
one year
years
£million
£million
Lease liabilities 1.6 1.7 0.3 0.7 0.7 -
Other financial liabilities 33.6 33.6 33.6 - - -
Non-derivative financial liabilities 3,739.2 3,882.7 2,144.5 1,008.7 726.8 2.7
Total 3,749.2 3,892.9 2,146.5 1,012.1 731.6 2.7
42. Capital risk (unaudited)
Capital risk is the risk that the Group will have insufficient capital
resources to absorb potential losses. The Group adopts a conservative approach
to managing its capital and at least annually assesses the robustness of the
capital requirements as part of the Group's Internal Capital Adequacy
Assessment Process ('ICAAP'). The Group has Tier 1 and Tier 2 capital
resources, noting the regulatory adjustments required in the table below.
The following table, which is unaudited and, therefore, not in scope of the
Independent Auditor's Report, shows the regulatory capital resources for the
Group.
2025 2024
£million
£million
(unaudited)
(unaudited)
CET 1
Share capital 7.6 7.6
Share premium 84.2 84.0
Retained earnings 284.4 271.1
Own shares (1.9) (2.2)
IFRS 9 transition adjustments - 0.1
Goodwill (1.0) (1.0)
Intangible assets net of attributable deferred tax (4.1) (4.0)
CET 1 capital before foreseeable dividend 369.2 355.6
Foreseeable dividend (4.4) (4.2)
CET 1 and Tier 1 capital 364.8 351.4
Tier 2
Subordinated liabilities 89.5 89.3
Less ineligible portion (25.9) (25.0)
Total Tier 2 capital¹ 63.6 64.3
Own funds 428.4 415.7
Reconciliation to total equity:
IFRS 9 transition adjustments - (0.1)
Eligible subordinated liabilities (63.6) (64.3)
Cash flow hedge reserve - -
Goodwill and other intangible assets net of attributable deferred tax 5.1 5.0
Foreseeable dividend 4.4 4.2
Total equity 374.3 360.5
Note:
1. Tier 2 capital comprises solely subordinated debt, excluding accrued
interest, capped at 25% of the Pillar 1 and 2A requirements as set by the PRA.
The Group elected to adopt the IFRS 9 transitional rules. The initial IFRS 9
transitional adjustment ended in 2022. The 'quick fix' part of the relief, for
increases in provisions since 1 January 2020, except where these provisions
relate to defaulted accounts, were added back to eligible capital (net of
attributable deferred tax) at 25% in 2024. This relief ended on 1 January
2025.
The Group's regulatory capital is divided into:
· CET 1 capital, which comprises shareholders' funds (excluding employee benefit
trust own shares), after adding back the IFRS 9 transition adjustment and
deducting qualifying intangible assets and prudent valuation adjustments. IFRS
9 transition adjustment and intangible assets are both net of attributable
deferred tax; and
· Tier 2 capital, which is solely subordinated debt net of unamortised issue
costs, capped at 25% of the capital requirement.
The Group operates the standardised approach to credit risk, whereby risk
weightings are applied to the Group's on and off balance sheet exposures. The
weightings applied are those stipulated in the UK Capital Requirements
Regulation.
Further information on capital is included within our Pillar 3 disclosures,
which can be found on the Group's website (www.securetrustbank.com/pillar3).
See Principal risks and uncertainties section for further details on the
mitigation and change during the year of capital risk.
The Group is subject to capital requirements imposed by the PRA on all
financial services firms. During the year, the Group complied with these
requirements.
43. Classification of financial assets and liabilities
All financial assets and liabilities at 31 December 2025 and 31 December 2024
were carried at amortised cost, except for derivative financial instruments
that are at fair value through profit and loss. Therefore, for these assets
and liabilities, the fair value hierarchy noted below relates to the
disclosure in this note only.
