I’ve always had a soft spot for banks. Early in my journalism career, I covered international banking and finance, and I’ve stayed fascinated by this sector ever since.
The past decade hasn’t been easy for the big players like Barclays, HSBC, Lloyds, and NatWest.
They were battered by the 2008 financial crisis, challenged by nimble online startups, and squeezed by years of low interest rates. It left many investors disappointed.
But things are looking up. After years of struggles, these banking giants have climbed back, hitting their highest valuations in five years.
Lloyds and NatWest recently posted solid interim results, and Barclays and HSBC are gearing up to share their numbers soon.
Why Smart Investors Are Looking Beyond the Big Four
While the Big Four are grabbing headlines, savvy investors might find better opportunities elsewhere.
With their recent rise, the potential upside for these giants isn’t as big as it once was.
Luckily, the banking world is full of smaller, specialized players that might deliver stronger growth—and here are some worth watching.
Secure Trust Bank Is Lending Its Way to Growth
Take Secure Trust, for example. This bank focuses on specialist lending in profitable, resilient markets.
Back in summer 2023, their shares were sitting at £5.56. Today, they’ve soared over 80% to £10.25—and analysts believe they could hit £15.
Secure Trust works with over 1,000 retailers—everything from DFS sofas to Optical Express glasses, dental crowns, and even jewellery.
They also support Premier League clubs like Arsenal and Manchester United by offering interest-free loans for season tickets.
Expanding in Real Estate and Business Finance
Real estate finance is another strong suit. Secure Trust lends money to property developers, from big landlords to small housebuilders.
They carefully assess each property before lending, which helps keep bad debts low.
On the business side, Secure Trust provides loans backed by invoices or physical assets—a huge market they’re only just starting to tap into.
With a solid reputation for reliability and service, they’re positioned to capture more of this multi-billion-pound sector.
Savers Are Flocking to Secure Trust
Deposits are growing fast too, hitting nearly £3.4 billion—up 15% year on year.
Their ISA, bond, and easy-access rates are competitive, and the bank has invested heavily in tech to make banking smooth for customers.
One area they’re stepping away from is vehicle finance, which has been troubled by industry-wide investigations into misselling.
Secure Trust announced plans to exit this sector to boost profits. Meanwhile, a new CEO, Ian Corfield, is joining soon to push growth even further.
Arbuthnot Banking Group Offers Old-School Service with Modern Flair
Another smaller player worth mentioning is Arbuthnot Banking Group, which once owned Secure Trust and helped it grow.
Arbuthnot blends old-fashioned personal banking with smart technology and a fresh entrepreneurial spirit.
I recommended Arbuthnot shares four months ago at £8.95, and they’ve climbed to £9.35, with forecasts pushing towards £15 in the near future.
A Focus on Wealthy Clients and Cautious Growth
Traditionally, Arbuthnot caters to wealthy clients—offering lending, advice, and a trusted home for their savings.
They also lend mortgages and finance classic cars, trucks, and buses.
The bank is cautious, with majority owner Sir Henry Angest controlling 58% of shares.
This caution led to a dip in lending and profits recently, but insiders see it as a temporary slowdown.
Sir Henry boosted the half-year dividend by 10% to 22p, and a full-year payout of 53p is expected—making Arbuthnot shares attractive for long-term investors at their current price.
Manx Financial Group Serves Niche Markets with Big Potential
Then there’s Manx Financial Group, a smaller bank combining mainstream services with niche lending—from interest-free car repair loans to support for craft breweries.
Their biggest subsidiary, Ninkasi, leases fermentation tanks and carbon capture tech to brewers, boasting over 200 tanks brewing nearly a million litres of beer annually—the UK’s largest operation of its kind.
Manx also owns Payment Assist, offering buy-now-pay-later loans for car repairs, with new partnerships including Nissan Motor and various garages.
Record Results but Cheap Shares at Manx
Chaired by billionaire investor Jim Mellon, Manx recently reported record half-year earnings and a 48% dividend increase, yet its shares remain low at just 27p—making it a strong buy for investors.
TwentyFour Income Fund Pays High Dividends from Specialist Lending
Lastly, TwentyFour Income Fund focuses on lending in bonds that yield high interest, passing generous dividends to shareholders.
Their dividend rose 11% last year to 11.07p, giving a yield close to 10%.
With investments in UK mortgages, Lloyds business loans, and European deals, they’ve maintained a perfect repayment record since launching 12 years ago.
Though they invest in complex products, their solid track record and attractive dividend make TwentyFour a compelling option for adventurous investors.
Plenty of Opportunities Beyond the Big Four
So while Barclays, HSBC, Lloyds, and NatWest dominate headlines, these smaller banks and specialist lenders offer exciting alternatives.
For investors looking beyond the obvious, there’s a whole sea of financial opportunities waiting to be explored.