Vanquis boost as Provident steers clear of risk-taking

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Doorstep lender Provident Financial said outperforming sales and margins at its Vanquis Bank operation have offset slightly slower sales at the doorstep lending operation.

The Bradford-based company said 2011 results will be in line with market expectations.

Analysts have pencilled in 2011 pre-tax profits of £159.5m.

The doorstep lending business focused on good quality existing customers and maintained tight lending criteria during the peak fourth quarter in the run-up to Christmas.

As a result, customer numbers were down two per cent on the previous year as the group targeted customers with a proven track record rather than take any risks.

Provident said customers are behaving cautiously due to the persistent pressure on household disposable incomes from rises in food and utility prices.

The company said collections performance remained strong through the final quarter of the year, underpinned by the quality of the receivables book and the improvements made to the agents’ commission scheme in April.

As a result impairment levels were below the prior year.

Provident said its Vanquis Bank operation continued to generate strong growth and margins throughout the fourth quarter.

Underwriting criteria stayed the same and delinquency levels have remained stable at record lows for the business.

As a result, the risk-adjusted margin of 35 per cent achieved through the first nine months of the year was maintained.

Customer numbers reached 691,000 at the end of the year, up 27 per cent on last year.

Provident said that both businesses enter 2012 with good quality receivables books.

Commenting on the final quarter of the year, Provident’s chief executive Peter Crook said: “I am pleased to report that the group had a good finish to 2011 and expects to report results in line with market expectations.

“The retail deposits programme at Vanquis Bank is now fully established and, most importantly, the credit quality of both businesses is strong as we enter 2012.”

The company also provided an update on retail deposit funding where performance continues to outstrip expectations, with a total of £140m of balances having been accumulated since the middle of the year.

This is ahead of the company’s target of £100m-£125m by the year end.

Combined with £290m of headroom on existing debt facilities, the company is confident that it can fund maturities and projected growth through 2013.

Analyst Gary Greenwood at Shore Capital said: “The company remains on target to fund 80 per cent of the Vanquis receivables book from retail deposits by the end of 2012, which should allow the business to comfortably repay a £300m intercompany loan.”