Transformation accelerates at specialist lender

Provident Financial’s transformation from corporate basket case to specialist bank has continued, with its restructuring delivering results that provide optimism for its customers and shareholders.

The Bradford-based group has spent much of the past five years in turmoil, after it spectacularly crashed out of the FTSE 100 in 2017 on the back of FCA investigations and substantial losses.

It also saw off an ill-fated hostile takeover bid by Non-Standard Finance in 2019, which had sought to take advantage of its weakened position.

But Provident’s chief executive Malcolm Le May says he and the board “look forward to 2022 with confidence” after revealing it “continued to track ahead of management expectations” in the final quarter of 2021.

There is confidence that its re-emergence as a specialist bank for its traditional audience – that used to be described as sub-prime and is now known as “underserved” – will create a stable and successful business for the long term.

Malcolm Le May

He said: “2021 was a strategically important year for PFG as we successfully focussed the group on becoming a leading specialist bank with a focus on the financially underserved.

“PFG is well positioned to deliver attractive and sustainable returns to shareholders built on a platform of credit cards, vehicle finance and personal loans underpinned by a strong balance sheet.”

Its share price is up 90% in the last 10 months and is close to the levels seen before the pandemic hit in March 2020. However last night’s closing price of 351p – which values the group at around £900m – is dwarfed by the 2000p-plus levels enjoyed during 2015-17.

Provident plans to declare an ordinary dividend of 30% of adjusted ongoing earnings for last year and will set out a “progressive dividend policy” for the longer term when it reports its full-year figures in early April.

There are a number of changes affecting its subsidiary Vanquis Bank as part of a governance restructure.

Vanquis Bank’s chairman Robert East, managing director Neil Chandler and finance director Gary Thompson have stood down from the board and the executives will leave the company at the end of March.

The board of Vanquis has been restructured to “substantially align” with Provident’s board.

In a statement, Provident said: “This is an important step in the execution of the Group’s specialist bank strategy, which includes the wider use of retail deposit funding across the Group from H2 2022.

“PFG believes that streamlining the boards of the two legal entities in this way will create a simpler, more efficient group governance structure, whilst streamlining and enhancing both PFG and Vanquis Bank’s handling of corporate governance.”