Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial Group — H1 2020 Earnings Presentation
40 slides from Vanquis Banking's earnings presentation, Aug 26, 2020
Slide 1: H1'20 Results
> \ HI’20 Results 26 August 2020 PFG | Provident
Slide 2: Today's presentation
INTRODUCTION 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 1 Provident Financial plc – H1’20 Results
Slide 3: Highlights and overview
Highlights and overview Malcolm Le May Chief Executive Officer
Slide 4: Robust balance sheet underpins our response to Covid-19
HIGHLIGHTS AND OVERVIEW Robust balance sheet underpins our response to Covid-19 • All three divisions operating ahead of initial Covid-19 plans Surplus capital over the regulatory minimum £215m having adapted swiftly and effectively to the early stages of lockdown • Continued to support our customer
Slide 5: Divisional snapshot
HIGHLIGHTS AND OVERVIEW Divisional snapshot H1'20 Customer Revenue Cost of Net interest Brands Products Est. market size 2019 Loan book numbers yield funds margin ROE/ROA 4 Provident Financial plc – H1’20 Results
Slide 6: Covid-19 response: Vanquis Bank
HIGHLIGHTS AND OVERVIEW Covid-19 response: Vanquis Bank • 100% of head office staff working remotely Head office colleagues working remotely • 80% of Vanquis Bank contact centre staff working remotely by mid-April 100% • SMS and dialler technology allowed customer contact Contact centre colleagues w
Slide 7: Covid-19 response: Moneybarn
HIGHLIGHTS AND OVERVIEW Covid-19 response: Moneybarn • Remained open to new business throughout to keep Customer facing colleagues retrained supporting our customers and our broking relationships • Contact centre staff working remotely initially with 150 some moving back to the office from late Apri
Slide 8: Covid-19 response: Consumer Credit Division
HIGHLIGHTS AND OVERVIEW Covid-19 response: Consumer Credit Division • Lending and collections carried out on a fully remote Collections performance in home credit vs pre-Covid basis, including: – Customer loan repayments taken over the phone by >80% field teams Collections performed remotely in Apri
Slide 9: Summary
HIGHLIGHTS AND OVERVIEW Summary • Operational resilience in H1’20 has been strong despite Covid-19 challenges • Focus on our customers and colleagues means we are well positioned for H2’20 • Our balance sheet provides a real competitive advantage vs others in the sector • However, three macroeconomi
Slide 10: Financial review
Financial review Neeraj Kapur Chief Financial Officer
Slide 11: Summary financials
FINANCIAL REVIEW Summary financials • Sector leading capital and liquidity position • Continuing focus on Capital Markets Day objectives • Pre-impairment adjusted PBT in H1’20 of £207.7m (H1’19: £246.3m) down 16% • Adjusted loss in H1’20 of £32.6m (H1’19: PBT of £80.4m) down 141% • Receivables in H1
Slide 12: Group results
FINANCIAL REVIEW Group results Six months to 30 June 2020 20191 Change £m £mi % Adjusted profit before tax and impairment2 207.7 246.3 (15.7%) Vanquis Bank 11.8 90.5 (87.0%) Moneybarn 2.4 15.5 (84.5%) CCD (37.6) (15.1) (149.0%) Central costs (9.2) (10.5) 12.4% Adjusted (loss)/profit before tax3 (32.
