* NSF plans to close guarantor loans division
* Shares slide 12% in morning trade
* Co slumps to annual loss vs year-earlier profit
(Adds details, background on the industry)
June 30 (Reuters) - Non-Standard Finance said it
plans to close its guarantor loans division, the latest British
sub-prime lender forced to scale back because of a sharp
increase in complaints and intense regulatory scrutiny.
NSF, whose shares slumped 12% after results showed an annual
loss and steep costs, said it will place its guarantor loans
division into a managed run-off, and eventually shut it down.
The business accounted for about a quarter of NSF's total
loan book, which stood at 258.2 million pounds ($357.19
million)by the end of 2020 - sharply lower than the pre-COVID
level of 361.6 million pounds.
"Having completed a detailed review of the group's guarantor
loans division and its prospects, the Board has concluded that
shareholder interests will be best served by placing the
division into a managed run-off and ultimately closing the
business," NSF boss John van Kuffeler said.
NSF's plans come after larger rival Provident Financial
exited the home credit market altogether, while another
guarantor lender Amigo is facing potential insolvency
after a surge in complaints against it.
NSF said it has raised concerns with regulators regarding
certain Claims Management Companies (CMCs) which seem to be
lodging large numbers of claims without proper authority from
customers or by using customer data obtained without
authorisation.
MUCH UNCERTAINTY AHEAD
As the number of lenders shrink and the health crisis leads
to an increase in people with poor credit ratings, experts
expect the gap in the market to let illegal lending to flourish.
Subprime lenders have been in the regulatory crosshairs for
more than a decade due to sky-high interest rates charged on
people struggling to get by.
NSF reiterated that it plans to raise 80 million pounds once
regulatory issues are resolved. It slumped to a pretax loss of
35.2 million pounds for 2020, compared to a profit of 14.7
million pounds a year earlier.
Its exceptional costs increased to 97.8 million pounds from
80.6 million pounds, including a charge of 15.4 million pounds
to account for the estimated costs of a redress programme.
Goodbody analyst John Cronin said there was "much
uncertainty ahead" over whether the capital raise could be
carried out and on what terms, as well as over the prospects for
a return to profitability in the medium term.
($1 = 0.7231 pounds)
($1 = 0.7229 pounds)
(Reporting by Muvija M in Bengaluru; editing by Carolyn Cohn)
