Profit drops at non-standard lender

Non-Standard Finance (NSF) has released its unaudited half year results to 30 June, showing that normalised revenue is up 4% to £92.2m.

This results comes after the Leads-based firm said the first half of the year had been the most challenging period in its history, with the ongoing pandemic having a major impact on its second quarter with both low levels of lending and collections impacted by forbearance measures put in place for customers impacted by the Covid-19 situation.

Despite the increase in revenue normalised operating profit fell by 75% which John van Kuffeler, group chief executive at NSF, explained was a result of an “increase in impairment due to the pandemic and an increase in the macroeconomic risk weighting of a severe downside scenario”.

Kuffeler, added: “Whilst the first two months of the year delivered a solid trading performance, the impact of Covid-19, the associated restrictions on social distancing and the slowdown of the entire UK economy each had a profound and immediate impact on all areas of the business, operations and financial performance.”

The results also show a provision of £15.8m as an estimate of the total cost of settlement of redress amounts due to customers affected by certain operating procedures in its guarantor division which led to the Financial Conduct Authority (FCA) raising a number of concerns. Since August and following recommendations by the FCA, the business has begun to implement additional enhancements to its lending process.

The FCA’s concerns have also forced the business to put on hold its plans to raise money from shareholders, which had reached an advanced stage by August.

Looking ahead Kuffeler said: “Since the outbreak of the pandemic, both branch-based lending and home credit have traded ahead of management’s previous expectations while the performance at guarantor loans has been below plan as lending has been limited pending the conclusion of the review by the FCA and is likely to remain subdued for the rest of the year. As a result, the Group’s financial performance since the end of June 2020 is broadly in line with management’s expectations.”

Adding that the firm was focused on reaching a conclusion on the customer redress as soon as practicable so they can “re-engage with investors regarding a substantial equity raise in order to strengthen the balance sheet and enable the Group to return to growth.”