Provident Financial looks to benefit from credit crunch

CONSUMER lender Provident Financial today unveiled a 10.7% rise in pre-tax profit from continuing operations as it said it is well placed to benefit from the credit crunch as mainstream lenders move away from lending to those on lower incomes.

The Bradford-based group saw pre-tax profits increase to £115.2m for the year to December 31, 2007, from £104.1m the year before.

The company said current market conditions are “favourable” and it has made a good start to 2008. It will pay a total dividend of 63.5p a share, in line with the analysts' forecasts.

Provident, which specialises in loans to lower income households, said that it saw a “strengthening rate of growth in the second half of last year with home credit customer numbers increasing by 5.3% to a record £1.65m.

The group, which has spun off its overseas unit and sold its car-insurance division last summer, provides “doorstep” loans to customers with poor credit histories, but said it had reduced its level of arrears thanks to strong credit management.

Chief Executive Peter Crook said: “I am very pleased with the group's full year performance. During the year we have invested in further enhancements to marketing, credit management and the talent base, which are now driving high quality growth in both customer numbers and profit.

“The strength of the group's funding and liquidity positions underpin the group's medium-term organic growth plans, as it pursues its strategy of addressing the broader UK non-standard lending market of some 10 million consumers.

“Current market conditions are favourable for us, as mainstream lenders continue to tighten their lending criteria. The group has made a strong start to 2008.”

Provident's Vanquis Bank credit card business moved into profit in June and produced a profit of £3.3m in the second half, making a loss for the year of £900,000.

Vanquis grew income from customers by 51.7% last year and also improved arrears.

Provident Financial now aims to target the 10m people in the UK who make up the “non-standard credit market”.

It currently has almost 2m customers served through a network of more than 300 branches, call centres and internet sites making it the largest non-standard lender in the UK.

Chairman John van Kuffeler said: “The non-standard population is growing, as mainstream lenders retrench to the prime markets in the face of mounting impairment and, more recently, pressures on liquidity.

“Consequently, the non-standard market is likely to be the domain of specialists such as Provident Financial.”