Preliminary results for the year ended 31 December 2023
Action taken to reset and rebuild for sustainable growth
London – 27 March 2024 - Vanquis Banking Group plc (‘the Group’), the specialist bank, today published its preliminary results for the twelve months to the end of December 2023.
Ian McLaughlin, Chief Executive Officer, commented: “Today’s results and strategy seminar highlight the considerable challenges we are managing as we reset our business. We also describe our opportunity to grow, to deliver benefit to our customers and increase adjusted return on tangible equity (ROTE) from 3.2% in 2023 to the mid-teens by 2026.
“After a first half loss in 2023, we generated adjusted profit before tax of £30.4m in the second half, reflecting cost management actions and impairment provision releases. We assembled the right leadership team and took some important first steps, creating a healthier mix of price and volume driven growth, simplifying our operating model and taking out costs. We have established solid foundations for the transformation of our business.
“We have a strong sense of social purpose and a unique market position. We have a better understanding than ever before of how to serve our large and growing customer base. We will build our position as their chosen banking partner, deploying unique assets like Snoop, improving operational effectiveness and managing our capital to support our growth ambitions. We do have a period of hard work and change ahead of us. It is still early days, but we are making progress.”
Key financial results
|
2023 £m |
20221 £m |
Change % |
|||
|
Net interest income |
442.6 |
432.7 |
2 |
||
|
Non-interest income |
46.2 |
48.0 |
(4) |
||
|
Total income |
488.8 |
480.7 |
2 |
||
|
Impairment charges |
(166.1) |
(66.1) |
151 |
||
|
Risk-adjusted income |
322.7 |
414.6 |
(22) |
||
|
Operating costs |
(327.1) |
(304.5) |
(7) |
||
|
Statutory (loss)/profit before tax from cont. ops |
(4.4) |
110.1 |
(104) |
||
|
Adjusted profit before tax2 |
24.9 |
126.6 |
(80) |
||
|
Adjusted operating costs3 |
(297.8) |
(288.0) |
(3) |
||
|
|
|
|
|
|
|
|
Metrics |
|||||
|
Adjusted EPS (p)4 |
|
|
38.7 |
(82) |
|
|
Basic (LPS)/EPS (p)5 |
|
(2.4) |
32.8 |
(107) |
|
|
Net receivables at 31 December |
|
2,175 |
1,913 |
14 |
|
|
Gross receivables (average)6 |
|
2,325 |
2,039 |
14 |
|
|
Net interest margin7 |
|
19.0% |
21.2% |
(2) |
|
|
Risk-adjusted margin8 |
|
13.9% |
20.3% |
(6) |
|
|
Cost:income ratio9 |
|
60.9% |
59.9% |
(1) |
|
|
Adjusted ROTE10 |
|
3.2% |
21.8% |
(19) |
|
|
CET1 ratio11 |
|
|
26.4% |
(6) |
2023 headlines
After a first half loss, the new management team took rapid action in 2H23 to improve performance
- After an adjusted loss before tax of £(5.5)m in 1H23, the Group generated adjusted profit before tax of £30.4m in 2H23. The statutory loss before tax was £(14.5)m in 1H23, followed by a statutory profit after tax of £10.1m in 2H23.
- The key drivers of profitability in the second half were:
- Pro-active management of volume growth, which contained net receivables growth to 2.7% in 2H23 compared to 10.7% in 1H23, to end the year at £2,175m (FY22: £1,913m).
- Upward re-pricing strategy in Vehicle Finance and Cards to reflect the rising interest rate environment while shielding vulnerable customers.
- Non repeatable provision releases of £74.5m primarily from IFRS 9 impairment model recalibration.
- Rapid action to simplify the operating model and reduce duplication which led to the removal of c.350 roles: this delivered cost savings in 2023 and will in total deliver c.£60m of cost savings.
- Net interest margin stabilised at 19.0% in 2H23.
- Impairments increased significantly year on year due to higher new originations, reduced benefits of enhancements in IFRS 9 modelling and post model releases compared to 2022, lower debt sale profits and lower revaluation of the post charge-off asset. The underlying credit quality of the book remains stable.
The Group maintained a robust capital position with a CET1 ratio of 20.5%, within the Group’s updated CET1 target range of 19.5 to 20.5%.