Doorstep lender Provident Financial profit hit after relaxing payback demands

Doorstep lender Provident Financial got another “kick in the teeth” on Tuesday after profits were hit by an overhaul of credit card repayment plans for under-pressure customers.

The company, led by former banker Malcolm Le May, said 2018 profits would be at the “lower end” of a £151 million to £166 million range due to higher impairments at Vanquis Bank, which offers credit cards to 1.8 million people with poor credit scores.

Shares fell nearly 20% to 525p.

The profit cut is the latest blow for the company, which suffered a string of profit warnings, regulatory investigations and the sudden death of executive chairman Manjit Wolstenholme last year.

The Provvy, as its clients call it, is offering customers more forbearance, freezing or reducing their repayment plans, meaning cash is taking longer to come in and knocking profits.

The change has been prompted by signals from the Financial Conduct Authority, the regulator for high cost credit, that it wants lenders to give people longer to pay amid a squeeze on household incomes.

It also warned of 2019 woes due to tightening up repayment terms for incoming customers. Vanquis customer numbers grew 3.1% last year and receivables 5% more but an increase in minimum repayments rates is likely to lead to “moderate” receivables growth in 2019.

Shore Capital analyst Gary Greenwood said: “Today’s news is another severe kick in the teeth for the investment case.”