Specialist lender Secure Trust Bank has completed the sale of its motor finance division to European alternative investment fund manager LCM Partners, marking another significant withdrawal from Britain's turbulent vehicle finance sector.
Strategic Transaction Details
The transaction involves the transfer of Secure Trust Bank's remaining vehicle finance loan portfolio to LCM Partners, with the deal expected to deliver substantial financial benefits for the bank. The sale is anticipated to boost the bank's Common Equity Tier 1 (CET1) ratio by 180 basis points, significantly strengthening its financial resilience metrics. Furthermore, the transaction is projected to generate a net profit of approximately £9 million for Secure Trust Bank.
Capital Reallocation Strategy
Secure Trust Bank has outlined a clear strategic vision for the capital unlocked through this divestment. The bank stated that the completion of the sale will enable the redeployment of resources into higher-returning continuing businesses, increase market penetration to support long-term growth ambitions, and potentially facilitate further shareholder distributions.
This strategic move follows the bank's announcement last July that it would cease fresh lending through its vehicle finance arm and allow its existing portfolio to gradually run off. During this restructuring phase, Secure Trust warned that as many as 78 positions faced redundancy in 2025, with a further 284 potentially affected by 2030.
Challenging Sector Background
The motor finance industry has experienced significant turbulence in recent years, with Secure Trust's vehicle finance operation recording substantial losses of £21.8 million throughout 2024. By the end of that year, net lending balances within the division stood at £558.3 million, representing a considerable portion of the bank's overall portfolio.
The unit proved particularly resource-intensive, accounting for almost 30 percent of the firm's total operational expenditure. This divestment comes as the Financial Conduct Authority prepares to reveal comprehensive details of its long-awaited compensation scheme for the car mis-selling scandal in early 2026, following delays due to growing criticism from both lenders and consumers.
Industry-Wide Implications
Secure Trust Bank's withdrawal from motor finance mirrors broader industry trends, with other major players also reconsidering their positions in the sector. Santander, which recently increased its provisions for the car mis-selling scandal to £460 million, has reportedly been considering separating its own motor finance division as part of a comprehensive operational revamp.
Secure Trust had previously earmarked £21 million in provisions for the upcoming industry-wide compensation programme, reflecting the challenging regulatory environment facing vehicle finance providers.
Positive Performance Indicators
Despite the challenges in its motor finance division, Secure Trust Bank has demonstrated strong performance across other areas of its business. The bank's overall loan book has experienced significant growth, with net lending exceeding £3.7 billion in the final quarter of the reporting period.
This represents an impressive 8.1 percent increase across the bank's continuing business operations. Throughout the year, Secure Trust's retail finance loan book grew by eight percent, while real estate lending saw an even stronger 9.4 percent increase.
Financial Strength and Market Response
Customer deposits showed healthy growth, increasing by 8.2 percent compared to the previous year. The bank noted that this trend has supported expansion within its lending book, contributing to overall financial stability.
Secure Trust predicts its adjusted pre-tax profit will surpass market consensus, reaching approximately £51.1 million. This positive outlook was reflected in early trading, with the bank's shares experiencing a modest one percent rise to reach 1,468.50p following the announcement.
Leadership Perspective
Chief executive Ian Corfield, who assumed leadership of the group last year, commented on the strategic repositioning. "We have made the right decisions to reposition the Group for growth and higher returns," Corfield stated, adding that these moves would "enable us to deliver value to customers and shareholders" in the coming period.
The transaction represents a significant milestone in Secure Trust Bank's strategic evolution, allowing the specialist lender to focus resources on more profitable business segments while navigating the complex challenges facing the motor finance industry.
