PCF.L Share News (PCF)

(Sharecast News) - Specialist bank PCF Group said trading in the first five months of the current financial year had been "strong", and in line with management expectations, in an update on Friday.

The AIM-traded firm, which was holding its annual general meeting, said business origination in the five months ended 29 February was 30% ahead of the comparative period last year at £127m.

Chief executive Scott Maybury said the quality of originations had been maintained, with over 79% of originations being in its prime credit grades, up from 76% a year ago.

He said the lending portfolio had grown by 55% to over £395m as at the end of February, which was supported by retail deposits of £346m, rising from £202m year-on-year.

"A key initiative for the 2020 financial year, which forms part of our strategy to further improve the credit risk profile of our business, was the launch of our automated prime proposition for consumer motor finance," Maybury told shareholders.

"After a trial with a small number of broker relationships in late 2019 the product and enhanced functionality were launched on 27 January.

"In our first full month of the new product's operation we can report that year-on-year, the comparative volumes for February show an increase in consumer motor lending of 80%."

Maybury said that had raised the prime credit quality statistics of the division in the month to 93%.

"This prime business attracts a lower net interest margin than our near prime originations but is expected to deliver both lower loan loss impairment charge and administrative expense.

"This is an exciting start for this product and proves our model to build portfolio scale and strong operational gearing in the medium-term."

PCF's other business lines were also continuing to grow, Maybury explained, saying that business finance volumes in the five months ended 29 February increased 5% year-on-year, with an increased proportion of the 'Azule' broadcast and media equipment written on its own balance sheet.

"The bridging property finance portfolio as at 29 February was £21m, having only commenced business this time last year.

"In the period we have continued to invest in our operating platform, infrastructure and human resources to prepare the group for our medium-term target of a £750m portfolio by September 2022.

"This investment includes a recent premises move which provides headcount capacity and our employees with an excellent working environment."

Scott Maybury noted that the global economy was facing increased economic concerns over the Covid-19 coronavirus, and there remained uncertainty over the UK's transition to an independent trading nation.

"It is therefore important we maintain our cautious risk appetite and remain proactive towards these challenges.

"We have confidence in the short-term as we build on our market share in diversified markets and can take comfort from the £75m of unearned operating income, in respect of future years, already present on our balance sheet.

"In the medium-term our return on equity target of 15% remains in place."

PCF Group said it would provide a further update on 3 June, when it would announce its half-year accounts for the six months ending 31 March.

At 1044 GMT, shares in PCF Group were down 2.83% at 29.15p.