Provident Financial says mortgage business is under regulatory investigation

Malcolm Le May, CEO of Provident Financial

The Bradford-based company said an ongoing review has made it clear that the company needs to address the problem of the growing volume of customer complaints.

The group said the operating environment for home collected credit had changed significantly in the second half of 2020. Provident decided that a plan of arrangement was needed in order to address the problem of increasing customer complaints then. that it strives to position the home credit division. for the future.

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Shore Capital analyst Gary Greenwood said: “While underlying trading was better than expected in the fourth quarter, disappointing news regarding the increase in complaints and the FCA investigation should weigh on the price of short-term action.

“Nonetheless, we do realize that valuation remains depressed in a historical context … CCD aside, we believe the outlook for the rest of the group remains strong and we expect demand for its products to increase due to the pandemic. . “

Provident said it performed better than expected over the last three months of 2020 after an “extremely difficult” year for its customers.

The lender said its Vanquis Bank division and vehicle finance arm, Moneybarn, were profitable in 2020.

Malcolm Le May, CEO of Provident Financial, said: “I am pleased to report that the group performed slightly above management expectations during the fourth quarter and, therefore, for the entire year.

“There is no doubt that 2020 has been an extremely difficult year for our customers. My colleagues in the group have worked tirelessly to ensure the continued support our clients needed in these difficult circumstances and for that I would like to express my sincere gratitude to everyone at Provident Financial Group.

Vanquis Bank, with its banking license and ability to accept retail deposits, and Moneybarn, which was able to increase its market share in 2020, remained profitable throughout 2020 and are both well positioned to take advantage of medium-term growth opportunities. “

He said that although the latest government foreclosure has reduced demand for unsecured credit in its markets so far this year, it continues to see growth opportunities, post-Covid, in the medium term.

“The group, supported by its strong capital and liquidity positions, will continue to focus on many of the goals we set for our Capital Markets Day 2019, which includes expanding our digital footprint, investing in new products, focusing on funding efficiency and becoming a larger banking group for financially underserved customers. I look forward to updating the market when we present our 2020 results in May, ”said Le May.

At Vanquis Bank, the lockdown resulted in lower customer spending in Q4 2020, in line with the broader market. The development of depreciations remained favorable over the period and the use of payment holidays remained below expectations.

At the end of February 2021, receivables were down 28% year-on-year, due to reduced customer spending and lower customer bookings in 2020. However, Vanquis Bank’s profitability was positively affected by the reduction of depreciations, according to IFRS 9 accounting, as a consequence of the decrease in receivables balances.

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