Financial model

To support the delivery of the group’s strategy, the group will continue to operate a financial model that is founded on investing in customer-centric businesses which offer attractive returns and which aligns an appropriate capital structure with the group’s dividend policy and future growth plans.

The group’s businesses have strong positions in their respective markets and the group’s future prospects will be underpinned by the significant actions underway to strengthen culture and governance and by placing positive customer outcomes firmly at the centre of the group’s strategy.

A target ROA of approximately 10% is considered to be a sustainable level of return for the group, after taking account of the outcome of the FCA’s investigation into Vanquis Bank’s ROP, meeting forthcoming changes in regulation, which include anticipated changes arising out of the FCA’s Credit Card Market Study, and delivering good customer outcomes in line with the group’s strategy.

The attractive growth opportunities available to each of the group’s businesses within the non-standard credit market is expected to allow for receivables growth of between 5% and 10% per annum, subject to economic conditions and maintaining the group’s minimum returns thresholds.

The group will maintain a CET 1 ratio of at least 25.5%, being the expected minimum regulatory requirement post the rights issue, together with a suitable level of headroom to support ongoing access to funding from the bank and debt capital markets.

Based on the target level of returns and the target capital structure, the group’s dividend policy will be to maintain a dividend cover ratio of at least 1.4 times once the home credit recovery plan has been fully delivered during 2018. The group remains strongly committed to the payment of future dividends and delivering long-term value to shareholders. The group will therefore aim to restore dividends with a nominal dividend for the 2018 financial year before adopting a progressive dividend, in line with the above dividend policy, from the 2019 financial year.