8th May 2014 09:57
LONDON (Alliance News) - UK sub-prime lender Provident Financial PLC Thursday said it had made a "very good" start to 2014, with customer numbers and margins up at credit card business Vanquis Bank and restructuring progressing at home credit business.
"Credit quality in both businesses is good and the group's funding position is strong, providing confidence that the group is on track to deliver good quality growth in 2014," it added.
In a statement, the company said Vanquis Bank had just over 1.1 million customers in the UK at the end of March, up nearly 20% on the year. It said marketing activity by its competitors remained at a modest level and credit standards are the same as they were a year ago.
Vanquis Bank's rate of delinquencies remains at an all-time low level, Provident said, as the credit card provider continues to apply tight credit standards. Receivables are up 33% on the year.
"The stable delinquency performance through the first quarter of the year has produced an annualised risk-adjusted margin of around 34% at the end of March, little changed from 2013," it said.
Vanquis also has a pilot operation in Poland, which in April launched a flexible credit line and flexible loan product to sit alongside the core credit card product.
"Both of these additional revolving credit products deliver cash into the customer's bank account, broadening Vanquis Bank's appeal to the target audience. In addition, the business is to test television and radio advertising in selected regions during June," Provident said.
It said the credit quality in the Polish business remains satisfactory and its start-up losses are running at a similar rate to those it booked in 2013.
Provident Financial's consumer credit division was hit by difficult trading conditions again in 2013, and the company has been restructuring it. In February, Provident said the unit had been hurt by weak credit demand because of lower customer numbers, "very low" home credit customer confidence and persistent pressure on household incomes from inflation.
"The repositioning of the home credit business as a leaner, better-quality, more modern business with an emphasis on driving returns rather than growth is well on track and has underpinned a sound trading performance through the first quarter of the year," the company said in its statement Thursday.
It said the disposable incomes of home credit customers had shown a marginal improvement in recent months due to the moderation in the rate of inflation of household bills. However, it cautioned that measures of confidence across its customer base continue to run at very low levels as the broader UK economic recovery has not yet fed through to home credit customers in the form of increased working hours.
Home credit customer numbers at the end of March were about 20% lower than a year earlier it said, while receivables were down 17%. The company blamed tighter credit standards introduced in the fourth quarter of last year that have restricted recruitment of more marginal customers. However, the unit's annualised revenue yield was little changed from December at around 96%.
It also said the unit's profitability was at a level similar to last year thanks to the cost cutting it implemented in the second half of 2013.
"Collections performance has now shown a year-on-year improvement for eight consecutive months and resulted in the annualised ratio of impairment to revenue reducing from 38.7% at December 2013 to 36.5% at March 2014. Similarly, the annualised risk-adjusted margin for the business has strengthened to 60.7% at March 2014, up from 58.9% at December 2013," it added.
Provident said the consumer credit business is also continuing to build its Satsuma online instalment loan business. It said it had deliberately moderated the number of new loans it issued in the first quarter of this year as it builds the capability to support the faster growth of the business later in the year.
Provident Financial shares were up 0.5% at 2,097.00 pence Thursday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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