Investors recoil as Amigo warns of flat growth and more bad debts

SHARES in Amigo collapsed yesterday after the lender warned that the UK’S deteriorating economic outlook and a potential regulatory crackdown will halt growth.

The FTSE 250 group, which lends to those with bad credit histories if repayments are guaranteed by a friend or relative, told investors it was “resetting expectations” for 2019-2020 with loan book growth expected to be flat and bad debts to remain high.

The shares more than halved to hit a record low of 70.7p, down 75.5p. Amigo was also the biggest faller on the midcap index on Wednesday, shedding almost 8pc of its value.

The plunge means investors who backed the Bournemouth-based lender when it floated at 275p a share in June 2018, netting founder and one-time

“Secret Millionaire” James Benamor the lion’s share of a £327m windfall, have seen three quarters of their money wiped out.

Earlier this year the Financial Conduct Authority (FCA) flagged the “dramatic increase” in the use of guarantor loans, where it said balances “are fast approaching £1bn” and where Amigo is the market leader. However, the City watchdog has grown increasingly concerned that poor British families are struggling with spiralling debts, and the FCA’S Jonathan Davidson said there were “questions over the level of interest rates charged” on guarantor loans.

Goodbody analyst John Cronin said “in short, it is not a pretty update” as new boss Hamish Paton “takes out the red pen to current year guidance”. However, he described the sell-off as “irrational and excessive”. Amigo’s loans of up to £10,000 come with an annual interest rate of about 50pc – higher than a bank loan or credit card but much lower than the fees charged by some short-term payday lenders.

Mr Paton, the former boss of controversial rent-to-own retailer Brighthouse, said “we remain firm believers in the guarantor product” but added that “we’re trying to listen harder to what is being said about the business”. He said he was concerned that people have forgotten what the reality of a hard Brexit will mean “and how damaging that might be – it’s become part of everyday language. [If] it actually happens it will be tough.”

Amigo is looking to expand globally and has a “long list” of countries where there might be strong demand and friendly regulation, Mr Paton added.