Crisis wipes £1.7bn off value of finance group
Provident Financial became one of the biggest one-day fallers in FTSE 100 history after its shares lost 66% of their value after delivering a package of bad news to the stock market.
The sub-prime lender has had £4bn wiped off its market value in the last year – with £1.7bn of that being lost in trading today.
Analyst Peter Lenardos at RBC Europe said his firm “would not be buyers at any price”.
Provident’s shares had already fallen by nearly half since its year-high last October.
Lenardos added: While the share correction was making us warm to Provident, this quadruple whammy (another profit warning, no dividend, FCA investigation and CEO departure) lead us to now believe that the shares are not investible until greater clarity is received, which may not be until next year at the earliest.”
Chief executive Peter Crook has left the FTSE 100 group with immediate effect, and the interim dividend it announced last month has been scrapped.
Today’s profit warning came just two months after Provident had warned of serious problems within its home credit division, which had seen some investors sensing its weakness.
“Hedge funds that built up short positions in Provident Financial made the right call after another, much bigger, warning has rattled investors and sunk the stock,” said Neil Wilson, senior market analyst at ETX Capital.
Provident’s place in the FTSE 100 was already under serious threat, less than two years after being promoted. It would now need a miraculous recovery to stay in the index of the largest listed companies.
Based on current trading, Provident would need a market value of around £4.5bn to keep its place in the FTSE 100. However, based on its closing share price of 589.5p, its market value is around £850m, ranking it around 315th in the FTSE list.
