Provident Financial (PFG.L) shares soared by 14.5% on Wednesday, as the sub-prime lender posted better-than-expected results and repaid government furlough grants.
The FTSE 250 (^FTMC) firm saw the biggest gains on the London Stock Exchange on Wednesday after it published its interim results for the six months to the end of June.
The lender, which specialises in customers “under-served by mainstream lenders,” said two arms of the business had remained profitable despite the economic turmoil triggered by the coronavirus.
Vanquis Bank, which provides credit cards and savings accounts, secured adjusted pre-tax profits of £11.8m ($15.5m), while vehicle finance specialists Moneybarn netted £2.4m.
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Chief executive officer Malcolm Le May announced the company would repay UK government wage subsidies and deferred taxes, as financial and operational performance had been “better than expected.”
The results pleased investors but the Bradford-based company still swung to pre-tax losses of £28m, compared to profits of £43.1m a year earlier. “This result is better than our initial view of Covid-19's potential impact on our businesses,” said Le May.
Le May added that the company was in a “strong” financial position, with £715m of capital—£215m more than levels required by regulators.
But the company’s board said there would be no interim dividend, in order to preserve more capital and support “business stability.” A return to shareholder payouts was promised as soon as conditions “normalise.”
“Looking forward, our strong financial position will mean that we can keep helping, and responsibly lending to, our customers, many of whom are key workers, as we, and they, face the challenge of furlough support ending and unemployment rising in the coming months,” said Le May.
But he also sounded the alarm over a tightening of lending more widely in the UK, despite the Bank of England slashing interest rates to record lows. “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."