Lender Provident continues recovery despite drop in home credit collections

Embattled doorstep lender Provident assured it is on stable footing as it continues to recover from a string of regulatory sanctions, but said home credit collections are still below historic levels.

Provident – which sells high-cost credit through its Vanquis Bank, Moneybarn and consumer credit business – said in a trading update that “performance management” for home credit collections was impacted by the roll-out of a new operating model.

It left collections 10% below historic levels in the third quarter.

The number of active credit customers dropped to 449,000, down from 464,000 in June, “reflecting the continued focus on collections performance rather than new customer recruitment”.

Chief executive Malcolm Le May said: “The home credit business is still experiencing the drag on collections performance from those customers who were active during the poorly executed migration to the new operating model in the third quarter of 2017.

“Importantly, customers who have taken credit from us since then are performing in line with historic levels.”

The division’s new operating model – which involves “improved oversight and control over field activity and customer outcomes” – has yet to be approved by City watchdog the Financial Conduct Authority.

Provident said it expects to gain authorisation in the fourth quarter, though analysts do not forecast a rebound in division profitability in the meantime.

“Once FCA authorisation has been received, performance-related management measures can be discussed with the FCA, with a view to improving collection performance back to previous levels,” Jefferies equity analyst Phil Dobbin said.

Provident assured that the group’s capital position and liquidity “both remained strong”.

The subprime lender said its Vanquis division’s refund programme, relating to hidden charges around its repayment option plan, was “progressing well” and would be near completion in early 2019.

The Financial Conduct Authority fined credit card lender Vanquis £2 million and ordered it to pay £168.8 million in compensation for failing to disclose charges of its popular repayment option plan (ROP).

Customer numbers at Vanquis Bank rose 6.3% to 1.8 million in the third quarter.

At Moneybarn, the car finance arm which was fined over affordability checks, customer numbers rose by more than 22% to 59,000, despite tighter underwriting standards.

Mr Le May said growth and operating performance of both Vanquis Bank and Moneybarn were “good and in line with management’s plans”.

He added: “I am pleased to report further good progress against the 2018 goals we set out at the start of the year.

“The implementation of the home credit operational recovery plan is substantially complete and the authorisation process close to conclusion.

“The group’s funding and capital positions are strong and I believe the group is well placed to achieve its strategic aim of being the leading provider of credit to the under-served sector.”

Shares were down around 0.5% in Friday morning trading.