RKW results19 Nov 2025 08:40
Richard Staveley made following comment in yesterday’s RKW update
This highly regulated bank is a “fallen angel”
having emerged from the collapse of Provident Financial Plc. With material deposits (covered by the FCSS), the business is primarily focused on a below-prime credit card and vehicle financing with over 1.7m customers. An evolving Board and highly experienced new management team is focused on its purpose of helping the nearly 20 million consumers who are financially stretched to access credit and achieve mid-teens return on net tangible assets in the process. Their potential financial returns are high relative to mainstream banks as managing high risk credit comes with higher returns. Recently they have been negatively impacted by a deluge of complaints from financially motivated Claims Management Companies. Changes to rules at the Financial Ombudsman have meant these are now falling fast. This has caused considerable cost to administer despite a very low uphold rate and is a welcome relief. Panic about motor vehicle finance compensation liabilities was misplaced as the recent Supreme Court judgement was positive and the Board has only had to make a modest provision.
Well capitalised and undergoing a technology improvement plan, our thesis for recovery targets an investment return well in excess of our target rate, hence we are running our position despite already having achieved an unrealised money multiple of 2.4x. On current market expectations, the shares are valued on a Price to Book ratio of 0.5x to their Financial year 2025.
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