Secure Trust Bank, a specialist lending institution, has communicated its decision to carry out a "strategic pivot" from its vehicle finance operations with the aim of enhancing returns.
The company will suspend new lending in its vehicle finance sector and instead "run off" its current book, which means it will supervise its existing portfolio until it reduces naturally over time, as reported by .
This manoeuvre stems from the assessment of the "historical financial performance" as well as the "medium-term outlook" for its motor finance arm.
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Previously, in November, Secure Trust had to revise their profit forecasts downward, largely due to issues within the motor finance segment, despite reporting the lowest early arrears level in the vehicle finance business for three years.
Should the wind-down be effectively executed along with all planned cost-saving measures, the group foresees an elevation by 800 basis points in return on average equity. It is expected that the full-year pre-tax profit for 2024 will ascend from £39.1m to £56.6m.
In the year 2024, the vehicle finance branch of Secure Trust saw a loss of £21.8m. The year ended with net lending balances standing at £558.3m.
The segment has been quite burdensome, accounting for nearly 30 per cent of the firm's operating costs.
Secure Trust puts 78 roles at risk this year
Further to its reorganisation, Secure Trust has indicated a potential impact on employment, with 78 roles at risk during 2025 and this could increase to 284 by the close of the decade.
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To facilitate a leaner operation as the loan book diminishes, the lender is aiming to make savings of up to £25m by 2030.
The verdict is anticipated from the Supreme Court this summer on whether banks acted unlawfully by paying commissions to car dealers without the informed consent of customers.
Following the Supreme Court's decision, the Financial Conduct Authority has committed to confirming within a six-week timeframe whether it plans to implement a compensation scheme.
David McCreadie, the CEO, stated: "This pivot will allow the Group to prioritise these established specialist businesses and achieves further simplification of the group combined with the removal of a significant level of costs."
"These measures will have a material positive impact on return on average equity for the Group and will position the Group to being capital accretive."
McCreadie is scheduled to relinquish his leadership role at the bank come summer. His successor will be former Treasury director Ian Corfield, who was implicated in Labour's "cronyism" scandal.