Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — H1 2010 Earnings Presentation
34 slides from Vanquis Banking's earnings presentation, Jul 27, 2010
Slide 1: 2010 Interim Results Presentation
Provident Financial plc 2010 Interim Results Presentation Maintaining the flow of credit through h h turbulent b l times i 27 July 2010
Slide 2: Today's presentation
Provident Financial plc Today’s Today s presentation • Overview and strategy Peter Crook • Financial review Andrew Fisher • Regulatory g y update and Outlook Peter Crook 1
Slide 3: Highlights
Highlights Good progress in a lower growth environment • Profit before tax up £0.9m to £54.0m after absorbing £7.0m attributable to higher funding rates • Sound credit quality and collections performance in both businesses • Granting of credit in home credit continues to be tempered by cautious cust
Slide 4: Strategy
Strategy Addressing the UK non-standard non standard lending market through responsible lending • Our aim is to be the leading non-standard lender in the UK, acting responsibly in all our relationships and playing a positive role in the communities we serve • The UK non-standard market will increasi
Slide 5: Market conditions and business positioning: Home credit
Market conditions and business positioning Home credit Current market conditions Business positioning • Competitive landscape little changed • Business plan for 2010 based on lower growth • Unemployment and particularly under- employment putting pressure on • Tight stance on underwriting new risks h
Slide 6: Market conditions and business positioning: Vanquis Bank
Market conditions and business positioning Vanquis Bank Current market conditions Business positioning • Vanquis Bank remains the only • Tight and consistent underwriting and significant active participant in the credit line increase criteria maintained non-standard credit card market since mid-2009
Slide 7: Market conditions and business positioning: Summary
Market conditions and business positioning Summary • Approach in both businesses proving to be appropriate in current market conditions • N No change h tto cautious ti positioning iti i off b both th b businesses i d due tto management’s t’ view of the risks stemming from the future direction of the
Slide 8: Financial review
Provident Financial plc 2010 Interim Results Presentation Financial review
Slide 9: Financial review: Profit before taxation
Financial review Profit before taxation Funding Six months ended 30 June 2010 2009 Change rate* £m £m £m £m Home credit 51.1 54.1 (3.0) 5.2 Real Personal Finance (1.8) (2.1) 0.3 0.2 Vanquis Bank 9.1 5.0 4.1 1.6 Yes Car Credit - (1.1) 1.1 - Central: - costs ( ) (4.1) ((3.6)) ( ) (0.5) - - interest (p
Slide 10: Home credit: Income statement
Home credit Income statement 2010 2009 Change Si months Six h ended d d 30 JJune £m £m % Customer numbers (‘000) 1,805 1,713 5.4% Average customer receivables 749 5 749.5 753 2 753.2 (0 5%) (0.5%) Revenue 362.3 335.9 7.9% I Impairment i (145 8) (145.8) (129 2) (129.2) (12 8%) (12.8%) Revenue less im
Slide 11: Home credit: Uplift in revenue yield
Home credit Uplift in revenue yield 100% 98% 96% 94% 92% % 90% 88% 86% 84% 82% 80% Jun-09 Jun 09 Sep-09 Sep 09 Dec-09 Dec 09 Mar-10 Mar 10 Jun-10 Jun 10 Annualised revenue as a % of average receivables for home credit 10
Slide 12: Home credit: Income statement
Home credit Income statement 2010 2009 Change Si months Six h ended d d 30 JJune £m £m % Customer numbers (‘000) 1,805 1,713 5.4% Average customer receivables 749 5 749.5 753 2 753.2 (0 5%) (0.5%) Revenue 362.3 335.9 7.9% I Impairment i (145 8) (145.8) (129 2) (129.2) (12 8%) (12.8%) Revenue less im
Slide 13: Home credit: Impairment as a % of revenue
Home credit Impairment as a % of revenue 40% 38% 36% 34% 32% 30% 28% 26% 24% 22% 20% Jun-09 Jun 09 Sep-09 Sep 09 Dec-09 Dec 09 Mar-10 Mar 10 Jun-10 Jun 10 Annualised impairment as a % of revenue for home credit 12
Slide 14: Home credit: Impairment policy
Home credit Impairment policy • Based on last 12 weeks payment performance • Loans deemed impaired p if more than 1 contractual weekly yppayment y missed in previous 12 weeks • 95%+ provision against loans for which no payment received in last 12 weeks Timely, realistic provisioning which has been a
Slide 15: Home credit: IFRS disclosures
Home credit IFRS 7 disclosures: % of closing receivables as at 30 June 2010 2009 % % In order 30.4 32.3 In arrears: - past due but not impaired 12.6 12.2 - impaired 57.0 55.5 Total 100.0 100.0 14
Slide 16: Home credit: Income statement
Home credit Income statement 2010 2009 Change Si months Six h ended d d 30 JJune £m £m % Customer numbers (‘000) 1,805 1,713 5.4% Average customer receivables 749 5 749.5 753 2 753.2 (0 5%) (0.5%) Revenue 362.3 335.9 7.9% I Impairment i (145 8) (145.8) (129 2) (129.2) (12 8%) (12.8%) Revenue less im
Slide 17: Vanquis Bank: Income statement
