Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — H1 2023 Earnings Presentation
35 slides from Vanquis Banking's earnings presentation, Jul 28, 2023
Slide 1: Vanquis Banking Group H1'23 Results
Vanquis Banking Group H1’23 Results 28 July, 2023
Slide 2: Today's presentation
Today’s presentation Highlights and Overview Malcolm Le May Financial Review Neeraj Kapur Malcolm Le May, CEO Strategy and Outlook Malcolm Le May Questions Appendix Neeraj Kapur, CFO Contacts 2
Slide 3: Highlights and Overview
Highlights and Overview Malcolm Le May Chief Executive Officer
Slide 4: Significant progress delivered in H1'23
Significant progress delivered in H1’23 Strategic update Financial delivery Board changes A specialist banking group, Disciplined but attractive focused on underserved receivables growth, Chair succession markets repositioning to mid cost Sir Peter Estlin elected Chair, subject near prime to regulat
Slide 5: Strategic transformation to banking model
Strategic transformation to banking model Carefully planned and executed optimisation of funding and capital delivering benefits to customers and shareholders £200m Tier 2 issued Capital and £71m Senior Bond C-SREP: TCR reduced Optimisation tendered from 18.3% to 11.9% Jan Aug Jan Jul Oct Oct Mar No
Slide 6: Financial Review
Financial Review Neeraj Kapur Chief Finance Officer
Slide 7: Summary financials
Summary financials Continuing Group H1’23 H1’22 Net receivables (£m) 2,118 1,685 • Strong net receivables growth +26% and strong Total income (£m) 237 240 customer growth +7% throughout the period Impairment charge (£m) (72) (72) • Flat income driven by expected reduction in NIM with Group repositio
Slide 8: Group results
Group results • Credit cards adjusted PBT £34m (H1’22: £76m) H1’23 H1’22 reflects higher expected credit losses from the £m IFRS 9 impact of strong loan book growth Total receivables 2,118 1,685 Total borrowings including retail deposits1 2,152 1,752 • Vehicle finance adjusted PBT £16m (H1’22: £20m)
Slide 9: Net Interest Margin (NIM)
Net Interest Margin (NIM) • Strategic shift towards lower risk customers across all products drives reduction in asset yield • NIM compression driven by lower asset yield and higher funding costs • Asset yield reduction driven by receivables growth in lower risk customer segments in Cards and Vehicl
Slide 10: Costs and business investment
Costs and business investment • Total adjusted Group operating costs, including business investment, was £157.0m in H1’23 (H2’22: £140.5m; underlying: £133.3m) • Inflation headwind of c.£12m mainly staff costs and third-party costs • Functional cost savings from lower headcount and optimisation of t
Slide 11: Key performance indicators (KPIs)
Key performance indicators1 (KPIs) Shareholder KPIs H1’23 H1'22 H1'21 Capital & Liquidity KPIs H1’23 H1'22 H1'21 EPS (basic) (4.1) 12.7 24.8 CET1 21.7% 27.3% 32.5% EPS (adjusted)2 (1.4) 15.4 26.7 Total capital ratio 31.9% 39.2% 32.5% RORE2 (1.7%) 18.1% 30.4% Liquid assets (HQLA) (£m) 386 430 279 ROT
Slide 12: Product Snapshot
Product Snapshot Net Adjusted Customer Total income Impairment Risk-adjusted Primary Products Brands receivables PBT/(LBT) numbers (‘k) (£m) (£m) income (£m) (£m) (£m) H1’23 1,224 1,617 175 (55) 120 34 Credit Cards H1'22 1,035 1,541 179 (18) 161 76 H1’23 764 111 62 (19) 43 16 Vehicle Finance H1'22 6
Slide 13: Net Receivables by product
Net Receivables by product 2,500 • Continued delivery of strong receivables growth (+26% vs 2,118 H1’22), with growth weighted towards lower risk customers 2,000 • Cards new customer bookings increased 74% year-on- 1,685 1,596 year, reflecting customer acquisition initiatives including an 1,500 impr
Slide 14: Credit card trends
Credit card trends Spend per customer able to spend1 Active customer spend by category indexed to 2019 2 £150 1.5 2019 H1 2020 H1 2021 H1 2022 H1 2023 H1 1.0 0.5 £100 - H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 Services Grocery / Food Retail Recreational & Travel Other Entertainment • Spend pe
Slide 15: Credit card asset quality – net receivables of £1.2bn
£1,300 £0 0% 50% 100% Jan-20 Jan-20 £686 Mar-20 Mar-20 May-20 May-20 Jul-20 Higher Risk Jul-20 Sep-20 Sep-20 Nov-20 <=26.5 Nov-20 Jan-21 Jan-21 Mar-21 Mar-21 May-21 May-21 Jul-21 Jul-21 26.5<=29.5 Sep-21 Sep-21 Nov-21 Booking mix Nov-21 Average Limit Jan-22 Jan-22 Mar-22 Mar-22 29.5<=39.9 May-22 May
Slide 16: Vehicle finance asset quality – net receivables of £0.8bn
0% 50% 100% £0 £1,200 Jan-20 Jan-20 £563 Mar-20 Mar-20 May-20 May-20 Jul-20 Jul-20 Higher Risk Near Prime (NP1) Sep-20 Sep-20 Nov-20 Nov-20 NP2 Jan-21 Jan-21 NP3 Mar-21 Mar-21 May-21 May-21 NP4 Jul-21 Jul-21 Sep-21 Sep-21 T1A Booking mix Nov-21 Nov-21 Average deposits T1B Jan-22 Jan-22 Mar-22 Mar-22
Slide 17: Personal loans asset quality – net receivables of £0.1bn
800 900 50% 0% 100% Jan-20 Aug-20 845 Mar-20 Oct-20 May-20 Dec-20 Jul-20 Higher Risk Sep-20 Feb-21 Nov-20 0-5 Apr-21 Jan-21 Jun-21 Mar-21 5-10 Aug-21 May-21 Jul-21 Oct-21 10-15 Sep-21 Dec-21 Nov-21 15-20 Feb-22 Booking Mix Jan-22 Apr-22 Mar-22 20-25 May-22 Jun-22 Jul-22 Aug-22 25+ Sep-22 Oct-22 Nov-
