Provident Financial warns Covid has created uncertainty

The company reported a six-month loss of £32.6 million due to the pandemic, but added that its performance was better than expected..

Provident Financial lends to more than two million consumers not served by high street banks. They slumped into the red it has emerged as it warned Covid-19 had created a “great deal of uncertainty” over the supply of credit to recession-hit households.

Covid, the uncertainty and the fall in red of Provident Financial

The Provident Financial company itself have a half-year loss of £32.6 million but said that its performance had been better than it expected at the start of the pandemic.

They added that the still in a strong financial position to keep lending some to its customers. Many of their customers are key workers.

Chief executive Malcolm Le May said the current number of 10 to 12 million adults who sit outside usual high street risk appetites will inevitably increase, but that this segment of the market will decrease as funding and capital constraints impact lending decisions.

Le May said: Our market will grow due to the pandemic, but at present, it appears the supply of credit into the market is decreasing, which cannot be a good outcome for customers, nor a public policy one for the UK.” He added that there remains a great deal of uncertainty as to how the impact of Covid-19 on the economy will be felt but the group has managed well to date.

Payment holidays and Monaybarn

Based on guidance from the Financial Conduct Authority in April, payment holidays were offered to Provident’s customers in Vanquis Bank, Moneybarn and its consumer credit division of between one and three months. The payment holiday take-up at car loans business Moneybarn peaked at 28% of customers before reducing to 3.5% by the end of July. Overall, Provident said the take-up of payment holidays since the FCA’s extension to six months had so far been modest.

The Moneybarn’s performance was one of the bright spots for the company after the demand for used cars rebounded strongly. It may because people try to avoid public transport. When others stopped lending, Moneybarn keeps open to new business throughout April. Because of that, they allow improving market share as well as credit quality.

Vanquis profits were down from £90.5 million last year to £11.8 million after an additional impairment of £70 million from the impact of Covid-19 and the weaker economic outlook. The home credit business reported a loss of £37.6 million, which was bigger than a year earlier but better than initially expected. Collections in July were at more than 90% of pre-pandemic levels, with 80% of the money paid remotely rather than on the doorstep.

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