The Bradford-based sub-prime lender reported falling sales and receivables in its home credit arm, which lends small sums to people who struggle to access finance from high street banks.
But Vanquis’s customer numbers and loan book are growing strongly, while expansion into Poland is also going to plan.
“The group expects to report results for 2012 in line with market expectations, with continued out-performance at Vanquis Bank compensating for relatively subdued demand for credit in the consumer credit division,” said the company. Analysts expect £180m of pre-tax profit in 2012.
Inflation remained stubbornly high at 2.7 per cent in December, with higher food and utility bills outweighing weaker transport inflation and falling petrol prices, figures from the Office for National Statistics showed yesterday.
“We’re expecting a fairly long, slow road to recovery,” said chief executive Peter Crook. “2013 won’t feel that different to 2012.
“We’re not assuming any dramatic change in the environment, with inflation continuing to run ahead of the Bank of England target (of two per cent).”
Home credit sales through the peak trading weeks of its fourth quarter were about 2.5 per cent down on 2011, and its loan book ended the year down about one per cent lower. However, its customer numbers were level with 2011 at 1.827m, after being down two per cent in June.
“Inflation and day-to-day living costs eat a big chunk out of our customers’ disposable income,” said Mr Crook. “When you’ve put some food on the table and heated the house, it does not leave a lot of money left over.”
He added positives include stable unemployment and its customers earning two to three per cent more year-on-year.
The division’s impairment rate – the proportion of its loans which have soured – is running at a similar rate to the 32.8 per cent in June.
Vanquis’s UK customer numbers surged 30 per cent to end the year at 899,000. Provident said it has seen “no discernible impact” from competition and continues to invest heavily on attracting customers, helping Vanquis’s average receivables grow 37 per cent.
“The rates of growth are excellent but that’s more because people are flocking to us,” said Mr Crook. “The high street banks have retreated from the underserved credit market.”
Bad debts at Vanquis remain “stable at record lows”.
Vanquis’s pilot credit card operation in Poland is “progressing to plan” and cost £3m in 2012.
Analysts at Numis Securities said: “We believe Vanquis has the potential to be more profitable than home credit and to grow beyond cards and the UK.”