Interim Management Statement

Provident Financial plc, the leading UK non-standard lender, made the following Interim Management Statement at its Annual General Meeting held at 12.30pm (BST) today. 

Commenting on the company's performance for the year to date, its Chairman John van Kuffeler said,

"The group has made a good start to 2009. Management's cautious approach to new lending over the last two years is undoubtedly proving to be the correct strategy in the face of a deteriorating economy."

Market conditions

The competitive conditions in the UK non-standard lending market remain favourable for Provident Financial. Other major providers of unsecured personal credit and credit card issuers to the non-standard market are heavily constraining their lending or have withdrawn from the market altogether. This presents a strong medium-term organic growth opportunity for the group, particularly when the UK economy recovers. 

Management's view that the economy would experience a marked deterioration has resulted in an increasingly cautious approach to lending since the middle of 2007. The progressive tightening of underwriting has continued during the early part of 2009, resulting in greater selectivity and an increasing proportion of customers being declined in both main businesses.

The national network of over 11,500 Customer Experience Managers who visit each customer every week, provides the group with a real-time picture of local economic conditions against which underwriting decisions are based. This reinforces the group's responsible lending policy at a time when the effects of a weakening employment market upon household incomes, including the increasing restriction on working hours and wage rates, is impacting many households across the UK.

Business performance

As planned, customer numbers in both divisions have grown at slightly slower rates than seen during 2008, primarily due to the further tightening of underwriting standards during the first quarter of 2009. 

The core Consumer Credit Division has made a good start to 2009 with customer numbers growing at between 4% and 5% during the first quarter. Home credit Customer Experience Managers are inherently cautious in granting additional credit as they are paid commission based upon collections, which encourages shorter-term lending during more uncertain times. In addition, the central analytical tools developed in recent years to enhance credit decisioning have been used during the early part of 2009 to curtail the granting of longer-term home collected loans. This provides further encouragement for Customer Experience Managers to lend short and thereby reassess customer affordability more regularly. 

Investment in the branch infrastructure to reinforce spans of control over collections and arrears management and add capacity throughout the field organisation has resulted in the creation of some 120 additional field-based management roles and 30 new branches over recent months. This investment, together with the cautious approach to lending, has ensured an appropriate balance between customer growth, credit quality and collections capacity. As a result, collections performance and impairment are running in line with plan.

Vanquis Bank continues to receive a strong flow of applications. Underwriting criteria, particularly as applied to new customer applications, have been tightened further during the first quarter of 2009 with 82% being declined, up from around 80% during the latter part of 2008. Customer numbers stood at 418,000 at the end of the first quarter, up from 404,000 at the end of 2008 and showing year-on-year growth of 21%.

The investment made to enhance collections processes within the contact centre during 2008, together with the further tightening of underwriting, has resulted in a current level of customer delinquency which is consistent with that experienced during the last quarter of 2008. In addition, the receivables book has continued to generate a risk adjusted margin, after credit losses, of over 30%.

As previously reported, Real Personal Finance, the market test of direct repayment loans, is trading from around 50 locations with a decision on the pace of roll-out to be made in mid-2009.


The group's funding position is strong and at the end of the first quarter committed debt facilities of £1.1bn provided headroom of £291m with no scheduled maturities in 2009. In addition, the group held over £60m of surplus capital at the end of March.


The good start to the year, together with management's cautious approach to new lending and the group's strong funding position, puts Provident Financial in a sound position to deliver high quality growth in 2009.

The company will announce its 2009 interim results on Tuesday 28 July 2009.





David Stevenson, Provident Financial

01274 731111

Nigel Prideaux / Eilis Murphy, Brunswick

020 7404 5959


Investor Relations


Stuart Caldwell, Provident Financial

01274 731111