Profits boost at Provident Financial

HOME credit business Provident Financial has posted increased half year profits boosted by an increase in customers.

However, the Bradford-based firm, which specialises in loans to people who typically borrow low amounts and pay it back in weekly instalments, said home credit customers remain cautious about borrowing.

Pre-tax profit for the six months ended June 30 was £54m, up from £53.1m over the same period last year. Customer numbers increased by 7.3% to 2.3m.

Provident, which has a consumer credit division and also runs Vanquis Bank as well as a credit card business, is to pay the same 25.4p dividend as in the the first half of 2009.

In the consumer credit division, pre-tax profits dipped to £49.3m from £52m after absorbing £5.4m attributable to higher funding rates.

The firm said lending continued to be hit by cautious customer behaviour and tight underwriting.

Vanquis Bank’s pre-tax profits rose by 82% to £9.1m while customer numbers grew by 16.1%.

Chief executive Peter Crook said: “I am pleased to report half-year results ahead of last year. Whilst home credit customers remain cautious, I am encouraged by the growth in customer numbers of over 5% which will underpin the medium-term growth of the business when market conditions improve.

“In addition, the early action taken to manage margins and costs is paying off and will provide ongoing benefit through the second half of the year.

“Vanquis Bank is making excellent progress whilst maintaining a cautious approach to granting new credit. It is expected to achieve the target set three years ago of a post-tax return on equity run rate of 30% by the end of 2010.
 
“The group’s balance sheet and liquidity are strong and our plans to deliver good quality growth in 2010 remain on track.”