Sale of Secure Trust Bank's motor finance arm 'very positive', says Shore Capital

(Sharecast News) - House broker Shore Capital said on Monday that the sale of Secure Trust Bank's consumer vehicle finance business was "very positive news" for the group for two reasons. Secure Trust announced just before the market closed on Christmas Eve that it had agreed to sell its consumer vehicle finance business to funds managed by investment fund manager LCM Partners for £458.6m.

The company said the sale was expected to generate a small net gain on sale, after accounting for applicable transaction costs, and will complete during the first quarter of next year.

Firstly, Shore Capital said the consumer vehicle finance business was loss-making in H1 2025 and it had expected a further loss in H2 2025 followed by a break-even profile thereafter as the portfolio runs down. "Delivering a small gain on disposal therefore represents a better-than-expected outcome," it said.

Secondly, the disposal significantly accelerates the release of capital relative to a run-off process, which could have taken up to five years to complete on an organic basis, the broker said.

"As such, this freed-up capital can potentially be put to use faster, thus bolstering future earnings per share and return on equity potential relative to that implied by our current forecasts."

Analyst Gary Greenwood noted that the company plans to issue an update on full-year trading in early 2026 and said the broker will review its forecasts to reflect the disposal and any additional information on trading thereafter.

"Based on our current forecasts, Secure Trust trades on an FY26F P/TNAV of 0.5x, PER of 3.7x and offer a dividend yield of 3.4%," he said. "We believe these metrics significantly under value the group's shares, noting there is 78% upside to our current fair value of 1945p."

At 1245 GMT, the shares were up 15.5% at 1,264.25p.