Crackdown fears leave Amigo shares friendless
SHARES in high- cost lender Amigo dropped to a record low as worries mounted that City regulators are preparing to crack down on guarantor loan companies.
Another £26m was wiped off Amigo’s value, just a day after it shed £ 78m from its market capitalisation.
The plunge followed a speech delivered by Financial Conduct Authority executive director Jonathan Davidson, who said there had been a ‘dramatic increase’ in the use of guarantor loans. This is when a consumer nominates someone else to make payments if the person taking out the loan is suddenly unable to.
Davidson said there was anecdotal evidence that some of the guarantors in these loans may not fully understand them and that guarantors are now making more payments.
He added that the FCA will look into interest rates and ‘the business models’ of providers such as FTSE 250-listed Amigo, which Labour MP Stella Creasy has described as a ‘legal loan shark’. Amigo shares dropped 3.1pc, or 5.5p, to 173.2p.
In an announcement after the market closed, Amigo said that payments made by guarantors rose slightly in the year to March 2018 but this year have remained constant at just below 10pc of the total.
It added that it will not make a bid for doorstep lender Provident Financial which is being targeted by rival Non-Standard Finance.
The FTSE 100 and FTSE 250 both ended the week in the red, with the blue- chip index down 2.01pc, or 147.72 points at 7207.59, and the mid- cap index down 1.8pc, or 349.12 points, at 18,998.46.
The Footsie dropped after poor data from Europe raised fears of a Eurozone recession and the pound made gains against the dollar as EU leaders agreed to a Brexit extension.
Big exporters dragging on the index included drug maker Astrazeneca, which lost 2.7pc, or 174p, to 6351p, drinks maker Diageo, which shed 1.7pc, or 53.5p, to 3085.5p, and Lucky Strike and Pall Mall cigarette maker British
American Tobacco, which fell 2.9pc, or 93.5p, to 3086.5p.
The poor economic data, which economists largely interpreted as indicating a potential slowdown in the wider global economy, hit emerging markets-focused bank
Standard Chartered. Its shares fell 4.6pc, or 27.8p, to 578.6p.
Aggreko, which is the world’s largest supplier of temporary power generators, gained 3.5pc, or 27.2p, to 802.4p, after analysts at Stifel upgraded its stock from ‘Hold’ to ‘Buy’. They were upbeat on Aggreko’s management and have interpreted a recent award to supply electricity systems at the Tokyo 2020 Olympics as a sign that momentum is recovering at the group.
Florida-based investment firm Flacks Group disappointed investors in Laura Ashley after it said it had decided against making an offer for the wallpaper, furniture and clothes retailer.
Flacks had said back in February that it was mulling a cash offer for the entire company.
Laura Ashley shares fell 1.2pc, or 0.04p, to 2.92p, though the announcement from Flacks Group was officially released just a minute before the market closed.
Next shares regained some of the ground they lost on Thursday after HSBC kept its ‘Buy’ rating on the High Street retailer’s stock and raised its target price to 6300p, from 5900p.
Its shares dropped on Thursday after it said annual profits and sales had both fallen following a trend of stagnating in-store sales that has beset most clothing companies. However, online sales had been a silver lining, rising by 15pc by £1.9bn. Next’s share price rose 1.2pc, or 64p, to 5380p.