Provident Financial boosted by 96 per cent take-up of its £331m rights issue

CREDIT LENDER Provident Financial reported a take-up of more than 96 per cent for its £331m rights issue to meet the cost of an investigation by the financial watchdog and restore its capital position.

The Bradford-based group’s credit card division Vanquis Bank has been fined £2m and ordered to pay compensation of £169m by the Financial Conduct Authority (FCA) for failing to disclose charges of its repayment option plan.

Analyst Gary Greenwood, at Shore Capital, said Provident is now able to move forward with more confidence following the recent £331m rights issue.

“Of the circa £100m of money raised to bolster the balance sheet, around half relates to increased operational risk and half to increased conduct risk,” he said.

“It is possible that this additional capital requirement could reduce over time if the group is able to demonstrate improvements in managing these risks.

“We think it will probably be easier to demonstrate the improvement in operational risk, which is mainly associated with a recovery in Home Credit performance, as against conduct risk, where the benefits of increased investment in risk management may take longer to be appreciated by the regulator.”

Mr Greenwood said the performance of the Home Credit business is improving, but it will still take some time for the business to fully recover.

“This mainly reflects the time it is expected to take for the group to re-engage with its customers,” he said.

Mr Greenwood said that the market opportunity for Vanquis is unchanged and remains substantial.