Provident Financial plc, the leading UK non-standard lender, is today hosting a Capital Markets Day.

The event will primarily focus on the significant organic growth opportunities at Vanquis Bank, Moneybarn and Satsuma together with the migration to a more efficient and effective operating model in home credit and the associated financial benefits. The event will also include an update on the development of the group’s digital proposition and the increased synergies available to the group’s businesses to improve competitive advantage.

Presentations will be made by the senior management teams of Vanquis Bank, the Consumer Credit Division (CCD) and Moneybarn. The presentation slides will be available on the company’s website,, at 10.30am in conjunction with the commencement of the event.

Commenting on the Capital Markets Day, Peter Crook, Chief Executive, said:

“At today’s event, our management teams will provide detailed updates on the enhanced growth, efficiency and cross-group synergy opportunities for each of our businesses. These plans support an upgrade to the group’s medium-term growth and profit potential which will extend the group’s track record of delivering shareholder value.”

The group’s refreshed guidance for the medium-term potential of each of its businesses is as follows:

Vanquis Bank
As reported at the preliminary results, the initiatives put in place by Vanquis Bank in the second half of 2016 to expand credit card distribution, together with the launch of the Chrome branded card to address the nearer prime segment of the non-standard market have resulted in a step-up in new account bookings. In addition, there is a good pipeline of opportunities to partner with other lenders, brokers and providers of retail finance. As a result, the medium term potential for Vanquis Bank has been increased from a customer base of between 1.5m and 1.8m with an average balance of £1,000 to a customer base of between 2.0m and 2.3m with an average balance of between £1,000 and £1,100. Customer numbers at the end of 2016 were 1.5m with an average balance of £922. The business is expected to deliver an ROA1 in the medium term of between 12% and 13%. This is modestly lower than the ROA1 of 13.8% generated in 2016 due to the incremental growth opportunities available to Vanquis Bank that are expected to deliver an ROA1 in the range of 10% to 12% which is consistent with the group’s minimum ROE2 threshold of 30%.

The Vanquis Bank wider loans proposition, which was launched in the second half of 2016, is making good progress. The market for unsecured loans of between £1,000 and £5,000 over durations of 1 to 5 years at APRs of between 29.9% and 49.9% is underserved and growing. Vanquis Bank’s proposition is currently focused on providing unsecured loans to existing credit card customers during the pilot phase with an open market proposition expected to be developed towards the end of 2017. Based on the available market opportunity, management estimate that Vanquis Bank loans has the medium-term potential to build a receivables book of between £200m and £250m at an ROA1 comparable to its credit cards business.

The migration to a more efficient and effective field organisation which was announced at the

2016 preliminary results is progressing in line with the CCD’s internal timetable. The new model involves employing Customer Experience Managers to serve customers rather than using self-employed agents, as well as streamlining the field management structure. It will be supported by the deployment of further technology including route planning and voice recording which we consider will enhance control and regulatory compliance. There will be an immediate cost reduction from July 2017 when the new model is in place and it is also expected to improve sales and collections performance in due course. As a result, the home credit business is expected to increase its annual profits in the medium term by at least £30m to over £150m, with approximately half of the increase derived from cost savings and half derived from sales and collections performance improvements. In order to secure the medium-term financial benefits, a one-off exceptional cost of between £15m and £20m will be incurred in 2017 in respect of redundancy, retention and training costs. In addition, there is expected to be a net short-term trading impact of up to £10m in 2017, comprising a shortfall in contribution of up to £15m during the first half of the year as the organisation migrates to the improved operating model before the anticipated benefits of cost savings in the second half of approximately £5m.

Satsuma made good progress during 2016 in developing its distribution, underwriting and digital platform in the small-sum, short-term unsecured online loans segment of the non-standard market. The uplift in new business volumes experienced in the last quarter of 2016 has continued in early 2017 and the business is expected to make a small profit contribution for the year as a whole. In addition, the business plans to further enhance its digital capability in 2017 and expand the product proposition into larger sum lending and revolving credit products in the future. The current development trajectory of Satsuma is encouraging and the business has clear potential in the medium term to grow its receivables book from £18m at the end of 2016 to between £100m and £150m in the medium term generating an ROA1 of approximately 20%.

Moneybarn continues to generate strong growth as a result of the extension of the product offering, the ongoing development of its best in class customer platform and access to the group’s funding lines. Receivables have now increased to over £300m, exceeding the lower end of the previous guidance of between £300m and £400m. There remains strong growth potential from increasing Moneybarn’s share of the underserved non-standard car finance market, further development of the light commercial vehicles proposition, expansion into other asset classes and the development of its B2C proposition. Accordingly, the medium-term potential of the business has been increased to a receivables book of between £400m and £500m generating an ROA1 of approximately 13%, consistent with the returns being made by the business currently.

Business    ROA1    Product    Medium-term growth potential
Vanquis Bank    c.12%-13%    Credit cards    2.0m-2.3m customers with an average balance of £1,000-£1,100
          Unsecured loans    £200m-£250m receivables
Provident    c.25%    Home credit loans    Profit of £150m+
Satsuma    c.20%    Online loans    £100m-£150m receivables
Moneybarn    c.13%    Vehicle finance    £400m-£500m receivables
The 2017 Provident home credit result will include:

A one-off exceptional cost of approximately £15m-£20m associated with transition to the new home credit business model comprising redundancy, retention and training costs; and
A short-term net trading impact of up to £10m comprising a shortfall of contribution of up to £15m in the first half of the year during the period of transition before the anticipated benefits of cost savings in the second half of approximately £5m.
ROA is calculated as profit before interest after tax divided by average receivables.
ROE is calculated as profit after tax as a percentage of average equity (average equity is stated after deducting the pension asset, fair value of derivatives and the proposed final dividend).
David Stevenson/Jade Byrne, Provident Financial    01274 351900
Nick Cosgrove/Simone Selzer, Brunswick    0207 4045959
Investor Relations     
Gary Thompson/Vicki Turner, Provident Financial    01274 351900