Vanquis Banking warns on full-year profits

(Sharecast News) - Vanquis Banking Group warned on full-year profits on Monday as it continues to be redevelop its customer proposition and reset pricing, and due to costs associated with reviewing complaints related to motor finance deals. In an update ahead of its 2023 results on 27 March, the company - formerly Provident Financial - said that income for 2024 is expected to be "materially lower" than consensus expectations of £538.3m. This is due in part to the redevelopment of its customer proposition, which is expected to allow the group to return to modest lending growth from the start of the second quarter.

In addition, Vanquis said that although it is not a subject the Financial Conduct Authority's review of historical motor finance commission arrangements and sales, it has been experiencing "significant" levels of third party complaint submissions.

"Reviewing them is causing an increase in administration costs," it said. "While the vast majority of these complaints are not upheld, the associated costs are likely to materially impact the group's profitability in 2024. The group is exploring proactive legal steps to address this situation."

As a result, it now expects adjusted pre-tax profit for 2024 to be "substantially" lower than market consensus of £75.1m, resulting in a low single digit adjusted return on equity.

Chief executive Ian McLaughlin said: "We have short term challenges to address but remain confident that the group's new strategy will deliver good outcomes for our customers and attractive and sustainable returns for our shareholders over the medium and longer term. I look forward to setting out our detailed plans at our strategy seminar."