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(Sharecast News) - Secure Trust Bank saw its shares rally on Thursday, after it posted a solid set of numbers and upped the dividend, despite difficult market conditions.
The challenger bank said lending balances grew 8.8% to 3.6bn, primarily driven by its consumer finance business, which reported growth of 13.4%. Business finance grew by 4.2%.
Customer deposits reached a record 3.2bn, up on last year's 2.9bn.
Total pre-tax profits fell 12.6% to 29.2m, after it was hit by a 61.9m impairment charge. Once that was stripped out, adjusted pre-tax profits improved 18% to 100.9m.
The impairment charge related to a pause in collections in its vehicle finance unit, while the Financial Conduct Authority carried out a Borrowers in Financial Difficulty review.
The group has also put aside 6.9m to cover costs associated with the watchdog's probe into discretionary commission arrangements in car finance.
The FCA is waiting until after a Supreme Court hearing in April to make its final decision on claims of potential mis-selling, but has already flagged it will likely implement a redress scheme to compensate customers.
The proposed total ordinary dividend per share, meanwhile, was hiked by 5% to 33.8p.
David McCreadie, chief executive, said: "Secure Trust Bank has remained focused on its medium-term targets and strategic priorities, delivering on balance sheet growth, stabilising net interest margin and delivering cost efficiencies.
"We remain confident in achieving our medium-term targets, which we will have largely delivered by the end of 2025."
As at 1300 GMT, shares in the bank had surged 20% at 506p.
Gary Greenwood, analyst at Shore Capital, said: "STB's results showed a robust financial performance in face of challenging market conditions. Underlying profitability was better than we expected.
"With near-term financial targets reiterated, including a 14% to 16% return on equity, we leave our forecasts broadly unchanged. We see the shares as hugely undervalued."
Shore Capital acts as joint broker to Secure Trust Bank.