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Principale » Doorstep lender Provident Financial shares slump 60% on profit alert

Doorstep lender Provident Financial shares slump 60% on profit alert

23 Août 2017

Analysts said competitors would be interested in parts of Provident's business, though there was no consensus on the value of the home credit operation.

United Kingdom subprime lender Provident Financial shed 66% after it issued its second profit warning in two months, canceled its dividend and said that its chief executive was leaving.

Update: Fund manager Neil Woodford has been left "hugely disappointed" by a collapse in the shares of Provident Financial (PFG), but the fund manager has insisted the company will "get back on track".

Also in the announcement, the group announced that the FCA is investigating subsidiary Vanquis Bank's sales of Repayment Option Plans.

The City was stunned.

Shares of the Bradford, England-based company dropped 71 percent to 505 pence at 11:35 London. It is negative, as 34 investors sold Provident Financial plc shares while 139 reduced holdings.

So do we have another Northern Rock on our hands?

Provident had already flagged up problems with its new system in June.

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"The process is largely complete and should prove highly beneficial for the business in the medium and long-term as it will enable Provident Financial to better manage customer relationships, improve debt collection and drive higher profits in the future".

The number of existing agents applying for the new roles fell short of expectations. The trading update says debt collection rates have dropped to 57 per cent from 90 per cent in 2016 and sales are £9m lower per week than in the same period a year ago.

The Financial Conduct Authority's probe into one of Provident Financial's products is an additional cause of concern to the City. The Company's divisions include Vanquis Bank, CCD, Moneybarn and Central. Some analysts have compared the product to the payment protection insurance pushed on customers by the big banks in recent years and which has ballooned into the industry's biggest-ever mis-selling scandal.

A voluntary agreement with the regulator last year to suspend sales of the product was reached in April last year, and the accompanying "customer contact exercise" has now been completed. The routing and scheduling software created to help the 2,500 full-time digital-savvy staff replacing the door-to-door salesmen "has presented some early issues, primarily relating to the integrity of data", Provident said, while "the prescriptive nature of the new operating model has not allowed sufficient local autonomy to prioritize resource allocation".

But the plunge in the price and the axing of dividends is a disaster for other investors.

The lender, which provides credit to those who fail to meet the loan criteria of mainstream banks, also issued its second profit warning in two months, blaming a "rapid deterioration" in the trading performance of its home credit business.

He added: "Although this is clearly not helpful, more often than not, the market over-reacts in response to bad news, even if the causes are only transitory".

He reiterated his support yesterday: "This business has been around for more than a century and I believe it will be around for many decades to come".

Doorstep lender Provident Financial shares slump 60% on profit alert