Sterling Trust to sell bank for pounds 25m

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STERLING TRUST, the USM-quoted second mortgage company formally known as Dewey Warren Holdings, is to sell Sterling Bank with a view to winding up the company. The board hopes to make a capital repayment to shareholders in excess of pounds 1 a share. The shares jumped 23p to close at 80p yesterday after the announcement.

Under a conditional agreement, Sterling Trust and its wholly-owned subsidiary, Argyle Trust, will sell Sterling Bank & Trust to Beneficial Corporation, a US institution with a dollars 10bn (pounds 5bn) loan book, subject to clearance by the Office of Fair Trading. The total price is expected to be about pounds 24.6m.

David Hart, Sterling's chief executive, said the board had decided to sell because the group's shares have consistently been trading at a significant discount to the net asset value of the group. In addition, costs of funding have increased substantially, mainly due to the withdrawal from the wholesale funding market of lenders prepared to provide funds to smaller operators.

The group's principal business of second mortgages has been severely affected by the recession. 'The bank is just not big enough,' Mr Hart said. 'With a loan book of only pounds 100m it lost out in every conceivable way.'

The sale of the bank will leave the group a cash shell company with pounds 25m. 'We are looking at ways in which shareholders can redeem their investment,' Mr Hart said. 'Obviously if ICI came on the market for pounds 1, we would look at it. But failing that the board feels that the money should be repaid.'

No redistribution can take place before 4 January 1993, when funds retained to meet contingent liabilities will be released.

Taxable profits for the half-year to June were pounds 1.22m against pounds 1.55m last time. Earnings per share fell from 5p to 4p. Last year's 2p interim dividend has been passed. The net asset value is 127.5p against 121.8p last time.