Citi upgrades Provident Financial on "exciting growth prospects"

12th Jun 2014 15:24

Citigroup has upgraded its recommendation for financial services firm Provident Financial from 'neutral' to 'buy', saying that the business offers some "exciting growth prospects".The US bank highlighted Provident's Satsuma product, its alternative to payday loans for small sums, as one of these prospects, along with Gaurantor Loans and a recovery in Home Credit."We acknowledge that buying a stock up 33% year-to-date is daunting. But we see 17% further upside just from Satsuma, even before looking at Vanquis Poland or Guarantor Loans," Citi said.The target price for the stock has been hiked by almost 40% from 1,825p to 2,530p.The stock trades at 15.2 times estimated earnings for 2015, which looks "fairly valued" for the existing business. However, any extra value achieved from the other prospects would offer "upside from here", the bank said.The stock was up 3.6% at 2,249p by 15:35.BC