Doorstep loan demand boosts Provident Financial

By This Is Money
Updated: 10:50 EDT, 1 March 2011

A recovery in demand for loans helped raise doorstep lender Provident Financial's annual profits by 11%.

Act of Provident: Company says it lends cautiously because of austerity cuts

Consumer confidence returned after details of the Government's spending review, said the Bradford-based group, which specialises in sub-prime lending - a trend that has continued into 2011.

But Provident said it would continue to take a cautious approach to lending as it fears further fall-out from the austerity cuts.

The group, which offers doorstep credit and also owns Vanquis Bank, posted underlying pre-tax profits of £144.5m in 2010, up from £130.1m in 2009. On a reported basis, profits rose 13% to £142m.

It maintained profits at £129.1m in the consumer credit division - which offers small, short-term loans to people who would have trouble borrowing from mainstream lenders - after cutting costs and jobs and increasing collections by focusing on existing customers.

Home credit sales rose 9% in the fourth quarter after being depressed earlier in the year ahead of the spending review.

Provident has tightened its lending criteria and collections policy since the credit crunch, hiring more field-based management roles to boost collections and expanding its contact centre at Vanquis.

This helped reduce its impairment rate across both home credit and Vanquis Bank last year.

Provident said its businesses also enjoyed a 'good start' to 2011, with sound collections and year-on-year sales growth.

However, the group added: 'There is uncertainty about the future direction of the employment market, which is likely to remain until the impact of the Government's spending review on UK economic growth is clearer.

Consequently, tight underwriting standards will remain in place in both businesses.'

Vanquis Bank continued to be the star performer, with profits growth of 89% to £26.7m in 2010.

The operation, which saw customer numbers leap up by a quarter, is in ongoing talks with the City regulator to begin taking customer deposits.

Analysts at Numis Securities said today's results came in slightly ahead of expectations.

'We remain concerned about the economic environment, but expect Provident to continue to prudently manage the growth of the business,' they added.

Shares in Provident Financial were down 50.5p (4.9%) to 982p by this afternoon.