15th Jan 2014 12:10
LONDON (Alliance News) - Sub-prime lender Provident Financial PLC Wednesday said it expects its results for its recent financial year to be in line with market expectations, as strong trading at its Vanquis Bank unit continues to make up for weak demand for credit at its consumer credit division.
Credit card provider Vanquis Bank continued to generate strong growth and profit margins through the fourth quarter of the year, according to Provident Financial, as its drive to add attract new customers saw 411,000 bookings for the year ended December 31, 2013, up from 375,000 in 2012,
Provident Financial said Vanquis Bank ended the year with about 1.1 million UK customers, about 22% higher than last year.
Vanquis Bank was one benefactor from the UK's falling unemployment levels, as the number of borrowers who couldn't repay their loans remained "stable at record lows". Provident Financial, describing the UK employment market as "benign", said its "tight" underwriting criteria had also contributed.
The 2013 cost of its pilot credit card operation in Poland of GBP7 million to GBP8 million is in line with previous guidance, Provident Financial said.
Meanwhile, Provident Financial's home credit business continued to suffer from "challenging" conditions in the fourth quarter, with the sub-prime lender blaming low customer confidence and pressure on disposable income arising from food and utility-rate inflation.
Provident Financial said the conditions meant customers had been cautious, exhibiting weak demand for credit.
The lender said the roll-out of products through its Satsuma online lender has been progressing well. Satsuma makes small, unsecured loans of GBP300 to GBP800, which can be paid back over either 13 or 26 weeks. The interest rates charged means it costs GBP140 to repay GBP100 after 13 weeks, or GBP168 after 26 weeks.
Provident Financial said it had been tightening its credit standards for the home-credit business in order to achieve higher returns.
According to the company, that drove down customer numbers by about 17% on 2012.
"The cost reduction measures taken in July 2013 successfully delivered second-half cost savings of approximately GBP10 million. The actions to deliver further planned cost savings in 2014, including conclusion of the consultation to reduce the headcount in the business by a further 340, were completed in December," Provident Financial said in a statement.
"As indicated at the Investor & Analyst Event in November, there will be an exceptional cost of approximately GBP13 million in 2013 relating to the restructuring of the consumer-credit division, including redundancy costs associated with 520 individuals who left the business in 2013," the lender added.
The company said its funding position remains strong, with GBP235 million in headroom on its own debt facilities, which, along with the retail deposit programme at Vanquis Bank, is "sufficient to fund maturities and projected growth until the seasonal peak in 2016".
Provident Financial's full results for 2013 are scheduled for publication on February 25.
Provident Financial shares were Wednesday quoted at 1,706.00 pence, down 5.00 pence, or 0.3%.
By Samuel Agini; [email protected]; @samuelagini
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