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Secure Trust Bank says loan demand from housebuilders slows

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By Noor Zainab Hussain

(Reuters) – The head of Secure Trust Bank <STBS.L> said it had seen a drop in demand for loans to housebuilders as Britain prepares for its divorce from the European Union and wage growth slows.

Secure Trust, founded in 1952 in the English West Midlands, offers savings accounts and lends to individuals and businesses. Real estate finance accounts for 23 percent of its business, according to Thomson Reuters data.

“Housebuilders in particular are becoming a little bit more cautious. There has been a little bit less demand for lending to housebuilders,” Chief Executive Officer Paul Lynam told Reuters.

“It is something that we noticed in negotiations and discussions with builders. Some of them are not as hungry for new sites as they once were,” Lynam said.

Britain’s housing market has cooled since the 2016 Brexit vote, which led to a rise in overall inflation and increased uncertainty among investors.

The dip in demand would not be material for Secure Trust, which deals with local and small regional builders, Lynam said.

Secure Trust, the former retail bank of Arbuthnot <ARBB.L>, has moved away from sub-prime lending, helping it to report a 36.4 percent rise in first-half underlying pre-tax profit to 16.5 million pounds.

Sub-prime lenders had seen rapid growth in Britain over the decade since the financial crisis, as major banks cut back on risky lending. But the high interest rates charged for those loans has fuelled a public, political and regulatory backlash.

“We would not anticipate re- entering things like sub-prime lending for a four-five year period. Certainly not until there is a lot more clarity around how the UK economy will fare in a post Brexit environment,” Lynam said.

Secure Trust said in January that it was looking for deals this year. Lynam, however, said the lender was steering clear of deals pending clarity on Britain’s exit from the European Union.

The bank said it had “risks to navigate” including the potential for a disruptive trade war between the United States and China, lower house prices, higher taxes and Brexit talks.

“If we were to suddenly see a big increase in the cost of living, because of disruptive trade wars or huge tariffs, that could negatively impact peoples ability to service their debt,” Lynam said.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Keith Weir)

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