Vanquis strong in weak market

The Bradford-based firm said Vanquis had seen a 22 per cent rise in customer numbers.

The outperformance was in direct contrast to challenging trading at its doorstep lending business, which reported a 17 per cent fall in customer numbers in the fourth quarter of 2013.

Provident’s chief executive Peter Crook said that Vanquis Bank traded strongly, whilst there has been no change to weak demand for credit at the consumer credit division.

He said that Vanquis generated strong growth and margins through the fourth quarter of the year.

“Demand remains strong and the consistent investment in the customer acquisition programme generated bookings of 411,000 for 2013, up from 375,000 in 2012,” he said.

This was despite an increase in marketing activity by competitors.

UK customer numbers ended the year at 1,099,000, 22.2 per cent higher than last year, and average receivables growth for the year was 37 per cent.

Mr Crook said a combination of a benign UK employment market together with tight underwriting criteria meant that delinquency levels stayed stable at record lows for the business.

In a bid to turn around its doorstep lending business, Provident is broadening its customer base and the products it sells through the roll-out of Satsuma, a new online credit service designed to take on payday loan companies like Wonga. Satsuma Loans lends sums of up to £300 to customers.

Mr Crook said this two-year long revamp is progressing well.

He said that trading conditions in the home credit business remained challenging during the fourth quarter with customer confidence very low and pressure on disposable incomes from the persistent rises in food and utility prices.

As a result, customer behaviour remained cautious and demand for credit was weak.

Provident said significantly tighter credit standards were applied to the recruitment of new customers.

As a result, customer numbers were down 17.3 per cent in 2013 and year-end receivables were 15 per cent lower.

Collections performance and the arrears profile were both stable during the fourth quart- er.

Mr Crook said new standardised arrears and collections processes will boost the division’s performance in 2014.

The group said it expects to report 2013 results in line with market expectations of pre-tax profits of £197m.

“Vanquis Bank’s trading performance remains excellent, there is good momentum behind the programme of work to reposition the consumer credit division and the group’s funding position is strong,” said Mr Crook.

Analyst Gary Greenwood, at Shore Capital, said: “In terms of divisional performance, Vanquis UK has performed strongly.

“By contrast, performance in the Home Credit business has remained challenging in the fourth quarter with key measures of business momentum weaker than we had anticipated, notably customer numbers down 17 per cent and period end receivables down 15 per cent.

“Although market conditions for the company’s Home Credit business remain difficult, we believe the company is getting to grips with this issue (as evidenced by the stabilisation in arrears) and, despite the business shrinking, future profit performance should be protected by the company’s ongoing cost saving pro- gramme.”

Analyst Keith Baird at Panmure Gordon said: “Vanquis Bank continues to be the driver of growth and profits.

“Home credit is struggling and is being repositioned over the medium term.”

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