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Provident losses widen as it winds down consumer credit business
11th Aug 2021 07:44
(Sharecast News) - Subprime lender Provident Financial reported first-half adjusted ongoing profit before tax, excluding its consumer credit division, of £63.5m on Wednesday, rising from £4.9m a year earlier.
The London-listed firm said that reflected a reduction in impairment and costs year-on-year, which combined to offset the fall in revenue.
Its group statutory loss before tax for the six months ended 30 June totalled £44.2m, widening from a restated £28.1m a year earlier, which included £46.3m of exceptional costs related to the wind-down of the consumer credit division businesses.
Vanquis Bank and Moneybarn were profitable for the period, including and excluding the impact of provision releases triggered by an improvement in the macroeconomic outlook.
The company said both divisions were "conscious" of potential macroeconomic shocks that could arise in the second half, as pandemic-related government support schemes end.
At the end of June, the group held regulatory capital of £585m, which equated to a CET1 ratio of 32.5%, compared to 35.4% a year earlier.
The board said the year-on-year reduction primarily reflected its performance in the period, and the transitional impact of IFRS 9.
Total group liquidity at the end of June stood at £510m, halving from £1.2bn a year earlier, including approximately £280m held by Vanquis Bank, which represented a "more normalised" level of liquidity for the bank.
Shortly after the period ended, the group successfully refinanced its revolving credit facility and Moneybarn's securitisation facility to at least 2023, increasing its net committed funding by around £120m since the year-end.
The board said it was not proposing a dividend for the first half, in line with its decision at the same time in 2020, as the focus remained on preserving capital during the period of closure of the consumer credit division business.
Provident would revisit the policy at the year-end, allowing time for the directors to assess the impact of the end of furlough, and any future lockdown restrictions, on the group's customers.
"The first six months of 2021 showed a marked contrast to the extremely difficult conditions seen throughout 2020," said chief executive officer Malcolm Le May.
"Underlying customer trends and macroeconomic conditions have improved year-on-year, allowing us to focus on the core businesses, which is reflected in our results.
"In March, we notified the market of our intention to launch a scheme of arrangement for the consumer credit division, and in May, regrettably, we took the difficult decision to place the business into a managed run-off."
Le May said he was "pleased" that the proposed scheme for the division, which was provided for in the firm's 2020 accounts, was sanctioned by the High Court on 4 August.
"We can now continue to move forwards with our plans to close the business before paying customer redress claims during 2022.
"During the remainder of 2021, Provident will accelerate its transition towards becoming the leading specialist bank focused on financially underserved customers, serving growing market segments with a range of mid-cost products across credit cards, vehicle finance and unsecured personal loans.
"We are well-positioned to complete this transition successfully and our strategy is underpinned by a robust balance sheet with access to a diverse range of funding options."
At 0903 BST, shares in Provident Financial were up 2.67% at 315.4p.
The London-listed firm said that reflected a reduction in impairment and costs year-on-year, which combined to offset the fall in revenue.
Its group statutory loss before tax for the six months ended 30 June totalled £44.2m, widening from a restated £28.1m a year earlier, which included £46.3m of exceptional costs related to the wind-down of the consumer credit division businesses.
Vanquis Bank and Moneybarn were profitable for the period, including and excluding the impact of provision releases triggered by an improvement in the macroeconomic outlook.
The company said both divisions were "conscious" of potential macroeconomic shocks that could arise in the second half, as pandemic-related government support schemes end.
At the end of June, the group held regulatory capital of £585m, which equated to a CET1 ratio of 32.5%, compared to 35.4% a year earlier.
The board said the year-on-year reduction primarily reflected its performance in the period, and the transitional impact of IFRS 9.
Total group liquidity at the end of June stood at £510m, halving from £1.2bn a year earlier, including approximately £280m held by Vanquis Bank, which represented a "more normalised" level of liquidity for the bank.
Shortly after the period ended, the group successfully refinanced its revolving credit facility and Moneybarn's securitisation facility to at least 2023, increasing its net committed funding by around £120m since the year-end.
The board said it was not proposing a dividend for the first half, in line with its decision at the same time in 2020, as the focus remained on preserving capital during the period of closure of the consumer credit division business.
Provident would revisit the policy at the year-end, allowing time for the directors to assess the impact of the end of furlough, and any future lockdown restrictions, on the group's customers.
"The first six months of 2021 showed a marked contrast to the extremely difficult conditions seen throughout 2020," said chief executive officer Malcolm Le May.
"Underlying customer trends and macroeconomic conditions have improved year-on-year, allowing us to focus on the core businesses, which is reflected in our results.
"In March, we notified the market of our intention to launch a scheme of arrangement for the consumer credit division, and in May, regrettably, we took the difficult decision to place the business into a managed run-off."
Le May said he was "pleased" that the proposed scheme for the division, which was provided for in the firm's 2020 accounts, was sanctioned by the High Court on 4 August.
"We can now continue to move forwards with our plans to close the business before paying customer redress claims during 2022.
"During the remainder of 2021, Provident will accelerate its transition towards becoming the leading specialist bank focused on financially underserved customers, serving growing market segments with a range of mid-cost products across credit cards, vehicle finance and unsecured personal loans.
"We are well-positioned to complete this transition successfully and our strategy is underpinned by a robust balance sheet with access to a diverse range of funding options."
At 0903 BST, shares in Provident Financial were up 2.67% at 315.4p.