Provident share price closes lower as Barclays sees no reason for recent stock recovery

Analysts turn bearish on troubled subprime lender

Provident share price closes lower as Barclays sees no reason for recent stock recovery

Shares in Provident Financial (LON:PFG) closed more than four percent lower yesterday, as Barclays turned bearish on the troubled subprime lender. The analysts argue that there is no reason for the recent stock recovery.

Provident’s share price lost 4.30 percent to close at 800.50p, underperforming the broader market. The group’s shares have lost just under 75 percent of their value over the past year, resulting in the company’s demotion from the FTSE 100 in the index’s latest reshuffle.

Barclays turns bearish on Provident

Barclays lowered its rating on Provident from ‘equal weight’ to ‘underweight’ yesterday, lowering its price target on the shares from 600p to 584p. The analysts explained that while Provident’s share price was down 68 percent in the year-to-date, falling 66 percent on the day of the second profit warning on August 22, it had nevertheless recovered by 42 percent from the trough, despite no new guidance on the consumer credit division or resolution of the Financial Conduct Authority’s investigation into its Vanquis unit.

“We perceive further tail risks of Provident Financial not being able to meet its October 2019 debt obligation,” Barclays’ analyst Toni Dang commented, as quoted by Citywire. “These assumptions are not baked into our base case but we believe could have a meaningful impact on earnings and cost of funding.”

Other analysts on Provident

The 10 analysts offering 12-month price targets for Provident for the Financial Times have a median target of 970.00p on the shares, with a high estimate of 2,000.00p and a low estimate of 584.00p. As of October 11, the consensus forecast amongst 14 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.  

As of 07:55 BST, Thursday, 12 October, Provident Financial plc share price is 797.82p.

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