Group
Total Fair value Fair Value Total Fair Fair Value
carrying
2025
hierarchy
carrying
value
hierarchy
amount
£million
level
amount
2024
level
2025
2025
2024
£million
2024
£million
£million
Cash and Bank of England reserve account 528.1 528.1 Level 1 445.0 445.0 Level 1
Loans and advances to banks 36.8 36.8 Level 2 24.0 24.0 Level 2
Debt securities 1.0 1.0 Level 1 - - -
Loans and advances to customers 3,295.8 3,289.0 Level 3 3,608.5 3,612.3 Level 3
Derivative financial instruments 0.2 0.2 Level 2 14.3 14.3 Level 2
Other financial assets 1.7 1.7 Level 3 2.0 2.0 Level 3
3,863.6 3,856.8 4,093.8 4,097.6
Due to banks 205.9 205.9 Level 2 365.8 365.8 Level 2
Deposits from customers 3,509.6 3,530.7 Level 3 3,244.9 3,254.0 Level 3
Derivative financial instruments 0.1 0.1 Level 2 10.0 10.0 Level 2
Lease liabilities 4.4 4.4 Level 3 1.8 1.8 Level 3
Other financial liabilities 87.0 87.0 Level 3 23.1 23.1 Level 3
Subordinated liabilities 93.5 104.2 Level 2 93.3 90.2 Level 2
3,900.5 3,932.3 3,738.9 3,744.9
Company
Total Fair value Fair Value Total Fair Fair Value
carrying
2025
hierarchy
carrying
value
hierarchy
amount
£million
level
amount
2024
level
2025
2025
2024
£million
2024
£million
£million
Cash and Bank of England reserve account 528.1 528.1 Level 1 445.0 445.0 Level 1
Loans and advances to banks 36.1 36.1 Level 2 23.6 23.6 Level 2
Debt securities 1.0 1.0 Level 1 - - -
Loans and advances to customers 3,295.8 3,289.0 Level 3 3,608.5 3,612.3 Level 3
Derivative financial instruments 0.2 0.2 Level 2 14.3 14.3 Level 2
Other financial assets 26.7 26.7 Level 3 4.0 4.0 Level 3
3,887.9 3,881.1 4,095.4 4,099.2
Due to banks 205.9 205.9 Level 2 365.8 365.8 Level 2
Deposits from customers 3,509.6 3,530.7 Level 3 3,244.9 3,254.0 Level 3
Derivative financial instruments 0.1 0.1 Level 2 10.0 10.0 Level 2
Lease liabilities 4.2 4.2 Level 3 1.6 1.6 Level 3
Other financial liabilities 100.8 100.8 Level 3 33.6 33.6 Level 3
Subordinated liabilities 93.5 104.2 Level 2 93.3 90.2 Level 2
3,914.1 3,945.9 3,749.2 3,755.2
Fair value classification
The tables above include the fair values and fair value hierarchies of the
Group and Company's financial assets and liabilities. The Group measures fair
value using the following fair value hierarchy that reflects the significance
of the inputs used in making measurements.
· Level 1: Quoted prices in active markets for identical assets or liabilities.
· Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
· Level 3: Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
Debt securities
The fair value of debt securities is based on the quoted price where
available.
Loans and advances to customers and Deposits from customers
The fair value of the financial assets and liabilities is calculated based
upon the present value of the expected future principal and interest cash
flows. The rate used to discount the cash flows was a market rate of interest
at the balance sheet date. For loans and advances to customers, the same
assumptions regarding the risk of default were applied as those used to derive
the carrying value.
Derivative financial instruments
The fair value of derivative financial instruments is calculated based on the
present value of the expected future cash flows of the instruments. The rate
used to discount the cash flows was the SONIA forward curve at the balance
sheet date.
Subordinated liabilities
The fair value of subordinated liabilities is calculated based on quoted
market prices where available, or where an active market quote is not
available, it is calculated based on the present value of the expected future
cash flows of the instruments. The rate used to discount the cash flows was
the UK Government five year bond plus the initial spread on the instruments.
For all remaining financial assets and liabilities, the fair value of
financial assets and liabilities is calculated to be equivalent to their
carrying value due to their short maturity dates.
