The UK and global economies are currently experiencing unprecedented uncertainty as a result of COVID-19.
The group’s immediate priority has been on safeguarding the health and wellbeing of our colleagues and customers. Significant steps have already been taken in this regard in line with Government guidance and policy. These include working from home for a significant proportion of colleagues throughout the group; encouraging more customers to make remote payments through the internet, apps or via telephone; and introducing technology to allow some contact centre colleagues to work from home whilst maintaining telephone contact with customers.
In our home credit business, we have introduced a temporary pause on face-to-face visits given the Government’s recent measures. Customer Experience Managers (CEMs) are maintaining the customer relationship through phone, SMS and online to support customers and encourage repayment through other mechanisms including the web, card payments via the CEM, contact centre or post office. Prior to the Government’s recent social distancing measures, approximately 25% of weekly collections were through non-cash methods. In addition, we are introducing remote lending capability for CEMs and electronic disbursement of loans for home credit customers. We have also accelerated the roll out of Provident Direct to increase repayment optionality for customers.
In the first eleven weeks of 2020, there was no discernible impact of COVID-19 on credit issued, credit quality or collections. However, we continue to assess the impact on our business from the measures recently announced by the UK Government, together with our own actions on forbearance where we help customers in difficulty to manage their repayments over an extended time frame. We expect both our credit issued and collections performance to be adversely impacted during this period of uncertainty. It is too early to quantify the potential financial impact of COVID-19 on the group’s financial performance and, therefore, we consider it prudent to withdraw any forward guidance for 2020.
We remain heavily focused on managing capital and liquidity through: (i) tightening underwriting across each of our businesses, particularly in respect of new business in Moneybarn where loan values are higher and demand is expected to reduce in the coming weeks – our focus in all three businesses is on supporting our existing customers; (ii) maintaining tight control of costs in each business, particularly discretionary spend; and (iii) preserving our capital and liquidity positions where possible.
The Board has decided that, given the uncertainties at this time, the 2019 final dividend of 16.0p per share will no longer be proposed at the Annual General Meeting (AGM). The cash and capital impact of the decision to withdraw the dividend is approximately £40m. Future dividend decisions will be made as and when conditions normalise and an update will be provided with the group’s interim results in July.
The group has strong capital and liquidity positions comprising:
- Regulatory capital headroom of approximately £200m1, prior to the capital conservation buffer of approximately £55m which is held and may be used in the event of a stress scenario such as currently being experienced in the UK.
- Headroom on committed facilities and surplus cash and liquid resources amounting to approximately £230m. This is in addition to £170m held by Vanquis Bank in respect of their Individual Liquidity Guidance and ongoing access to the retail deposits market.
The requirements of persistent debt regulation on credit cards which was due to come into effect on 1 March 2020 (PD36) has been deferred by the Financial Conduct Authority (FCA) until 1 October 2020.
The company's AGM is currently scheduled for 7 May 2020. This is being kept under review and a further announcement will be made in due course. We plan to provide a further update to the market on COVID-19 and trading in mid-May.
Malcolm Le May, Group Chief Executive, commented:
“In these trying times, the welfare of our customers and colleagues has been paramount and I have been very pleased with how we have adapted our business practices to ensure that we continue to safely support our customers. I would like to thank all our colleagues for their hardwork and the way they have risen to this challenge.
The impact of COVID-19 on the wider UK economy and our own financial performance clearly remains uncertain. However, the decisive actions we are taking, together with our strong capital and liquidity positions, mean that I remain confident in the group’s medium-term opportunity.”
1 Regulatory capital headroom is calculated based on the group’s Total Capital Requirement (TCR) of 24.5% (which has reduced by 1% due to the reduction in the counter cyclical buffer from 1% to 0%) and includes the dynamic transitional adjustment for IFRS 9 of approximately £20m which was reflected in the group’s Pillar 3 disclosures and capital reporting but was conservatively not reflected in the headroom disclosed in the group’s financial statements (the dynamic transitional adjustment for IFRS 9 allows 70% of new stage 1 and 2 provisions since the adoption of IFRS 9 to be reversed in line with the transitional arrangements for IFRS 9).
The person responsible for arranging for the release of this announcement on behalf of the company is Charlotte Davies, Group Legal Counsel and Company Secretary.
Richard King, Provident Financial: 0203 620 3073
Nick Cosgrove/Simone Selzer, Brunswick: 020 7404 5959
Gary Thompson/Vicki Turner, Provident Financial: 01274 351900, firstname.lastname@example.org
Notes to editors:
Provident Financial plc is a leading provider of credit products which provide financial inclusion for those consumers who are not well served by mainstream lenders. The group serves 2.3 million customers and its operations consist of Vanquis Bank, Moneybarn, and the Consumer Credit Division (CCD) comprising Provident home credit and Satsuma.