Provident Financial not fazed by benefit cuts

22nd Oct 2010 07:40

Home credit group Provident Financial has played down the possible impact of the government's welfare and spending cuts even though its core customer base are low to middle income earners."The phased introduction of the changes to welfare benefits does not increase the exposure to credit risk in Home Credit due to the short duration of its loan book. In addition, the impact of the changes on the typical household income of a Home Credit customer is expected to be modest," the firm said.Cutbacks in public sector employment are also not expected to have a significant impact on the Home Credit or Vanquis Bank customer base, though the potential impact of public sector spending cuts on the broader economy is difficult to estimate, it added. "We expect the direct impact of the government's spending review on the group's customer base to be modest but continued tight underwriting and close attention to margins and costs will remain in place over the coming months until there is evidence of a sustained economic recovery," chief executive Peter Crook said.On trading, he added "The receivables books in both businesses are in good condition and the strong performance of Vanquis Bank and the pick-up in Home Credit sales in recent weeks have added to management's confidence of delivering a good result for the year."Home Credit experienced subdued customer demand over the summer months, but has seen a pick-up in sales, which are now running ahead of the same period last year, Vanquis Bank is performing strongly. During September, it passed 500,000 customers and £300m of receivables, Provident added.