TIDMVANQ
RNS Number : 2991Q
Vanquis Banking Group PLC
17 October 2023
Vanquis Banking Group third quarter trading statement
Management action drives trading improvement
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
London - 17 October 2023 - Vanquis Banking Group plc ('the
Group'), the specialist bank, publishes the following trading
update for the three months to 30 September 2023.
Trading headlines
-- The Group returned to profit during the third quarter
following management action to reduce costs and support net
interest margin (NIM). Despite continuing macroeconomic
uncertainty, the customer credit environment remained resilient,
which supported lower levels of impairment and improving risk
adjusted margin.
-- The Group expects to deliver adjusted profit before tax(1)
(PBT) in the range of GBP25-30m for full year 2023, although this
outturn remains subject to a range of external variables.
-- In light of the Group's profitability profile for FY23 and
the 5.0p per share dividend paid for H1 23, the Group today signals
that any H2 dividend payment is not expected to be more than 1.0p
per share. Payment of any H2 dividend will be subject to the
customary regulatory and Board approvals.
Immediate management action summary
CEO Ian McLaughlin and team have taken immediate action to
return the Group to a path to sustainable, profitable growth.
-- Product price increases which reflect the rising interest
rate environment have now been applied in Vehicle Finance and
Credit Cards, with vulnerable customer segments protected.
-- 2023 exit NIM is now projected to be 17-18%, supported by product price increases.
-- A simplified operating model has been introduced that removes
duplication and reduces costs. Cost reductions of c.GBP60m are
expected to be achieved within 2024, including the removal of c.350
roles. Key initiatives include greater use of outsourcing and
changes to phasing of investments.
-- Customers remain at the heart of the Group's purpose and
strategic planning: the acquisition of personal financial
management app Snoop in August 2023 enables the use of AI and data
analytics to better understand customers' needs and gives customers
a smart new way to manage their money.
-- A broader strategy review has been initiated. This will run
through Q4 and will segment customers more effectively, enabling
the Group to provide more targeted, compelling customer
propositions and deliver attractive, sustainable returns for
shareholders.
(1) Adjusted profit before tax is stated before amortisation of
acquisition intangibles, discontinued operations and exceptional
items.
Ian McLaughlin, Chief Executive Officer, said: "For all of us
here at Vanquis Banking Group, helping to put our customers on a
path to a better everyday life really matters. We deliver important
solutions to an
under-served customer base in a growing market segment. We have
strong foundations from which to deliver value for our customers
and shareholders, based on a coherent Group structure and
differentiated access to retail funding.
"We have worked at pace to undertake a detailed operating review
of the Group. We have scrutinised every cost centre and product
line. As a result, we have taken action to stabilise our NIM,
significantly reduce our cost base and put ourselves in a position
to clarify guidance for our year end PBT. We have also refreshed
our Executive Committee and have already appointed a Chief
Technology Officer, Chief Financial Officer, Chief of Staff and
Head of Investor Relations, with an offer made for the post of
Chief Customer Officer.
"We have started a full strategy review that will complete by
the end of January 2024. The outputs of this will enable us to
become the outstanding customer champion in our target market
segment and deliver sustainable, profitable growth based on our
deep understanding of, and commitment to, our customer base. On the
27 March 2024 in conjunction with our full year results, we will
host a Capital Markets Day setting out our new vision for the
Group.
"Sir Peter Estlin, who took over as Chairman of the Board on 15
September, and I share a determination to deliver operational
improvements in the short term, and to build a business that
delivers value for all of our stakeholders over the medium and
longer term."
Webcast
Ian McLaughlin, CEO of Vanquis Banking Group will host a webcast
at 08:30 today, joined by Interim CFO, Gareth Cronin. To register
your attendance, please use this link:
https://brrmedia.news/vanquisbankinggroupq3
Third quarter operating update - details
Volume, pricing and growth initiatives
-- Pro-active action has been taken to moderate lending growth
in Credit Cards, Vehicle Finance and Personal Loans. A detailed
review of product risk and returns is taking place to enable the
Group to serve its customers more profitably in the long term: in
the short term, this action will improve profitability by reducing
the Day 1 impact of IFRS9-driven expected credit losses from new
business and moderate the overall increase in receivables.
-- Price increases were applied in Vehicle Finance and Credit
Cards, reflecting the rising base rate environment, with a further
increase in Credit Cards to come into effect from December
2023.
