RBC Capital starts Provident Financial at 'sector perform'
RBC Capital Markets initiated coverage of Provident Financial at ‘sector perform’ on Friday, with a 445p price target.
It noted that Provident operates four "well-established, industry-leading" franchises in the non-standard consumer credit sector.
"While we appreciate the strength of its market positioning, and have faith in the medium-term strategy, over the short term we see material uncertainty from 'persistent debt', and acknowledge ongoing regulatory uncertainty for the sector," RBC said.
It said that the company’s prospects over the next 12 to 18 months may be clouded by the implementation of the Financial Conduct Authority’s ‘persistent debt’ regulation. "We therefore see uncertainty in earnings over this time period," it said.
Last September, the FCA introduced new rules to support credit card borrowers deemed to be in persistent debt, which mean firms must write to those who have been in debt for more than 18, 27 and 36 months, encouraging them to make higher repayments. By March 2020, lenders will also have to comply with stricter affordability testing.
At 1430 GMT, the shares were up 1% at 426.20p.