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Provident Financial makes ‘good progress’ toward goals despite fall in profits

Malcolm Le May, chief executive of Provident Financial
Malcolm Le May, chief executive of Provident Financial
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Provident Financial reported a 24 per cent drop in first-half adjusted pre-tax profit after its performance was affected by disappointing collections at its home credit business.

The lender, which provides credit to people who do not meet the lending criteria of mainstream banks, said adjusted pre-tax profit fell to £74.9 million ($98.33 million) in the six months ended June, from £98.6 million a year earlier.

The company also said Patrick Snowball would take over as chairman on September 21 and interim chairman Stuart Sinclair would retire.

Provident is trying to win back customers after problems at its home lending arm last year.

Provident Financial lost 70 per cent of its value last year after a reorganisation of its home credit business led to two profit warnings. This prompted the departure of its CEO and the suspension of its dividend.

The company’s troubles scuppered hopes that Provident, which provided loans through the Wall Street crash of 1929 and both World Wars, would benefit from a growing consumer base as real wages came under threat from Britain’s exit from the European Union.

Provident Financial set out a recovery plan for its home credit business in October, involving a move from two UK home credit divisions to four units, employing more regional managers and at least 300 part-time staff who used to work as self-employed agents.

Provident also lost income resulting from a Financial Conduct Authority (FCA) investigation into the Repayment Option Plan (ROP) offered by Provident’s Vanquis Bank and an investigation into Moneybarn, its car and van financing arm.

Malcolm Le May, the chief executive, said: “I am pleased to report good progress against the 2018 goals we set out at results back in February. The implementation of the home credit operational recovery plan is going well, we have commenced our ROP refund programme after a successful pilot, and we remain engaged in constructive dialogue with the FCA on their investigation at Moneybarn.

“I am confident we are well placed to make good progress on all three goals during the second half of the year and within the provisions we made in 2017.

“Today we have also significantly strengthened the board, another key objective, with the appointment of Patrick Snowball as chairman, and three new non-executive directors.

“These appointments will add to the board’s financial services, consumer finance, regulatory and non-executive director skill set.”

Mr Le May added: “Operationally we have made good progress. Collections performance in home credit in the second quarter did not show the improvement we expected mainly due to lower collections from customers who were ‘live’ during the poorly executed migration to the new operating model last summer.

“However, customers who took credit from us since then are performing in line with historic levels, indicating to me the changes we are making to our model are working. “Vanquis Bank continues to perform well and in line with our expectations and has made the necessary changes required to meet the new regulatory requirements introduced by the FCA’s new rules addressing persistent debt. Moneybarn has delivered strong growth and continues to perform in line with our expectations.

He added: “I believe the group is well placed to champion the underserved, and through greater collaboration across our businesses we can provide them with the credit they need, when they need it, and on responsible terms.

“I look forward to continuing the journey of repositioning the group as the leading provider of credit to this underserved sector.”