Provident Financial profit up 34 percent

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Provident Financial profit up 34 percent

30/07/2008 08:43

LONDON (Reuters) - Subprime lender Provident Financial posted a 34 percent rise in half year profit, slightly ahead of market forecasts, and said it expects to expand customer numbers further in the second half.

Provident said it has benefited from mainstream credit providers tightening their lending criteria and the number of near-prime lenders and credit card issuers constraining their lending or withdrawing from the market.

The company, which specialises in doorstep loans of under 500 pounds on which its agents collect repayments each week, said pretax profit from continuing operations rose 34 percent to 51.3 million for the half-year to the end of June.

Citigroup’s pretax forecast was for 49.1 million.

Despite its growth Provident said it will continue to be cautious in its approach to granting new credit but expects to perform well in the second half.

"The company has operated through downturns before, with almost the same business model and so credit quality should be fine," said Citigroup analyst Haley A Tam in a pre-results note.

Provident said it is well-funded until 2010 and has 380 million pounds available in its banking facilities.

Shares in Provident Financial have dipped 4 percent since the turn of the year -- well ahead of the FTSE General Financial Index <.FTASX8770> which has lost more than a fifth of its value since the start of 2008, according to Reuters data.

Customer numbers in its direct lending arm Home Credit grew 7 percent to 1.66 million and rose 29.4 percent to 374,000 in its Vanquis Bank credit card business.

Impairment -- or bad debt -- as a percentage of revenue in the period fell to 30.4 percent from 31 percent for its Home Credit division as the company tightened its lending criteria.

The ratio of impairment to revenue at Vanquis fell to 36.8 percent from 50.1 percent.

Vanquis said it is turning away more than seven out of 10 customers who apply for a credit card, due to caution about the economic environment in 2008 and beyond rather than because it is seeing more people with worse credit situations applying.

Total amounts receivable from customers from continuing operations grew 15.4 percent to 851.5 million pounds, with Home Credit delivering an 11 percent increase in revenue at 324 million, the company said. Revenue at Vanquish increased to 42.9 million pounds from 27.8 million in the same period last year.

Provident maintained an interim dividend of 25.4 pence per share.

(Reporting by Rhys Jones; Editing by Louise Ireland)

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