Specialist lender Vanquis Banking Group is rebuilding for sustainable growth, says CEO

The group generated a £5.5m adjusted loss before tax from continuing operations in the first six months of 2023. Mr McLaughlin also said the results “describe our opportunity to grow, to deliver benefit to our customers and increase adjusted return on tangible equity (ROTE) from 3.2 per cent in 2023 to the mid-teens by 2026. After a first half loss in 2023, we generated adjusted profit before tax of £30.4m in the second half, reflecting cost management actions and impairment provision releases.

"We assembled the right leadership team and took some important first steps, creating a healthier mix of price and volume driven growth, simplifying our operating model and taking out costs. We have established solid foundations for the transformation of our business. We have a strong sense of social purpose and a unique market position. We have a better understanding than ever before of how to serve our large and growing customer base.”

In a statement, Vanquis said the group is continuing to take significant steps in the first quarter of 2024 to redevelop its customer proposition and reset pricing. With the implementation of these changes, the group expects to return to modest lending growth from the start of the second quarter, the statement said.

It added: “The group is not a subject of the FCA's (Financial Conduct Authority’s) review of historical motor finance commission arrangements and sales. Nevertheless, the group has been experiencing significant levels of third-party complaint submissions.

“Reviewing them is causing an increase in administration costs. While the vast majority of these complaints are not upheld, the associated costs are likely to materially impact the group’s profitability in 2024. The group has taken proactive legal steps to address this situation.”

Analysts from Shore Capital said Vanquis’ full year results for 2023 were a tale of two halves, with a loss in the first half followed by a return to profitability in the second half of the year, as the new leadership team took action to reset the business ahead of implementing its new strategic plan.

The note added: “While the near-term outlook remains challenging due to elevated levels of customer complaints, there is the promise of sunnier uplands and a ‘mid-teens’ return on tangible equity by FY26F (full year 2026).”

"The group took its foot off the gas on lending during H2 (the second half of the year), which resulted in the receivables book contracting during Q4 (the fourth quarter), a trend that we understand has continued through Q1 (the first quarter).

"This ‘pause for breath’ was to allow management time to assess the quality of the loan book and implement an updated pricing strategy, with growth expected to resume from Q2 (the second quarter) onwards.”