Customer caution reins back growth at Provident Financial

The Bradford-based company said it does not see the UK economy or the jobs market improving this year. While this cloud of uncertainty remains, the group will continue with cautious growth.

Provident, which lends sums of between 400 and 500 to cash-strapped households across the UK through a network of agents, said economic uncertainty was behind customers' wariness.

"The economy is difficult and demand for credit is a little bit softer than it was a year ago," said chief executive Peter Crook. "Demand is a bit weaker, probably by five per cent and therefore the loan book is flatish.

"A few existing customers are not renewing loans when they otherwise would have taken another one from us.

"Some of these guys won't know how much they're going to earn in August or September. That's just making a few of them slightly more cautious about taking on further credit."

Many of the group's customers are on benefits, and while few of them will be directly affected by public sector job cuts, Mr Crook said they feel the knock-on impact through under-employment.

The group increased customers by 7.3 per cent to 2.3 million in the six months to the end of June, but continued with its cautious underwriting approach, also shortening the duration of some loans.

Group pre-tax profits ticked up by 1.7 per cent to 54m. However, profits in it its main consumer credit business were down 5.2 per cent at 49.3m, in part due to 1.8m losses on its Real Personal Finance business. The RPF division, offering larger direct payment loans, has now been scaled back.

Its Vanquis Bank credit card division remains the most active in a market from which rivals have withdrawn, said Provident. It grew pre-tax profits by 82 per cent to 9.1m, although only accepting about one in five of its 600,000 applicants during the period.

While Provident said the results were in line with its expectations they missed some analysts' forecasts, sending shares down seven per cent to 821p.

"I'm pretty happy with the way the company is positioned," said Mr Crook. "When things do start to improve we are very well placed to move earnings forward."

Brokerage Collins Stewart downgraded it to sell as the results came in just below its expectations. But analyst James Hamilton at Numis Securities said Provident's "resilience and profitability" has been clear. "As a UK bank that has seen profitability steadily increase through the recession, Provident demonstrated its strength."