Secure Trust Bank (STBS.L) announced on Friday that it anticipates its annual profits will significantly fall short of market expectations. The company’s vehicle finance business is experiencing early arrears at a three-year low, leading to a drop in share prices to record lows.
This warning comes in the wake of a ruling by a London court last month, which mandated that motor finance brokers must provide customers with complete information regarding commissions when securing car loans. As a result, lenders have temporarily suspended the issuance of new motor finance loans in the UK.
In a statement, Secure Trust Bank’s CEO David McCreadie expressed disappointment over the prolonged recovery process from an excessive level of defaulted vehicle finance balances. He noted that recent Court of Appeal decisions regarding motor commissions have introduced additional uncertainty regarding potential benefits for the year 2024.
Following this announcement, shares of the Solihull-based bank plummeted by 22.3%, hitting 440 pence during early trading.
The Court of Appeal’s ruling coincided with ongoing considerations by Britain’s financial regulator regarding a consumer redress scheme, which could exceed a billion pounds in response to complaints from customers about excessive commission charges related to car purchases. In light of these developments, Secure Trust Bank had already suspended new consumer lending in its motor division back in August.
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