Slide 13: Divisional snapshot
FINANCIAL REVIEW Divisional snapshot Average Net interest Risk-adjusted net Adjusted PBT Adjusted receivables margin Impairment interest margin pre-impairment PBT/(loss) (£m) (£m) (£m) (£m) (£m) (£m) 12 Provident Financial plc – H1’20 Results
Slide 14: Key Performance Indicators ('KPIs')
FINANCIAL REVIEW Key Performance Indicators (‘KPIs’) 13 Provident Financial plc – H1’20 Results
Slide 15: Group results
FINANCIAL REVIEW Group results Six months to 30 June 2020 2019 Change £m £m % Customer numbers (‘000) 2,154 2,392 (9.9%) Period end receivables 1,878 2,195 (14.4%) Average receivables 2,053 2,192 (6.4%) Revenue 445.6 501.5 (11.1%) Interest (36.0) (36.5) 1.4% Net interest margin 409.6 465.0 (11.9%) I
Slide 16: Customer spend data: Vanquis Bank
FINANCIAL REVIEW Customer spend data: Vanquis Bank £250m 0% +10% -4% -35% -31% £200m £150m £100m £50m £0m Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Retail Grocery/food Services Holidays & Other recreation 2019 2020 H1'19 H1'20 • Vanquis customer spending on credit cards fell initially, before
Slide 17: Lending and collections: Moneybarn and CCD
FINANCIAL REVIEW Lending and collections: Moneybarn and CCD 150% 150% 100% 100% MonM Change MonM Change 50% 50% 0% 0% Jan Feb Mar Apr May Jun Jul Jan Feb Mar Apr May Jun Jul (50%) (50%) (100%) (100%) New business Lending Collections New business Lending Collections • Moneybarn new business volumes r
Slide 18: Payment holidays: Vanquis Bank
FINANCIAL REVIEW Payment holidays: Vanquis Bank 3.5% 2.2% 1.9% 1.2% Jan Feb Mar Apr May Jun July • Payment holiday take-up has as a percentage of customers has been modest to date • Customer behaviour profiles at expiry in line with expectations • Payment holiday extensions and current applications
Slide 19: Payment holidays: Moneybarn
FINANCIAL REVIEW Payment holidays: Moneybarn 23.7% 14.1% 10.5% 3.5% 2.0% Jan Feb Mar Apr May Jun July • Payment holiday take-up higher initially as Moneybarn proactively sought to support its customers • As arrangement have expired, the level of outstanding payment holidays has fallen to c3.5% in Ju
Slide 20: Risk reductions: Vanquis Bank
FINANCIAL REVIEW Risk reductions: Vanquis Bank 35% 40k 30% 35k 25% 30k 25k 20% 20k 15% 15k 10% 10k 5% 5k 0% 0k Low Risk High Risk Jan Feb Mar Apr May Jun Jul • Active decision to move new bookings to lower risk scores • New customer bookings for Vanquis credit cards fell as expected in April and May
Slide 21: Risk reductions: Moneybarn
FINANCIAL REVIEW Risk reductions: Moneybarn 730 30% 725 25% 720 2019 20% 715 2020 2019 15% 710 2020 10% 705 700 5% 695 0% Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun 20% £1,000 £800 15% 2019 2020 £600 10% 2019 £400 2020 5% £200 0% £0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun 20 Provident F
Slide 22: Coverage ratios robust
FINANCIAL REVIEW Coverage ratios robust 72% H1-19 H2-19 H1-20 64% 58% 33% 33% 27% 28% 24% 23% 24% 19% 14% Vanquis Bank Moneybarn CCD Total group • We started 2020 with strong coverage ratios which have been enhanced during H1’20 • Increases in H1’20 vs H2’19 reflect significant deteriorations in mac
Slide 23: Impairment increased in H1'20 due to Covid-19 & macroeconomic outlook
FINANCIAL REVIEW Impairment increased in H1’20 due to Covid-19 & macroeconomic outlook 18.0% 14.9% 13.6% 12.0% 8.6% 7.1% H1'19 H2'19 H1'20 H1'19 H2'19 H1'20 45.1% 38.0% 38.9% 19.3% 16.4% 15.4% H1'19 H2'19 H1'20 H1'19 H2'19 H1'20 22 Provident Financial plc – H1’20 Results
Slide 24: ECL driven by significant deterioration in the macroeconomic outlook
FINANCIAL REVIEW ECL driven by significant deterioration in the macroeconomic outlook Assumed UK unemployment 2020 2021 £11m £128m (£138m) Peak Upside 6.3 5.7 £73m Peak Base Case 8.0 7.4 £945m £871m Peak Downside 10.0 10.2 Peak Severe 13.5 14.1 Dec'19 Impact of Debt sale Underlying Volume Jun'20 eco
Slide 25: Receivables have declined due to Covid-19 lockdown
FINANCIAL REVIEW Receivables have declined due to Covid-19 lockdown £1,465m £1,462m £502m £529m £1,202m £485m H1'19 H2'19 H1'20 H1'19 H2'19 H1'20 £245m £249m £2,195m £2,213m £1,878m £147m H1'19 H2'19 H1'20 H1'19 H2'19 H1'20 24 Provident Financial plc – H1’20 Results
