Prudent pay-off for Provident

A PRUDENT approach to lending and careful management has enabled Provident Financial to grow its profits.

The Bradford-based business, which is the market leader in home credit in the UK and Republic of Ireland, said today that pre-tax profits for the six months ended June 30 were up 3.5% to £53.1m.

Its balance sheet strength maintained with headroom on committed funding facilities of £280m and surplus capital of £60m.

Basic earnings per share up 3.9% to 29.3p (2008, 28.2p).

A cautious approach to new lending in its consumer credit division saw customer numbers grow by 3.9% from June 2008.

Provident said it is still planning the Real Personal Finance roll-out next year – assuming market conditions have stabilised.

Vanquis Bank, which is a central underwriter using highly bespoke credit scorecards, saw pre-tax profits rise 67% to £5m although new customer growth slowed to 11.2% following further tightening of the criteria applied to underwriting card applications.

Demand for non-standard credit cards has remained strong with around 500,000 applications being received in the last six months.

According to Provident, Vanquis is more resilient than typical prime card issuers during a recession as its customers tend to carry modest debt with the average balance £550.

It said its core consumer credit division had seen customer numbers grow 3.9% year-on-year compared to 7% in 2008.

Provident is using its network of more than 11,500 agents who visit customers every week, to assess the economic conditions upon which its lending policy is based. 

Around 120 additional field-based management roles and 30 new branches have been created over recent months, which has helped collections performance and impairment run to plan.

Peter Crook, chief executive of Provident Financial, said: “These are good first half results, in line with our internal plans which anticipated the pressure of rising unemployment and reduced working hours on household budgets.

“We have been increasingly selective in the granting of new credit for two years now, having held the view that the UK economy would experience a marked deterioration.”

Mr Crook said that Provident has also invested in improving the quality of credit decisioning and in the collections and arrears management operations.

“These measures have allowed us to maintain an appropriate balance between growth, credit quality and collections capacity, which is fundamental to the success of any lending business, and has reinforced our responsible lending policy,” he added.