Blackfriar: Learning need not fly away as temptation rears its head

Even as we emerge from a financial crisis that has brought banks to their knees and sent unemployment soaring, companies are being tempted to repeat the mistakes of the past.

Blackfriar was bemused this week to hear analysts call for Bradford-based doorstep lender Provident Financial to "become less risk averse".

Analysts said the group, which lends sums of about 400 to cash-strapped households, should consider accelerating growth to capitalise on rivals' demise and improving credit conditions.

"Having been very cautious in terms of new customer and receivable growth over the last two years, we would hope to see Provident becoming less risk averse from mid-2010 onwards," they said.

But this risk aversion is exactly what has allowed Provident to negotiate the worst financial crisis in decades relatively unscathed. Even without the considerable financial mismanagement that ruined it, rival Cattles stumbled over the duration of its loans and the impersonal direct debit repayments.

By contrast, Provident currently relies on its army of 11,500 agents to collect repayments via door-to-door weekly visits, with smaller loans easier to keep tabs on.

"The agent force should ensure Provident is quick to spot increasing confidence within the customer base," said the analysts.

"At that point, Provident may think about growing the home credit receivable book at a stronger rate. In addition, management may also set fresh goals in respect of Vanquis and Real Personal Finance, and this could act as a further catalyst."

But Blackfriar believes the path to recovery will be slow and painful, with many false dawns.

While they are not quite urging the group to throw caution to the wind, and highlight Provident's prudence, analysts are staking a lot on economic recovery.

Unemployment may have started falling, but it is still sky high.

And with a huge deficit to cut, a new Tory Government could shrink the myriad of benefits that Provident's customers rely on, sending impairments soaring.

Vanquis, the group's credit card operation, and Real Personal Finance, its direct repayment pilot project, both have significant opportunities to grow market share, with rivals on the retreat.

However, a big loan grab in the impersonal direct debit loan market could also distance the group from its customers, adding further dangers.

Provident recently said its path to profitable growth will involve more caution and less risk. Blackfriar believes Provident would do well to resist big strides forward until it is certain of recovery.

So another one bites the dust. After 186 years of independence, Cadbury has succumbed to the clutches of US food giant Kraft.

Frankly it's a bit late for Cadbury family shareholders to start weeping about the loss of heritage. They were quite happy to sell the family shares before, so why the patriotism now?

Cadbury is the latest in a long line of UK "Crown Jewels" to be sold abroad.

ICI was sold to Akzo Nobel, Leeds-based Asda to Wal-Mart, Corus (the former British Steel) to Tata, Jaguar/Land Rover to Tata, BAA to Grupo Ferovial, both Abbey and the savings side of Bradford & Bingley to Santander, O2 to Telefonica, Allied Domecq to Pernod Ricard and EDF to British Energy.

So why does Cadbury pull at the heart-strings more than others? Well it's a brand we all grew up with and one that our children have taken to their hearts.

The UK, unlike France and Germany, is fiercely anti-protectionist and even under a Tory Government this is unlikely to change.

The argument is that only vulnerable countries see foreign participation as a bad thing.

But right now we are looking more than vulnerable. Until the Government (whichever hue it may be) does something to improve conditions for UK PLC, we will continue to haemorrhage our best companies and nothing will spring up to take their place.