Vanquis Bank Income statement 2010 2009 Change Six months ended 30 June £m £m % Customer numbers (‘000) 483 416 16.1% Average customer receivables 265 3 265.3 218 3 218.3 21 5% 21.5% Revenue 74.7 60.1 24.3% Impairment (33.3) (28.4) (17.3%) Revenue less impairment 41.4 31.7 30.6% Annualised risk-adju
Slide 18: Vanquis Bank: Maintaining the risk-adjusted margin
Vanquis Bank Maintaining the risk-adjusted risk adjusted margin 70% 60% 50% 40% 31.1% 30% 20% 10% 0% H2-05 H2 05 H1-06 H1 06 H2-06 H2 06 H1-07 H1 07 H2-07 H2 07 H1-08 H1 08 H2-08 H2 08 H1-09 H1 09 H2-09 H2 09 H1-10 H1 10 Annualised revenue % average receivables Annualised impairment % average receiv
Slide 19: Vanquis Bank: Expansion of risk-adjusted margin
Vanquis Bank Expansion of risk-adjusted risk adjusted margin 58% 30% 29% Annualised im 57% e receivables 28% 56% 27% mpairment % average Annualised revenue % average 55% 26% 54% 25% 24% 53% e receivables 23% 52% 22% 51% 21% 50% 20% Jun 09 Jun-09 Sep 09 Sep-09 Dec 09 Dec-09 Mar 10 Mar-10 Jun 10 Jun-1
Slide 20: Vanquis Bank: Impairment policy
Vanquis Bank Impairment policy • Loans deemed to be impaired as soon as 1 contractual monthly payment is missed • Provision of over 80% made against accounts that are 90 days in arrears* Realistic accounting policy applied consistently which is prudent when benchmarked against other card issuers * s
Slide 21: Vanquis Bank: IFRS disclosures
Vanquis Bank IFRS 7 disclosures: % of closing receivables as at 30 June 2010 2009 % % In order 83.7 82.3 In arrears: - past due but not impaired - - - impaired 16.3 17.7 Total 100.0 100.0 20
Slide 22: Vanquis Bank: Income statement
Vanquis Bank Income statement 2010 2009 Change Six months ended 30 June £m £m % Customer numbers (‘000) 483 416 16.1% Average customer receivables 265 3 265.3 218 3 218.3 21 5% 21.5% Revenue 74.7 60.1 24.3% Impairment (33.3) (28.4) (17.3%) Revenue less impairment 41.4 31.7 30.6% Annualised risk-adju
Slide 23: Financial review: Profit before taxation
Financial review Profit before taxation Six months ended 30 June 2010 2009 Change £m £m £m Home credit 51.1 54.1 (3.0) Real Personal Finance (1.8) (2.1) 0.3 Vanquis Bank 9.1 5.0 4.1 Yes Car C C Credit - ( ) (1.1) 1.1 Central: - costs (4.1) (3.6) (0.5) - interest (payable)/receivable (0.3) 0.8 (1.1)
Slide 24: Balance sheet
Balance sheet Strong balance sheet with modest gearing levels As at 30 June 2010 2009 £m £m Receivables: - Consumer Credit Division 758.5 781.5 - Vanquis Bank 281.2 229.7 - Yes Car Credit - 0.3 1,039.7 1,011.5 Pension asset 1.0 10.6 Borrowings* (818.5) (786.9) Other 22 1 22.1 16 1.6 Net assets 244.3
Slide 25: Borrowings and committed facilities
Borrowings and committed facilities Increasing diversity and significant headroom As at 30 June 2010 2009 £m £m Committed facilities: - bank facilities 690.0 762.5 - private placement notes 161.9 190.1 - senior bonds 250.0 - - retail bonds 25 2 25.2 - - subordinated bonds 6.0 100.0 Total committed f
Slide 26: Maturity of committed borrowing facilities
Maturity of committed borrowing facilities Borrowing long and lending short Facilities as at June 2010 1,400 1,200 1,000 800 £m 600 400 200 0 0 1 2 3 09 9 10 0 11 1 12 09 10 11 12 2 13 -1 -1 -1 -1 -0 -1 -1 -1 p- p- p- p- n- n- n- n- n- ar ar ar ar ec ec ec ec Ju Ju Ju Ju Ju Se Se Se Se M M M M D D D
Slide 27: Capital and dividend strategy
Capital and dividend strategy Strong capital generation and modest gearing • Group generated £82m of capital in the 12 months to June 2010 • slower growth in receivables generating a higher yield • q Vanquis Bank now g generating g surplus p capital p • Internal capital generation and modest use of
Slide 28: Regulatory update
Provident Financial plc 2010 Interim Results Presentation Regulatory update
Slide 29: Regulation: Recent developments
Regulation Recent developments • OFT review of £35bn high-cost consumer credit market concluded in June 2010 • recognises the valuable contribution made by home credit in maintaining the flow of credit to non-standard consumers • low levels of customer complaints • serving customers not catered for
Slide 30: Outlook
Provident Financial plc 2010 Interim Results Presentation Outlook
Slide 31: Outlook
Outlook • The group has reported half-year results ahead of the prior year and in line with internal plans • As anticipated, anticipated demand for home credit continues to reflect cautious behaviour from some customers in the context of an employment market which is unlikely to change in the near f
Slide 32: Questions
Provident Financial plc 2010 Interim Results Presentation Questions
Slide 33: Maintaining the flow of credit through turbulent times
Provident Financial plc 2010 Interim Results Presentation Maintaining the flow of credit through h h turbulent b l times i 27 July 2010
Slide 34: Contact details
Provident Financial plc C Contact d details il Provident Financial plc Colonnade Sunbridge Road Bradford West Yorkshire BD1 2LQ Contact: Gary Thompson – Group Financial Controller & Head of Investor Relations Telephone: (+44) 1274 379111 E-mail: gary.thompson@providentfinancial.com www.providentfina