-- Good progress has been made on other growth initiatives
including the completion of the first transaction under the second
charge mortgage pilot and test marketing of Snoop to the Group's
customer base.
Costs
Action has been taken to simplify structures and reduce the
Group's cost base. Total cost savings within 2024 are expected to
be c.GBP60m. Approximately 80% of the savings are expected to be
recurring in nature.
The areas which will deliver these cost savings are set out
below.
-- The shared services model, initiated in 2021 to streamline
the Group, is being implemented with renewed ambition.
o A simpler operating model has been defined to extend
implementation of shared services across the Group.
o Areas of duplication, vacant roles and contractor positions
are being removed and platforms and processes refined, notably in
Finance, IT and Change and HR.
o Difficult decisions have been taken to remove c.350 roles, of
which c.120 are from operations which are being transferred to
third party suppliers.
-- Plans to deliver a single IT platform for the Group are being
reviewed to ensure better alignment of investment spend to business
strategy.
-- Use of the Group's successful operations outsourcing facility is being extended.
-- Cost discipline has been improved in areas such as third
party spend, overtime, and travel and expenses.
The majority of exceptional costs to deliver these savings will
be taken in 2023 and are estimated to be c.GBP6.0m.
Third quarter trading details
-- The Group returned to profit during the third quarter
following management action to reduce costs and support net
interest margin (NIM). Despite continuing macroeconomic
uncertainty, the customer credit environment remained resilient,
which supported lower levels of impairment and improving risk
adjusted margin.
-- Net receivables grew by 5.7% to GBP2,237.5m, with action
taken during the quarter to moderate growth, to allow for a
detailed review of product risk and returns. This will enable the
Group to serve its customers more profitably and sustainably over
the long term.
-- Product repricing actions, reflecting increases in the
underlying interest rate environment, are providing support to the
Group's NIM. The Group's most vulnerable customers have been
protected from price rises.
-- The cost of funding, whilst rising, remains at a discount to
market interest rates reflecting the duration of the Group's
funding. The Group has now completed its programme of repaying all
unsecured wholesale debt, which has been replaced by more efficient
retail funding from Vanquis Bank.
-- The cost:income ratio for Q3 reduced by 3.8 percentage points
from H1 to 62.4%, reflecting income growth and the early benefits
of management actions on costs.
-- As at 30 September 2023, the Group continues to hold
significant capital and liquidity resources above minimum
regulatory requirements. It is operating at around the Board's
previously guided target CET1 ratio of c.20%, which includes any
confidential and management buffers.
Outlook
Q3 2023 has been a period of intense change for Vanquis Banking
Group. These changes are already starting to deliver improved
results. Although the year end outturn is still subject to a range
of external variables, the Group currently expects to deliver an
adjusted PBT for FY 23 in the range of GBP25-30m.
In light of the Group's expected profitability profile for FY23
and the 5.0p per share dividend paid for H1 23, the Group today
signals that any H2 dividend payment is not expected to be more
than 1.0p per share. Payment of any H2 dividend will be subject to
the customary regulatory and Board approvals.
Looking forward into 2024, the Group will continue to focus on
the following key drivers of profitability.
-- A move back to disciplined, returns-focused growth in net
receivables, following action to continue to moderate growth in
Q4.
-- Further support for NIM(2) , which is expected to exit 2023 in the range of 17-18%.
-- Continued low levels of impairment.
-- Substantial cost reductions, with c.GBP60m of savings announced for 2024.
-- Continued investment in customer proposition and technology platform.
The Group is conducting a broader strategy review during Q4 and
will provide an update at a Capital Markets Day on 27 March 2024.
This will include guidance on medium term targets, including an
appropriate cost:income ratio for the Group. The Group will
demonstrate its ambitions to deliver value for its customers, plans
for sustainable and attractive profitable growth, with clear
priorities for capital allocation, including dividends.
Enquiries:
Analysts and shareholders:
Miriam McKay, Interim Head
of Investor Relations 07577 390666
miriam.mckay@vanquisbankinggroup.com
Media:
Richard King, Vanquis Banking
Group 07919 866876
Nick Cosgrove/Simone Selzer,
Brunswick 0207 4045959
vanquisbankinggroup@brunswickgroup.com
(2) Guidance on NIM excludes any impact arising from second
charge mortgages.
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END
TSTUNRKROOURAAA
(END) Dow Jones Newswires
October 17, 2023 02:00 ET (06:00 GMT)
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