Financial model

To support the delivery of the Group’s purpose, the financial model is founded on investing in customer-centric businesses offering attractive returns, which aligns an appropriate capital structure with the Group’s dividend policy and future growth plans.

The Group targets an ROA of approximately 10%, which is considered to be a sustainable level of return for the Group, balancing the estimated impact of known regulatory changes whilst delivering good customer outcomes.

The attractive growth opportunities available to each of the Group’s businesses 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 has a minimum CET 1 requirement of 25.5%. This represents the Group’s minimum regulatory capital requirement set by the PRA following the rights issue, together with the fully loaded capital conservation buffer (2.5%) and existing counter cyclical buffer (1.0%) effective from 1 January 2019. The Board aims to maintain a headroom in excess of £50m above the minimum CET 1 requirement. This is considered to be an appropriate level of headroom based on the ongoing recovery of the Group, the economic and regulatory backdrop and maintaining an appropriate level of capital to support the ongoing access to funding from the bank and debt capital markets.

Following the declaration of a nominal dividend in respect of the 2018 financial year, the Board intends to adopt a dividend policy of maintaining a dividend cover of at least 1.4 times as the home credit business recovers and moves into profitability. The dividend policy will reflect the Group’s risk appetite of maintaining a regulatory capital headroom in excess £50m and the remaining transitional impact of IFRS 9 on regulatory capital of £157m over the next 4 years.