LENDER TAKES SHARES HIT

Provident Financial suffers as it warns over profit expectations

SHARES IN credit lender Provident Financial fell nearly 20 per cent after it warned that 2018 profits will be at the lower end of expectations following a rise in bad debts at its Vanquis Bank arm.

The Bradford-based firm said it has tightened its lending criteria in anticipation of the current uncertain UK economic environment. Provident said it has seen falling numbers of new accounts after clamping down on its lending.

Provident now expects full year profits to be towards the lower end of the expected range of between £151m and £166m.

The group’s chief executive Malcolm Le May said: “We have been progressively tightening our underwriting standards throughout the group in anticipation of the current uncertain UK economic environment we are facing.

“We will continue to monitor underwriting standards in light of any changes in customer behaviour.”

The company, which offers credit through its Vanquis Bank, Moneybarn and consumer credit business, said it saw a 71,000 fall in new accounts at Vanquis, down to 366,000 in 2018.

It comes after a torrid time for Provident, which is recovering from a string of regulatory sancrowers

tions. The group is completing a refund programme in the Vanquis division, relating to hidden charges around its repayment option plan, with more than one million customers now refunded and most of the payments due to have been made by early 2019.

The Financial Conduct Authority (FCA) fined credit card lender Vanquis £2m and ordered it to pay £168.8m in compensation for failing to disclose charges of its popular repayment option plan.

Meanwhile, its Moneybarn car loan arm is under investigation by the FCA over how it treats bor- who fall behind with payments.

Analyst Gary Greenwood at Shore Capital said: “We upgraded Provident to ‘buy’ in October at 547p since when the shares have performed relatively well.

“However, today’s news is another severe kick in the teeth for the investment case and is likely to see the shares fall sharply. We place our recommendation under review pending the shares price settling down, but at this stage our inkling is that the shares would need to be trading closer to 500p for us to maintain a positive stance.”

Last week, the chairwoman of the Business Select Committee called for a probe into Provident after it advertised loans with a hefty interest rate over Christmas.

Leeds West Labour MP Rachel Reeves wrote to the City watchdog asking it to investigate Provident’s “cynical” marketing tactic to target customers who are financially vulnerable with loans advertised with an APR of 535.3 per cent.

In its latest update, Provident said Moneybarn “continues to assist the FCA in its investigation into affordability, forbearance and termination options” and hopes to conclude the matter in the first half of 2019.

The company has seen shares decimated after two profit warnings in 2017, which prompted the resignation of former chief executive Peter Crook.