44. Related party transactions
Related parties of the Company and Group include subsidiaries, key management
personnel, close family members of key management personnel and entities that
are controlled, jointly controlled or significantly influenced, or for which
significant voting power is held, by key management personnel or their close
family members.
At 31 December 2025, £0.3 million (2024: £0.1 million) deposits were
outstanding in relation to key management personnel.
The Company undertook the following transactions with other companies in the
Secure Trust Bank Group:
2025 2024
£million
£million
Interest income and similar income (30.4) (30.3)
Operating expenses (0.1) (0.4)
Allowances for impairment of amounts due from related companies - 0.2
Investment income 10.8 9.5
(19.7) (21.0)
Equity contribution to subsidiaries re. share-based payments 0.2 0.2
The loans and advances with, and amounts receivable and payable to, related
companies are noted below:
Company Company
2025
2024
£million
£million
Amounts receivable from subsidiary undertakings 25.3 2.3
Amounts due to subsidiary undertakings (15.7) (12.5)
9.6 (10.2)
All amounts above are repayable on demand and the Company charged interest at
a variable rate on amounts outstanding.
Directors' remuneration
The Directors' emoluments (including pension contributions and benefits in
kind) for the year are disclosed in the Directors' Remuneration Report in the
2025 Annual Report and Accounts.
At the year-end the ordinary shares held by the Directors, holdings of share
options, as well as details of those share options exercised during the year
are disclosed in the Directors' Remuneration Report in the 2025 Annual Report
and Accounts.
45. Immediate parent company and ultimate controlling party
The Company has no immediate parent company or ultimate controlling party.
46. Country-by-Country reporting
The Capital Requirements (Country-by-Country Reporting) Regulations 2013
introduced reporting obligations for institutions within the scope of CRD V.
The requirements aim to give increased transparency regarding the activities
of institutions. The Country-by-Country information is set out below:
Name Nature Location Turnover Average Profit Tax paid
of activity
£million
number of
before tax
on profit
FTE
£million
£million
employees
31 December 2025 Secure Trust Bank PLC Banking services UK 387.1 860 27.5 12.0
31 December 2024 Secure Trust Bank PLC Banking services UK 385.2 915 29.2 8.8
47. Post balance sheet events
There have been no significant events between 31 December 2025 and the date of
approval of these Financial Statements, which would require a change to or
additional disclosure in the financial statements.
The sale of the Consumer Vehicle Finance business completed on 25 February
2026. The Group will undertake servicing of the loan portfolio on behalf of
the purchaser post completion until a target migration date of 30 May 2026.
The Group will remain responsible for administering, and retain liability for,
payments due to customers under the FCA's motor finance commission redress
scheme (when concluded) for any relevant loans in the portfolio.
Further information will be included in the Group's Interim Report for the six
months ended 30 June 2026.
Five-year summary (unaudited)
2025 2024 2023 2022 2021
£million £million £million £million £million
Profit for the year
Continuing operations
Interest and similar income 301.8 296.8 244.9 156.4 125.9
Interest expense and similar charges (150.7) (159.5) (121.5) (42.7) (21.9)
Net interest income 151.1 137.3 123.4 113.7 104.0
Net fee and commission income 14.1 18.2 15.4 15.6 11.6
Operating income 165.2 155.5 138.8 129.3 115.6
Net impairment charge on loans and advances to customers (31.4) (23.2) (28.4) (16.9) (4.9)
Other gains/(losses) 0.1 (0.4) - 1.1 1.5
Fair value and other gains/(losses) on financial instruments 0.1 1.2 0.5 (0.3) (0.1)
Operating expenses¹ (74.7) (72.2) (71.5) (74.6) (72.7)
Profit before income tax before exceptional items 59.3 60.9 39.4 38.6 39.4
Exceptional items - (1.5) (1.8) - -
Profit before income tax 59.3 59.4 37.6 38.6 39.4
Discontinued operations
(Loss)/profit before income tax before exceptional items (7.7) (21.8) 0.5 5.4 16.6
Exceptional items (24.1) (8.4) (4.7) - -
(Loss)/profit before income tax (31.8) (30.2) (4.2) 5.4 16.6
Total profit before income tax 27.5 29.2 33.4 44.0 56.0
Continuing Continuing Continuing Continuing Continuing 2021
2025 2024 2023 2022 £million
£million £million £million £million
Earnings per share for profit attributable to the equity holders of the
Company during the year (pence per share)
Basic earnings per ordinary share 238.8 227.7 149.9 156.9 172.2
1 Group transfer pricing changed after 2022, therefore 2022 and 2021
operating expenses represents management accounts at that time and are
prepared under a different basis.
