Lender slumps on huge loss

Lender slumps on huge loss

Money lending company Provident Financial expects to report a loss of about £120m (€135m) in its consumer credit division for 2017 as it struggles to win back customers following problems at its door-to-door lending business.

Shares in Provident were down by nearly 13%. They have fallen almost 70% since June.

Provident first warned about problems at its door-to-door lending operation in late June after a botched reorganisation led to a shortage of staff. It said in August the situation had deteriorated and the business would lose between £80m and £120m in 2017.

The doorstep lending business accounted for £115m of the consumer credit division’s loss.

Sub-prime lenders, such as Provident Financial, have seen rapid growth in Britain over the decade since the financial crisis, as banks cut back on risky lending and years of austerity have forced poorer people to borrow more. But the high interest rates charged for loans has fuelled a public and political backlash, leading to a regulatory crackdown.

Adding to its specific problems, Provident is seeking a permanent executive chairman after the sudden death in November of former investment banker Manjit Wolstenholme, who took the helm in 2017 charged with turning round the business.

Interim executive chairman Malcolm Le May said the lender had made progress in the search for a new chief. The lender also said the home credit business would cut an unspecified number of jobs at its central support functions as it looks to cut costs.

The consumer credit division accounted for 44% of Provident’s revenue in 2016.

Rivals Non-Standard Finance and Morses Club have both gained from Provident’s loss, after recruiting hundreds of its agents and taking on customers.

“The rate of reconnection with those customers whose relationship had been adversely impacted was at the lower end of expectations through the fourth quarter,” Provident said.

Provident has also contended with lost income resulting from a Financial Conduct Authority investigation into the repayment option plan offered by Provident’s Vanquis Bank and an investigation into Moneybarn, its car and van financing arm.

Provident Financial said Vanquis Bank and Moneybarn units had both started talking to the FCA with a “view to reaching a resolution to their respective investigations”.

Reuters

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