(Alliance News) - Provident Financial PLC on Wednesday said that while trading in the four months to April has been lower year-on-year, it remains confident in its "extremely strong" liquidity position.
The FTSE 250-listed doorstep lender said in the four months to April, Vanquis Bank's new customer bookings fell by 75% due to a tightening of underwriting standards in response to the Covid-19 pandemic. Customer spending has been on a downward slope since the end of 2019 - and made worse by the emergence of the outbreak - with spending through April and May at around 60% of normal levels. As a result, receivables are now approximately 10% lower than at December.
The company added that 3% of Vanquis customers have been granted payment holidays, adding that it expects this to increase by the end of July.
Bradford-based Provident - which provides credit to people who do not meet the lending criteria of mainstream banks - said loans to existing consumer credit division customers are currently at just one-third of the expected volumes.
Provident said that Moneybarn has remained open to new business throughout the Covid-19 crisis. While new business volumes from January to the third week of March were strong, in April the volumes fell significantly. However, they have started to recover in May.
At Moneybarn, Provident said that in April, new business volumes fell significantly, before starting to recover in May. As a result, new business volumes have reduced by approximately 20% year to date at the end of April, it added.
In the Home Credit unit, collections are over 80% of normal levels. Lending to new customers in Satusuma has been paused temporarily with the restart to lending currently "under constant review".
Regulatory capital was GBP710 million at April 30, equating to a core CET1 ratio of 33.4% and headroom of approximately GBP190 million above the minimum regulatory requirement. This is before taking into account the capital conservation buffer of GBP50 million, the subprime lender noted, which is held to be used in the event of a stress situation.
"Our capital and liquidity positions remain extremely strong. We believe we have the strongest and most diverse funding options in our sector, a key competitive advantage for us. Despite 2020 being a difficult and unprecedented year, the combination of our customer offering, together with our robust balance sheet, mean that I remain confident in the group's ability to become a broader banking group for the financially underserved population, whilst generating attractive returns for our shareholders over the medium-term," said Chief Executive Malcolm Le May
Provident Financial shares were trading 7.1% higher at 195.83 pence each on Wednesday morning in London.
By Ife Taiwo; ifetaiwo@alliancenews.com
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