2025 2024 2023 2022 2021
£million £million £million £million £million
Financial position
Cash and Bank of England reserve account 528.1 445.0 351.6 370.1 234.0
Loans and advances to banks 36.8 24.0 53.7 50.5 52.0
Debt securities 1.0 - - - 25.0
Loans and advances to customers 3,295.8 3,608.5 3,315.3 2,919.5 2,530.6
Fair value adjustment for portfolio hedged risk 7.3 (6.8) (3.9) (32.0) (3.5)
Derivative financial instruments 0.2 14.3 25.5 34.9 3.8
Assets held for sale 390.8 - - - 1.3
Other assets 56.0 31.7 35.8 36.6 42.7
Total assets 4,316.0 4,116.7 3,778.0 3,379.6 2,885.9
Due to banks 205.9 365.8 402.0 400.5 390.8
Deposits from customers 3,509.6 3,244.9 2,871.8 2,514.6 2,103.2
Fair value adjustment for portfolio hedged risk 4.7 (3.4) (1.4) (23.0) (5.3)
Derivative financial instruments 0.1 10.0 22.0 26.7 6.2
Subordinated liabilities 93.5 93.3 93.1 51.1 50.9
Other liabilities 127.9 45.6 46.0 83.5 37.7
Total shareholders' equity 374.3 360.5 344.5 326.2 302.4
Total liabilities and shareholders' equity 4,316.0 4,116.7 3,778.0 3,379.6 2,885.9
Appendix to the Annual Report (unaudited)
Key performance indicators and other alternative performance measures
All key performance indicators are based on continuing operations and
continuing loans and advances to customers, unless otherwise stated.
(i) Continuing loans and advances to customers
A reconciliation of total loans and advances to customers to continuing
operations loans and advances to customers is set out below:
2025 2024 2023
£million £million £million
Loans and advances to customers 3,295.8 3,608.5 3,315.3
Assets held for sale - Vehicle Finance 390.8 - -
Total loans and advances to customers 3,686.6 3,608.5 2,315.3
Less discontinued loans and advances to customers:
Vehicle Finance (Held for sale in 2026) (390.8) (558.3) (467.2)
Continuing loans and advances to customers 3,295.8 3,050.2 2,848.1
(ii) Continuing average equity
Continuing average equity is calculated by multiplying the percentage of the
average of the monthly total Group equity balances over the total Group
average risk-weighted assets ('RWAs'), by the continuing average RWAs.
2025 2024 2023
£million £million £million
Total Group average equity 371.7 355.3 334.9
Total Group average RWAs 2,857.9 2,732.9 2,500.0
13.0% 13.0% 13.4%
Continuing average RWAs 2,399.6 2,279.7 2,100.2
Continuing average equity 312.1 296.4 281.3
(iii) Net interest margin, net revenue margin and risk adjusted margin ratios
Net interest margin is calculated as net interest income for the financial
year as a percentage of the average loan book. Risk adjusted margin is
calculated as risk adjusted income for the financial year as a percentage of
the average loan book. Net revenue margin is calculated as operating income
for the financial year as a percentage of the average loan book. The
calculation of the average loan book is the average of the monthly balance of
loans and advances to customers, net of provisions, over 13 months.
