Canaccord stays at 'sell' on Provident Financial Group

Analysts at Canaccord Genuity stood by their 'sell' recommendation for shares of Provident Financial Group, pointing out how changes in its accounting had flattered its bottom line for the 2019 financial year.

They also marked down their estimates for the doorstep lender's dividend payout for 2020 and 2021.

Provident now capitalised the customer acquisition costs for its Vanquis unit, instead of expensing them.

Were it not for that changem its profits before tax would have fallen 7% short of their estimates.

And now, the analysts no longer expected profit growth at Vanquis until 2022.

They were also concerned about the risk of impairments "at the current point in the cycle", even as Moneybarn was tackling credit quality issues and the recovery in the consumer credit arm "remained protracted".

"PFG may appear to screen well on value and yield at the current level, but the risk to our EPS & DPS forecasts, which are 4% and 7% below consensus in FY20 and FY21, respectively, remains firmly to the downside in our view," Canaccord said.

"We believe a better entry point will emerge and retain our SELL rating."