Operating income rises but profits fall at PCF Group
By Josh White
Date: Wednesday 03 Jun 2020
(Sharecast News) - Specialist bank PCF Group reported a 26% improvement in its operating income in its interim results on Wednesday, to £12.7m.
The AIM-traded firm said its cost of risk for the six months ended 31 March was 1.7%, up from 0.9% year-on-year, including an incremental charge of £1.6m for the potential impact of the Covid-19 coronavirus crisis.
Statutory profit before tax fell 21% to £2.6m, which the board said was due solely to the impairment charge, while earnings per share totalled 0.8p, down from 1.2p a year earlier.
Its net interest margin reduced to 6.8% from 8.0%, with the board reporting "continued active management" of its lending quality.
The company said its cost-to-income ratio was lower at 52.4%, compared to 54.3%, reportedly reflecting the benefits of operational gearing, while the company's after-tax return on equity decreased to 6.8% from 11.4%.
Its total capital ratio was 17% at period end, down from 18% at the start of the half-year, while its liquidity coverage ratio rose to 1,181% from 553%.
Unearned finance charges totalled £69m at period end, up from £63m, which the board said would contribute to earnings in future years.
On the operational front, PCF said total new business originations were ahead 26% at £153m, which comprised new business origination for both its own portfolio, and that placed for broker commission income.
Portfolio growth was 18% during the period to £401m, with the company saying its focus remains on the prime end of the credit spectrum, as 80% of originations were in its top four credit grades, up from 76%.
Retail deposits totalled £340m, rising from £267m, with more than 7,800 customers, growing from 6,250.
The company said its business continuity plans had proven "resilient", adding that PCF remained open for business to support consumers and small-to-medium enterprises.
"As with all banks, the crisis caused an immediate decrease in demand for our products and our lending volumes reduced by 52% against target in April and May 2020, with the business finance division being most affected," the board noted in its statement.
Customer forbearance had been granted totalling £138m as at 29 May, representing 34% of the bank's lending book by value.
PCF said market guidance would be withheld, until there was greater economic certainty.
"As one might expect for a financial period affected by Covid-19, there is a nuanced picture in this set of results," said chief executive officer Scott Maybury.
"What I can say with certainty, however, is that the strengths of our business model are clear to see in both normal market conditions and a more challenging environment.
"The rationale for PCF gaining a banking licence was that the group would be able to write greater volumes of business to borrowers with better credit quality and have a more secure source of funding through retail savings deposits."
That, Maybury said, allowed for both stronger growth during normal trading, and a business less exposed to external shocks when they arrived.
"Notwithstanding the seriousness of the current situation, I would like to emphasise that PCF is well equipped for the challenges ahead.
"We were able to implement our business continuity plan both quickly and effectively.
"In addition, our leadership team and many of our employees have experience of three previous recessions and are determined to bring PCF through in a strong position."
Although at lower levels, Maybury said the firm was continuing to write new loans to support consumers and businesses, and would continue to be "open for business".
"In addition, we are working productively with borrowers who are facing financial difficulties to help find solutions for them, and we are confident that this ongoing, committed customer service will help PCF prosper as the economic picture improves."
At 1241 BST, shares in PCF Group were up 4.78% at 22p.
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