Continuing operations 2025 2024 2023
£million £million £million
Net interest income 151.1 137.3 123.4
Net fee and commission income 14.1 18.2 15.4
Operating income 165.2 155.5 138.8
Average loan book 3,184.3 2,908.4 2,669.9
Net revenue margin 5.2% 5.3% 5.2%
Net interest margin 4.7% 4.7% 4.6%
Retail Finance 2025 2024 2023
£million £million £million
Net interest income 97.5 86.8 73.1
Average loan book 1,405.6 1,285.9 1,143.4
Net interest margin 6.9% 6.8% 6.4%
Net interest income 97.5 86.8 73.1
Net fee and commission income 3.7 3.2 3.2
Net impairment charge on loans and advances to customers (19.2) (13.3) (15.9)
Risk adjusted income 82.0 76.7 60.4
Risk adjusted margin 5.8% 6.0% 5.3%
Real Estate Finance 2025 2024 2023
£million £million £million
Net interest income 34.2 32.6 29.7
Net fee and commission income 0.3 0.4 0.9
Operating income 34.5 33.0 30.6
Net impairment charge on loans and advances to customers (8.8) (4.0) (4.5)
Risk adjusted income 25.7 29.0 26.1
Average loan book 1,417.2 1,269.5 1,177.7
Net revenue margin 2.4% 2.6% 2.6%
Risk adjusted margin 1.8% 2.3% 2.2%
Commercial Finance 2025 2024 2023
£million £million £million
Net interest income 12.1 12.2 13.2
Net fee and commission income 10.1 14.5 11.3
Operating income 22.2 26.7 24.5
Net impairment charge on loans and advances to customers (3.4) (5.9) (8.0)
Risk adjusted income 18.8 20.8 16.5
Average loan book 361.5 353.0 348.8
Net revenue margin 6.1% 7.6% 7.0%
Risk adjusted margin 5.2% 5.9% 4.7%
Discontinued: Vehicle Finance 2025 2024 2023
£million £million £million
Net interest income 47.5 47.6 44.1
Average loan book 519.5 505.4 429.6
Net interest margin 9.1% 9.4% 10.3%
Net interest income 47.5 47.6 44.1
Net fee and commission income 0.8 0.8 1.8
Net impairment charge on loans and advances to customers (26.6) (38.7) (14.8)
Other (losses)/gains: gains on modification of financial assets 0.1 0.1 0.3
Risk adjusted income 21.8 9.8 31.4
Risk adjusted margin 4.2% 1.9% 7.3%
These ratios show the net return on our lending assets, with and without
adjusting for cost of risk.
(iv) Return on average equity
Total return on average equity is calculated as the total profit after tax for
the previous 12 months as a percentage of average equity. Total adjusted
return on average equity is calculated as the total adjusted profit after tax
for the previous 12 months as a percentage of average equity. Average equity
is calculated as the average of the monthly equity balances.
2025 2024 2023
£million £million £million
Total profit after tax 17.6 19.7 24.3
Less: total exceptional items after tax 21.2 8.9 5.9
Total adjusted profit after tax 38.8 28.6 30.2
Average equity 371.7 355.3 334.9
Total return on average equity 4.7% 5.5% 7.3%
Total adjusted return on average equity 10.4% 8.0% 9.0%
Continuing return on average equity is calculated as the continuing profit
after tax from the previous 12 months as a percentage of average continuing
equity. Continuing adjusted return on average equity is calculated as the
continuing adjusted profit after tax for the previous 12 months as a
percentage of average continuing equity. Average equity is calculated as the
average of the monthly equity balances.
2025 2024 2023
£million £million £million
Continuing profit after tax 44.6 43.4 28.1
Less: continuing exceptional items after tax - 1.1 1.8
Continuing adjusted profit after tax 44.6 44.5 29.9
Average continuing equity 312.1 296.4 281.3
Continuing return on average equity 14.3% 14.6% 10.0%
Continuing adjusted return on average equity 14.3% 15.0% 10.6%
Return on average equity is a measure of the Group's ability to generate
profit from the equity available to it.
