Adds details from the statement, CEO quote
Aug 26 (Reuters) – Doorstep lender Provident Financial PFG.L sank to a loss in the first half of 2020 and suspended its interim dividend, as business slowed during the coronavirus lockdowns and bad loans soared in its consumer credit division.
UK-based Provident, whose shares were expected to fall 3-5% as per premarket indicators, also set aside 73 million pounds ($96 million) to brace for the flood of loan defaults.
The company said its units Vanquis Bank, which has been a growth driver for the firm, and Moneybarn managed to squeeze out smaller profits as operations recovered after an initial slide, but the consumer credit division (CCD) saw losses more than double to 37.6 million pounds.
CCD’s customer numbers fell to 379,000 from 531,000 a year earlier, said Provident, which provides credit to people who do not meet the lending criteria of mainstream banks.
Lenders across the globe have had to increase their provisions for loan losses as COVID-19 lockdowns disrupted businesses and left customers unable to pay back their debts.
Coverage ratio, which measures a company’s ability to service its debt and meet its financial obligations, surged by 13.5% to 71.6% in CCD.
“Our market will grow due to the pandemic, but at present it appears the supply of credit into the market is decreasing, which cannot be a good outcome for customers, nor a public policy one for the UK,” Chief Executive Officer Malcolm Le May said.
The company posted a pretax loss of 28 million pounds for the six months ended June 30 versus a profit of 43.1 million pounds a year earlier.
Provident, which said it has decided to repay the furlough support to the British government, will resume dividends “as soon as operational and financial conditions normalise”. J.P. Morgan analysts expect payouts to resume in the first half of 2021.
($1 = 0.7616 pounds)
(Reporting by Muvija M in Bengaluru; Editing by Amy Caren Daniel and Saumyadeb Chakrabarty)
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