* Provident posts HY loss vs year-ago profit
* Beaten down shares jump 14%
* "It could have been much worse," Goodbody analysts
(Recasts, adds share move, analyst comment)
By Muvija M
Aug 26 (Reuters) - British doorstep lender Provident
Financial sank to a first-half loss and suspended
dividend payments, as it put aside 240 million pounds ($316
million) for an expected surge in bad loans in the
coronavirus-driven economic slump.
However, shares in the company - already down about 50% this
year - jumped as much as 14% as some analysts said the numbers
were better than feared and hailed what they described as
prudent planning.
Britain has plunged into the deepest recession for
centuries, but a government furlough scheme has paid the bulk of
the wages of millions of workers, helping to protect jobs.
With the scheme set to end in October, however, life looks
set to get harder for Provident's customers - typically people
who do not meet the lending criteria of mainstream banks.
The company's impairment coverage ratio for its consumer
credit division (CCD), which measures bad loan provisions as a
percentage of gross receivables, soared from 13.5% to 71.6% as
it bet job losses would spur a wave of defaults.
"It could have been much worse," Goodbody analysts wrote in
a note to clients of the first-half results.
"While impairments are very high, some of this will be seen
as judicious prudence on the part of management – and should
reduce the need for substantive charges in the coming quarters."
Provident said CCD customer numbers had fallen to 379,000
from 531,000 a year earlier, as it tightened credit conditions
and the furlough scheme bailed many households out.
But demand for loans looks set to pick up as unemployment
rises.
"Our market will grow due to the pandemic, but at present it
appears the supply of credit into the market is decreasing,
which cannot be a good outcome for customers, nor a public
policy one for the UK," CEO Malcolm Le May said.
Provident, emerging from a period of heavy fines for its
past selling practices, posted an adjusted pretax loss of 32.6
million pounds for the six months ended June 30 versus a profit
of 80.4 million pounds a year earlier, adding that was
materially better than its internal plans.
It added it would repay its own furlough support to the
government.
($1 = 0.7604 pounds)
(Reporting by Muvija M in Bengaluru; Editing by Saumyadeb
Chakrabarty and Mark Potter)
