Credit firm IPF warning over new regulations

The firm saw improvement in its credit quality, with group impairment as a percentage of revenue within its target range at 27.0 per cent, again mainly due to the improved performance in Mexico.

Overall Mexico home credit grew by 20 per cent and Europe home credit decreased by 7 per cent.

Customer numbers fell by two per cent year-on-year and growth in Southern European markets was also lower due to new credit scoring assessment regulations in Romania.

Elsewhere its IPF Digital business delivered strong growth in the first quarter of the year, increasing credit issued by 61 per cent and active customer numbers by 47 per cent to 212,000.

However the Leeds-based lender also reported a contraction in its customer numbers, primarily as a result of competitive pressures in the Czech Republic and Poland.

And one analyst warned that proposals to introduce price capping measures in the latter country could prove “seriously damaging” to IPF’s fortunes if they were implemented.

Last year the firm shut down its Slovakian operations after similar restrictions were imposed. Any cap on the fee and costs that lenders can charge from customers ​hit profits and make it difficult to serve high-risk customers.

A statement said: “We will continue to optimise the performance of our European home credit businesses to fund growth in our IPF Digital and Mexico home credit operations. In Mexico, we remain focused on balancing good growth with improving collections and expect to deliver further strong growth in IPF Digital.”

The firm, which demerged from Provident Financial in 2007, has been battling increased competition from banks and pay day loan operators in recent years. Earlier this year IPF said ​its 2016 pre​-​tax profit fell 20.2 per​ ​cent​ to £92.6m​.

The statement continued: “We are continuing to focus on optimising returns from our European home credit operations.

“In Poland, the expected impact of total cost of credit legislation introduced in March 2016 together with the challenging competitive landscape resulted in a contraction in credit issued and customer numbers of 2 per cent and 11 per cent respectively. Looking ahead, we expect to deliver growth during the rest of 2017 because the comparative period in 2016 was impacted negatively by the implementation of the total cost of credit legislation.

“IPF Digital continued to deliver strong growth in the first quarter of the year increasing credit issued by 61 per cent and active customer numbers by 47 per cent to 212,000. This performance was driven primarily by our new digital markets of Poland, Australia, Spain and Mexico where credit issued growth was 254 per cent.”

Gary Greenwood, analyst at Shore Capital, said: “IPF’s Q1 trading update demonstrated good growth in Mexico and IPF Digital but continued challenges in Eastern Europe.

“Valuation multiples are appropriately depressed, in our view, reflecting ongoing regulatory uncertainty in Poland where proposed price capping measures if implemented without amendment, could be seriously damaging to the business.”

Shares in IPF closed up 3.3 per cent up on the previous day’s trading.