Slide 18: Cost of risk normalising
Cost of risk normalising Credit card cost of risk rates Vehicle finance cost of risks rates 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 • Cost of risk normalising after release of previously created Covid-19 impairment provi
Slide 19: Quality driven reduction in coverage ratios
Quality driven reduction in coverage ratios Credit card coverage ratios Vehicle finance coverage ratios1 40% 20% 20% 10% 0% 0% H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 1,174 1,075 978 1,063 1,035 1,182 1,224 516 567 602 596 608 655 764 Net receivables Net r
Slide 20: Resilient and diversified capital base
Resilient and diversified capital base Capital position moving towards target 20% CET1 ratio, with headroom to support future growth Total Capital Requirement (TCR) + Combined Buffer2 post C-SREP Change in capital surplus (£77m) due to: A. Reduction in resources (£55m) • The scheduled unwind of the
Slide 21: Transition to a primarily retail-funded bank complete
Transition to a primarily retail-funded bank complete 75% of the Group’s funding now sourced from stable retail deposits 164 60 300 174 174 141 250 HY’21 HY’22 HY’23 £1,866m £1,583m £1,914m1 174 1,051 921 325 200 1,430 Retail Deposits Retail Deposits Retail Deposits 56% 58% 75% • The Group is now fu
Slide 22: Highly stable funding mix
Highly stable funding mix Change in funding mix and stable duration has largely offset market rate rises Group annualised cost of funds1 vs. market rates Wholesale maturity profile (excl. £200m Tier 2 capital)2 6.0% 2023 60 Maturity pre-funded with retail funds 5.0% 4.0% 2024 3.62% 3.0% 2.0% 2025 17
Slide 23: Financial outlook
Financial outlook Growth and asset quality Macroeconomic backdrop enhancement • The Group will continue to focus on disciplined growth • High levels of inflation have persisted for longer than in the mid-cost and near-prime segments… originally forecast in the UK… • …adding approximately £12m to the
Slide 24: Strategy and Outlook
Strategy and Outlook Malcolm Le May Chief Executive Officer
Slide 25: Vanquis Banking Group Overview
Vanquis Banking Group Overview A leading specialist banking group with a focus on customers in the mid-cost and near-prime credit markets Credit cards Vehicle finance Personal loans Second charge Core products 1.6m customers 111k customers 50k customers mortgages £1.2bn receivables £764m receivables
Slide 26: Final thoughts from Malcolm
Final thoughts from Malcolm “I am extremely proud of what we have achieved during my time as CEO. I believe I am handing over the reigns of a Group which has strengthened its competitive position and operating platform materially over the last five years whilst I have been CEO.” Malcolm Le May CEO
Slide 27: Questions
Questions • Appendix • Contacts
Slide 28: Appendix
\Yo VANQUIS ex" Appendix
Slide 29: Expected credit losses
Expected credit losses £m • The Group H1’22 impairment charge (£39m) was depressed by: • Provision releases associated with a significant volume of debt sales occurring in the period (£16m), and; • the release of Covid-19 provisions no longer required (£18m). • The remaining increase (£13m) is a res
Slide 30: Group results – continuing operations
Group results – continuing operations H1’23 H1’22 Change £m £m % Customer numbers (‘000) 1,778 1,659 7 Period end receivables1 2,118 1,684 26 Gross average receivables 2,267 2,002 13 Interest income 251 238 5 Interest expense (49) (25) 95 Net fee and commission income 21 24 (13) Other income 14 3 36
Slide 31: Group results – statutory balance sheet
Group results – statutory balance sheet1 H1’23 H1’22 Change Assets £m £m % Cash and balances at central banks 447 560 (20) Amounts receivables from customers2,4 2,112 1,677 26 Pension asset 37 82 (56) Goodwill and other intangibles 137 124 10 Other assets 151 100 52 Total assets 2,884 2,543 13 Liabi
Slide 32: Credit cards results
Credit cards results H1’23 H1’22 Change £m £m % Customer numbers (‘000) 1,617 1,541 5 Period end receivables 1,224 1,035 18 Gross average receivables 1,401 1,322 6 Interest income 166 164 1 Interest expense (20) (10) 100 Net fee and commissions income 21 24 (13) Other income 9 1 800 Total income 175
Slide 33: Vehicle finance results
Vehicle finance results H1’23 H1’22 Change £m £m % Customer numbers (‘000) 111 95 17 Period end receivables1 764 608 26 Gross average receivables1 750 641 17 Interest income 73 69 6 Interest expense (12) (12) - Net fees and commissions income - - - Other income 2 2 - Total income 62 59 5 Asset yield
Slide 34: Personal loans results
Personal loans results H1’23 H1’22 Change £m £m % Customer numbers (‘000) 50 24 109 Period end receivables 130 42 209 Gross average receivables 116 39 197 Interest income 12 5 140 Interest expense (2) (1) 100 Net fee and commission income - - - Other income - - - Total income 10 5 100 Asset yield 21
Slide 35: Investor relations contact
Investor relations contact Neeraj Kapur, CFO Email: investors@vanquisbankinggroup.com Website: www.vanquisbankinggroup.com
Vanquis Banking Group — H1 2023 Earnings Presentation on 6ix