Acquisitions on the cards for challenger bank

SECURE Trust Bank is targeting a raft of major acquisitions which look set to spark a series of consolidations and mergers in the challenger bank sector.

STB has offices in Birmingham Leeds, Liverpool, Newcastle, Bristol and London and the south coast, but much of its senior management team in the North West.

According to the Telegraph, its chief executive Paul Lynam said they have a chance to lead a transformation in the banking industry, after a series of new banks have been launched in recent years.

STB’s parent company Arbuthnot Banking Group sold one-third of the bank to institutional investors last week.

The sale is subject to the approval of Arbuthnot’s board but there is a written undertaking from chairman Sir Henry Angest, who owns 55.08% of Arbuthnot, that he will support the move.

The sale of 6m shares in Secure Trust Bank will reduce Arbuthnot’s stake from 51.9% to 18.9% after it found buyers for slightly more of its shares than it had originally announced.

It sold its shares at £25 each, which was a 10.7% discount to its closing price on May 26 – and was the cause of a 7% fall in its share price on Friday. At the same time Arbuthnot’s shares rose by 6%.

 

This will allow new institutional investors to take a stake in STB, freeing up funds for acquisitions.

“The reality is that Arbuthnot would not be able to support such a transaction, so diversifying the shareholder register opens up a broad range of strategic opportunities that aren’t on the table at the moment,” said Lynam.

“There are assets on the market such as Williams & Glyn and perhaps Co-op Bank, and we may be interested in giving those serious consideration.

Williams & Glyn is the brand name which has been brought back to life by the Royal Bank of Scotland, but RBS is aiming to sell it by the end of 2017.

Reports, however, suggest the sell-off may be delayed beyond that date.

Lynam said: “We are in a better position to lead the consolidation, give we were the first of the challenger banks to IPO post-crisis in 2011 and we’ve achieved 100% returns for shareholders each year for the past four years, which buys a degree of credibility with the stock market.”

He said that other challenger banks, like Shawbrook and Aldermore, have large private equity investors and this could limit their acquisition options in the same way that Arburthnot had restricted STB’s fundraising options.

“That means that of all the challengers, we’ll have the most diversified shareholder register,” he said.

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