TIDMPFG
RNS Number : 8926N
Provident Financial PLC
26 January 2023
Provident Financial plc
Fourth quarter trading, new product launch and Group name change
plans
26 January 2023
Provident Financial plc ('the Group'), a leading specialist
banking group with a focus on customers in the mid-cost and
near-prime credit markets, publishes today a trading update
covering the three months to 31 December 2022, unless otherwise
stated. The Group is also making a separate announcement today
about Malcolm Le May's decision to step down as Chief Executive
Officer and the appointment of his successor.
Highlights
-- The Group experienced strong momentum across each of its products during the fourth quarter, notwithstanding the challenging macroeconomic backdrop, underpinned by its strong capital position and access to retail deposit funding:
- Strong receivables growth across credit cards, vehicle finance and personal loans
- Asset quality remained high and delinquency trends remained
stable, consistent with the experience in the first three quarters
of the year, driven by the Group's robust underwriting framework
and focus on credit quality
- Investment in the Group's platforms, products and capabilities
continued, as previously announced
- The large exposure waiver application was approved by the
Prudential Regulation Authority ('PRA') enabling all future lending
to benefit from lower cost funding
-- Consistent with its stated strategy to diversify its product
offering, and thereby to reduce credit risk over time, the Group
has launched a pilot phase for a new secured product of second
charge mortgages.
-- The Group has decided to change its name to Vanquis Banking
Group plc to better reflect the Group's mix of lending products
today and its repositioning as a specialist banking group focused
on lower risk customers, as illustrated by the Group's current
average credit risk more than halving since 2019.
Malcolm Le May, Chief Executive Officer, commented:
"2022 was a transformational year for the Group as we built on
the very strong foundations put in place during the previous year.
We enter 2023 with a planned new corporate identity as Vanquis
Banking Group, a new secured product strategy with the launch of
our second charge mortgage pilot phase and new funding optionality
with the approval of the large exposure waiver. None of these
achievements would be possible without the effort of colleagues
across the Group and I would like to thank colleagues for all their
hard work and sustained commitment to our collective ambitions. In
2023, we will continue to support our colleagues and customers
during the current high inflationary environment. The Group remains
well positioned to deliver long-term attractive and sustainable
returns to shareholders and the Board remain confident in the
outlook for our businesses."
Fourth quarter trading
-- The Group continued to trade in-line with management and
current market expectations(1) for FY'22 during the fourth quarter
of the year. New lending during the period was strong, with credit
issued and customer acquisition volumes increasing significantly
year-on-year. This performance is supported by the Group's well
capitalised balance sheet and access to cheaper retail deposit
funding, which remains a key differentiator.
-- In the Group's credit card business, receivables grew by
approximately 9% during the fourth quarter and by approximately 11%
for the year as a whole. Underlying demand for credit in the run up
to the festive trading period was stable, with credit card spend
increasing by c.2% year-on-year. New customer acquisition volumes
were approximately 225k for FY'22 (FY'21: 199k). Customer
delinquency also remained stable and consistent with the benign
trends reported throughout FY'22.
-- The Group's vehicle finance business saw receivables growth
of approximately 5% during the fourth quarter and of approximately
10% for FY'22 as a whole. Credit issued increased by 19%
year-on-year, reflecting its strong competitive positioning and
attractive pricing policy, and the business had approximately 100k
customers for the first time as of 31 December. The arrears profile
also remains stable and consistent with the trends reported in the
first three quarters of the year reflecting the ongoing focus on
lower risk customers and near-prime products.
-- The Group's personal loans business also had an excellent
fourth quarter. It reached an important milestone of lending over
GBP10m to customers in a single month, resulting in strong
receivables and customer numbers growth to approximately GBP75m and
approximately 34k respectively as of 31 December. The project to
migrate Vanquis Bank branded loans onto the Group's new IT
platform, Gateway, is progressing well.
-- The Group continued to be underpinned by a strong,
well-capitalised balance sheet during the fourth quarter and
funding options were improved by the approval of the large exposure
waiver by the PRA, as previously disclosed in the fourth quarter.
This strong capital position and access to funding continue to be
key drivers of competitive advantage for the Group.
Product offering update
Consistent with the Group's strategy of diversifying its range
of products, and reducing credit risk over time as a result, the
Group has launched a pilot phase for a new secured product offering
of second charge mortgages. During the pilot phase, the Group will
acquire existing second charge mortgage loans on a forward flow
basis and will recognise the loans on its balance sheet as customer
receivables. If the pilot phase is successful, the Group intends to
start to originate its own flow of new loans directly to new and
existing customers. Second charge mortgages have the potential to
improve customer outcomes and to promote financial inclusion,
consistent with the Group's purpose and mission, whilst enabling
the Group to provide attractive and sustainable returns to its
shareholders. Further details of the product strategy will be
provided with the FY'22 results.
Group name change
In recent years, the Group has evolved how, and to which
customers, it provides credit. This has resulted in credit quality
across the Group improving significantly, as illustrated by the
Group's current average credit risk more than halving since
2019.
During 2021, the Group's evolution continued and involved the
closure of its home collected credit business, which carried the
'Provident' brand. The Group chose to focus on its credit cards,
vehicle finance and personal loans operations in the mid-cost and
near-prime parts of the market. Accordingly, the Group has decided
to change its name to Vanquis Banking Group plc in recognition of
its new and future mix of lending products and its repositioning as
a specialist banking group. The change of name from Provident
Financial plc to Vanquis Banking Group plc is expected to be
effective in March 2023. A further announcement will be made when
the name change becomes effective. The Group's stock ticker on the
LSE will change to VANQ.
Outlook
The Group demonstrated strong momentum across its loan books
during the fourth quarter of 2022. Notwithstanding the challenging
macroeconomic backdrop, including persistently high inflation, the
Group remains well positioned with strong capital and funding
positions, and aided by its robust credit risk management
framework. The Group anticipates publishing its FY'22 results on
Friday 31 March.
(1) Current market expectations is defined as a consensus of
analyst forecasts.
Enquiries:
Analysts and shareholders:
Owen Jones, Group Head of Investor Relations 07341 007842
Owen.jones@providentfinancial.com
Media:
Richard King, Provident Financial 07919 866876
Nick Cosgrove/Simone Selzer, Brunswick 0207 4045959
providentfinancial@brunswickgroup.com
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END
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January 26, 2023 02:00 ET (07:00 GMT)
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