Provident Financial confident despite tough consumer credit conditions

17th Oct 2014 07:52

Despite continuing tough conditions for its consumer credit division, non-standard lender Provident Financial said it was confident of hitting its full-year targets.The FTSE 250 group said credit quality in all three of its businesses remained "very sound" and the its funding position was strong.However, customer numbers and receivables worsened at the consumer credit division (CCD), which introduced tighter credit standards as part of its repositioning as a more returns-focused business in September last year, significantly curtailing the recruitment of more marginal customers into the business.CCD customer numbers and period-end receivables showed year-on-year reductions of approximately 25% and 19% respectively, worsening from the reductions of 24.9% and 17.9% respectively at the June half-year stage.The division continues to face subdued demand from existing home credit customers as the company said customer confidence "has not yet shown any sign of improvement despite the improvement in the wider UK economy".The larger Vanquis Bank business, which provides responsible credit for those turned down by standard credit card lenders, continued the first half's strong growth and margins.With credit standards unchanged and making continued investment in its customer acquisition programme the bank enjoyed year-on-year customer growth of 17%, compared to 17.3% in the first half, and generated average receivables growth of roughly 32%, against 32.4% in the first half. The annualised risk-adjusted margin was slightly above 33% as at September 2014, only minimally behind June's 33.6% and well ahead of its minimum target of 30%.The third business, Moneybarn, the vehicle finance group acquired on 20 August, has enjoyed trading in line with internal plans and "good progress" has been made in its integration.Chief executive Peter Crook said: "Credit quality in all of our businesses is good and the group is well positioned as it enters the important fourth quarter trading period. "The group's funding position remains strong and the recent acquisition of Moneybarn, together with our organic growth initiatives, represent exciting opportunities to augment the group's medium-term growth prospects."