Bradford-based Provident Financial is on the verge of shutting down its mortgage business and has started consulting with around 2,100 employees regarding the plans.
The announcement came as the listed company reported a statutory loss before tax of £ 113.5million for the year ended December 31, 2020, compared to a profit of £ 119million in 2019.
This was attributed to a significant drop in receivables as a result of Covid-19, and included one-off items related to the senior bond tender, the release of the ROP to Vanquis Bank, and termination costs. within the mortgage business and at the costs of the plan of arrangement.
Its consumer credit division (CCD), which includes Provident and Satsuma mortgage loans, recorded an adjusted loss before tax of £ 74.9million, compared to a profit of £ 20.8million the previous year. .
After the end of the year, Provident Financial launched a plan of arrangement to deal with the problem of increasing customer complaint volumes within CCD. It has committed £ 50million to fund legitimate claims under the scheme and will cover related administrative costs of around £ 15million.
Following an operational review of the division, the group has now decided to completely withdraw from the mortgage market and intends to either place the activity in managed run-off, or to consider a sale.
The cost to the group of managed runoff or CCD disposal is expected to be up to 100m. The CCD has also initiated a collective consultation process with approximately 2,100 employees on its project to withdraw from the mortgage market.
Malcolm Le May, Managing Director of Provident Financial, said: “In light of changing industry and regulatory dynamics in the mortgage industry, as well as changing customer preferences, it is with the greatest regret that we have decided to withdraw from mortgage loans. market and we intend to place the business in managed liquidation or consider a divestiture. It is expected that the cost to the group of a managed liquidation or sale would be broadly similar.
“As a result, PFG will no longer be offering ‘high cost’ products and we will no longer issue high cost or door-to-door credit products from any CCD entity in the future.”