Slide 26: Significant regulatory capital buffer above requirement
FINANCIAL REVIEW Significant regulatory capital buffer above requirement Regulatory capital (£m) Total capital ratio • CET1 ratio of 35.4% • Strong Regulatory Capital resource maintained • Headroom capacity increased from December 2019 driven by: – Preserving capital through cancellation of the 2019
Slide 27: Strong capital base provides resilience and has capacity to drive growth
FINANCIAL REVIEW Strong capital base provides resilience and has capacity to drive growth • Capital stack is currently held entirely in CET1 capital; all growth currently funded by CET1 • There is an opportunity to support growth through a more cost effective and efficient capital stack • To lower t
Slide 28: Funding: focus on balance sheet management
FINANCIAL REVIEW Funding: focus on balance sheet management Our commitment Capital markets day set out our funding principles, to drive more cost effective liabilities management Delivered in 2020 • Moneybarn securitisation signed in January 2020 • Early repaid M&G facility (£25m) • In line with con
Slide 29: Strategy and outlook
Strategy and outlook • Malcolm Le May • Chief Executive Officer
Slide 30: Our purpose: 'We help put people on a path to a better everyday life'
STRATEGY AND OUTLOOK Our purpose: ‘We help put people on a path to a better everyday life’ 29 Provident Financial plc – H1’20 Results
Slide 31: Non-standard market likely to grow as a result of Covid-19
STRATEGY AND OUTLOOK Non-standard market likely to grow as a result of Covid-19 Consumers not well served by mainstream lenders Significant opportunity to grow remains for a number of reasons Experienced a significant life event e.g. divorce, 1.5–2.0m movement p.a. loss of a job, etc. New to credit
Slide 32: Vision for the future
STRATEGY AND OUTLOOK Vision for the future Now Medium term Growth – core cards innovations, loans, partnerships, self-employed Cost and digital focus Evolving model to new regulation Platform investment Core market growth, distribution and digital development Funding improvement – securitisation Nea
Slide 33: Summary and outlook
STRATEGY AND OUTLOOK Summary and outlook • Resilient performance across the Group in H1, despite challenges of Covid-19 – Improving trends across customer demand and collections for June and July are encouraging, including a record new business month for Moneybarn in July – Continued execution again
Slide 34: Questions
Questions • Appendix • Contacts
Slide 35: Appendix
Provident Financial Group PFG Appendix
Slide 36: Vanquis Bank results
FINANCIAL REVIEW Vanquis Bank results Six months to 30 June 2020 2019 Change £m £m % Customer numbers (‘000) 1,694 1,791 (5.4%) Period end receivables 1,202 1,465 (18.0%) Average receivables 1,341 1,465 (8.5%) Revenue 261.1 291.1 (10.3%) Interest (16.3) (15.9) (2.5%) Net interest margin 244.8 275.2
Slide 37: Moneybarn results
FINANCIAL REVIEW Moneybarn results Six months to 30 June 2020 2019 Change £m £m % Customer numbers (‘000) 82 70 17.1% Period end receivables 529.4 484.7 9.2% Average receivables 520.6 436.2 19.3% Revenue 66.1 58.3 13.4% Interest (13.3) (13.7) 2.9% Net interest margin 52.8 44.6 18.4% Revenue yield 25
Slide 38: CCD results
FINANCIAL REVIEW CCD results Six months to 30 June 2020 2019 Change £m £m % Customer numbers (‘000) 379 531 (28.6%) Period end receivables 146.9 245.4 (40.1%) Average receivables 191.2 254.2 (24.8%) Revenue 118.4 152.1 (22.2%) Interest (4.6) (5.1) 9.8% Net interest margin 113.8 147.0 (22.6%) Revenue
Slide 39: Contact details
CONTACTS Contact details Provident Financial plc No.1 Godwin Street Bradford BD1 2SU Contacts: Owen Jones, Head of Investor Relations Vicki Turner, Group Financial Controller Telephone: +44 (0)7341 007842 Email: investors@providentfinancial.com Website: www.providentfinancial.com 38 Provident Financ
Slide 40: Disclaimer
Disclaimer The information in this presentation may include forward looking statements, which are based on assumptions, expectations, valuations, targets, estimates, forecasts and projections about future events. These can be identified by the use of words such as ‘short term’, medium term’, ‘long t
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