Provident axes 170 as home loan sales fall

The Bradford-based lender, which typically loans out £450 over a year to customers who can’t get a bank loan, said the cuts were necessary as part of a drive to save £10m in the second half of 2013 and £18m in 2014.

Provident customers have been hit by the persistent rise in day-to-day living costs, particularly the high winter fuel bills during the cold snap earlier this year.

The group’s consumer credit division, which sells small loans door-to-door, made a pre-tax profit of £36.1m in the six months to June 30, down from £49.3m the previous year.

Provident said customers were put off taking loans by weak consumer confidence and inflationary pressure on disposable incomes.

“People are worried about energy bills and food bills,” said Provident’s chief executive Peter Crook.

“The Government cuts don’t make them feel very good. Asda has pointed to record falls in the amount of money left over at the end of the month. People are feeling the pressure in the lower income demographic.

“We don’t see a pick up in the near term. Middle income consumers are feeling better. Our customers are late in the cycle. We only saw customers feel the pinch in late 2009, well after the bank crisis.”

He said the group had had no choice but to cut its cost base. The 170 field management jobs have been lost all over the country and no customer facing agents have been affected

He added that the business is expected to stabilise in the second half and there are no plans for any more job cuts.

The weaker performance of the traditional home credit business was in stark contrast to the group’s credit card operation Vanquis Bank, which reported a 71 per cent rise in half year pre-tax profit to £50.2m.

Customer numbers at the bank, which provides credit cards for those turned down by mainstream banks, rose 29 per cent over the half year.

The bank is targeted at the 10 million people in Britain likely to be refused credit by the main lenders.

Vanquis now has over a million customers and Provident hope to reach 1.5 million over the next three years.

“Vanquis has been the star performer,” said Mr Crook.

“We’re growing very well. The credit card is of great use to the consumer. You can shop online, use low cost airlines, shop in Amazon or on eBay. If you haven’t got plastic you can’t do it. It’s a product customers really want.

“The banks aren’t serving customers. Demand for credit cards, particularly driven by online, is very strong.”

Arrears at Vanquis are at an all time low of less than 10 per cent as people are very keen not to lose the facility.

In contrast impairment levels for home credit rose 23 per cent as a result of the weak demand from existing customers which feeds into a deterioration in arrears.

This is because customers who don’t want to take on further credit have less incentive to bring their accounts up to date and so they typically stay in mild arrears.

Group first half pre-tax profits rose seven per cent before exceptional items to £76.5m in the first half of 2013 thanks to the strong growth at Vanquis.

Provident launched a credit card pilot in Poland at a cost of £3.6m in the first half. The group said the test is going well.

It is paying an interim dividend of 31p, up 7.6 per cent, reflecting the growth in earnings.

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