Provident shares tumble further on profit warning

Provident shares tumble further on profit warning

Provident Financial expects 2018 earnings to be at the lower end of market expectations, sending shares in the sub-prime lender 20% lower.

Provident’s worst day on the stock market since August 2017 deepened a more than 70% drop in value in the last two years as it works to win back customers after prolonged problems at its home lending business.

Provident said profit for last year would be towards the lower end of the £151m-£166m (€169m-€186m) range forecast by the market.

The firm blamed modestly higher impairment at its credit card business Vanquis Bank. 

The Ftse-250 company also guided to exceptional costs of about £55m in 2018 relating to its home credit recovery plan.

“We believe the market will be disappointed that the fourth quarter shows a further drift down in profitability, this time from the impairment charge at Vanquis,” said Jefferies analysts.

Provident, established in 1880, has been rebuilding after a botched reorganisation of its home credit business led to profit warnings, the departure of its CEO, and the suspension of its dividend in 2017. 

It has also been under investigation by Britain’s financial watchdog.

The doorstep lender, which provides credit to people who do not meet the lending criteria of mainstream banks, had begun to show some signs of a turnaround last year.

Sub-prime lenders have seen rapid growth in Britain over the decade since the financial crisis, as banks cut back on risky lending and years of austerity forced poorer people to borrow more. 

But the high interest rates charged for loans has fuelled a backlash, leading to a regulatory crackdown.

Reuters

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