ShoreCap upgrades Provident Financial to 'buy'
Vanquis Banking Group 20
48.30p
11:39 26/04/24
Analysts at ShoreCap upgraded their recommendation for shares of doorstep lender Provident Financial Group amid signs that it was "getting back on track following a period of significant upheaval".
Financial Services
13,992.32
12:14 26/04/24
FTSE 250
19,815.10
12:15 26/04/24
FTSE 350
4,460.23
12:15 26/04/24
FTSE All-Share
4,413.64
12:15 26/04/24
In particular, they hailed the narrower loss in its Consumer Credit division, while noting the "surprise" £16.8m provision release now that historical conduct matters pertaining to Vanquis Bank and Moneybarn had been resolved.
But much remained to be done.
"That said, there remains plenty of work for management to do as it continues to reshape the group for the new, more challenging, regulatory environment," they added.
Above all, management needed to reverse the fall in profits at Vanquis Bank - its largest operating unit.
ShoreCap was still anticipating another "step back" in 2020 at Vanquis "before profit can begin to move forward again" due to additional run-off of its Repayment Option Plan product, accounting changes and write-offs associated with persistent debt "before growth initiatives assert themselves".
On a more positive note, they explained that "upcoming discussions with the regulator will also provide an opportunity for management to explore potential capital and funding efficiencies.
"Following the recent market correction, there is now enough upside to justify a more positive stance."
The fair value estimate for Provident Financial's shares was raised from 485.0p to 520.0p.