Provident Financial reports a significant decline in loan volumes due to tighter lending

Provident Financial reports a significant decline in loan volumes due to tighter lending
  • Provident Financial reports a significant decline in loan volumes due to tighter lending.
  • The British sub-prime lender reports three confirmed cases of COVID-19 in its staff.
  • The Bradford-headquartered firm expresses confidence in its strong liquidity position.

In its Q1 trading update on Wednesday, Provident Financial (LON: PFG) announced business volumes to have declined in April ascribed to tighter underwriting rules. The company, however, expressed confidence in early signs of recovery that it saw in May.

The UK-based company is currently 10% up on Wednesday. At 201 pence per share, Provident is presently about 55% down year to date in the stock market. Learn more about volatility in the stock market.

Provident Financial is the go-to creditor for people that fail to satisfy the lending criteria laid out by mainstream banks. The company said that loans to its existing customers in CCD (consumer credit division) were roughly 65% lower.

Provident is committed to making CCD profitable since last year when its smaller competitor, Non-Standard Finance placed a hostile takeover bid; an offer that Provident successfully sidestepped.  

Provident Financial reports three confirmed cases of COVID-19

The Coronavirus pandemic, however, restricted the company from in-person visits as the UK government resorted to strict social distancing measures and nationwide lockdown to minimise the fast spread of COVID-19 that has so far infected more than a quarter-million people in Britain and caused over 37,000 deaths.

Provident recently reported three confirmed cases of COVID-19 in its staff. The crisis also pushed the British sub-prime lender into suspending its targets for 2020.

As per Provident, all home credits are now being collected remotely and are more than 80% lower as compared to what the company expected before the outbreak.  

Vanquis Bank is Provident’s credit card business that reported an about 75% decline in new customer bookings attributed primarily to tighter lending. In the past, Vanquis Bank has been a major driver of growth for Provident Financial.

Provident Financial boasts a strong liquidity position

In terms of liquidity, however, the Bradford-headquartered company expressed confidence in its strong position. Provident boasted £710 million in regulatory capital that translates to a CET1 ratio (common equity tier 1) of 33.4%. According to CEO Le May of Provident Financial:

“We believe we have the strongest and most diverse funding options in our sector, a key competitive advantage for us.”

Provident’s performance in the stock market was also reported downbeat in 2019 with an annual decline of about 20%. At the time of writing, the British lender currently has a market cap of £511.92 million and a price to earnings ratio of 6.11.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.