(v) Cost to income ratio
Total cost to income is calculated as total operating expenses for the
financial year as a percentage of total operating income for the financial
year. Adjusted cost to income is calculated as adjusted operating expenses for
the financial year as a percentage of total operating income for the financial
year.
2025 2024 2023
£million £million £million
Total operating expenses 128.3 113.7 106.2
Less: exceptional items (24.1) (9.9) (6.5)
Total adjusted operating expenses 104.2 103.8 99.7
Total operating income 213.5 203.9 184.7
Total cost to income ratio 60.1% 55.8% 57.5%
Adjusted cost to income ratio 48.8% 50.9% 54.0%
Continuing cost to income is calculated as continuing operating expenses for
the financial year as a percentage of continuing operating income for the
financial year. Continuing adjusted cost to income is calculated as continuing
adjusted operating expenses for the financial year as a percentage of
continuing operating income for the financial year.
2025 2024 2023
£million £million £million
Continuing operating expenses 74.7 73.7 73.3
Less: continuing exceptional items - (1.5) (1.8)
Continuing adjusted operating expenses 74.7 72.2 71.5
Continuing operating income 165.2 155.5 138.8
Continuing cost to income ratio 45.2% 47.4% 52.8%
Continuing adjusted cost to income ratio 45.2% 46.4% 51.5%
The cost to income ratio measures how efficiently the Group is utilising its
cost base to produce income.
(vi) Continuing cost of risk
Continuing cost of risk is calculated as the total of the net impairment
charge on continuing loans and advances to customers for the financial year as
a percentage of the average continuing loan book.
Continuing 2025 2024 2023
£million £million £million
Net impairment charge on loans and advances to customers 31.4 23.2 28.4
Average loan book 3,184.3 2,908.4 2,669.9
Continuing cost of risk 1.0% 0.8% 1.1%
The cost of risk measures how effective the Group has been in managing the
credit risk of its lending portfolios.
(vii) Continuing cost of funds
Cost of funds is calculated as the interest expense for the financial year
expressed as a percentage of average loan book.
Continuing 2025 2024 2023
£million £million £million
Interest expense and similar charges 150.7 159.5 121.5
Average loan book 3,184.3 2,908.4 2,669.9
Continuing cost of funds 4.7% 5.5% 4.6%
The cost of funds measures the cost of money being lent to customers.
(viii) Funding ratio and loan to deposit ratio
The funding ratio is calculated as the total funding at the year-end divided
by total loans and advances to customers at the year-end. The loans to deposit
ratio is calculated as total loans and advances to customers at the year-end
divided by deposits from customers at the year end:
2025 2024 2023
£million £million £million
Deposits from customers 3,509.6 3,244.9 2,871.8
Term Funding Scheme with additional incentives for SMEs and sale and 201.2 358.9 395.1
repurchase agreements (including accrued interest)
Tier 2 capital (including accrued interest) 93.5 93.3 93.1
Equity 374.3 360.5 344.5
Total funding 4,178.6 4,057.6 3,704.5
Total loans and advances to customers 3,686.6 3,608.5 3,315.3
Funding ratio 113.3% 112.4% 111.7%
Loan to deposit ratio 105.0% 111.2% 115.4%
The funding ratio and loan to deposit ratio measure the Group's excess of
funding that provides liquidity.
(ix) Tangible book value per share
Tangible book value per share is calculated as the total equity less
intangible assets divided by the number of shares in issue at the end of the
year less own shares.
2025 2024
£million £million
Total equity 374.3 360.5
Less: Intangible assets (5.1) (5.0)
Tangible book value 369.2 355.5
Shares 18,715,773 19,071,408
Tangible book value per share £19.73 £18.64
Tangible book value per share is a measure of the Group's value per share.
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Copyright 2019 Regulatory News Service, all rights reservedRecent news on Secure Trust Bank
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