Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — Non-Deal Roadshow (September 2012)
33 slides from Vanquis Banking's roadshow presentation, September 2012
Slide 1: US Roadshow Presentation
PROVIDENT FINANCIAL PLC US ROADSHOW PRESENTATION September 2012
Slide 2: Highlights
PROVIDENT FINANCIAL PLC Highlights STRONG FIRST HALF PERFORMANCE • Profit before tax up 17.0% to £72.9m and EPS up 19.8% to 41.1p • Interim dividend per share up 7.9% to 28.8p • Stable Consumer Credit Division (CCD) performance in challenging market conditions • Further strong growth and returns at
Slide 3: Market conditions and business positioning – CCD
PROVIDENT FINANCIAL PLC Market conditions and business positioning – CCD MARKET CONDITIONS BUSINESS POSITIONING • Competitive landscape unchanged • Continuing tight credit standards have reinforced credit quality and moderated growth • Modest increase in household average weekly earnings • Heavy foc
Slide 4: Market conditions and business positioning – Vanquis Bank
PROVIDENT FINANCIAL PLC Market conditions and business positioning – Vanquis Bank MARKET CONDITIONS BUSINESS POSITIONING • Vanquis Bank remains the most active • No change to tight underwriting and credit line participant in the underserved non-standard increase criteria which are supporting record
Slide 5: Group – Profit before tax
PROVIDENT FINANCIAL PLC Group – Profit before tax 6 months ended 30 June 2012 2011 Change £m £m £m CCD (Home-collected Credit) 50.4 50.2 0.2 Vanquis Bank - UK 29.4 17.6 11.8 - Poland (1.2) - (1.2) Total Vanquis Bank 28.2 17.6 10.6 Central: - costs (5.5) (4.9) (0.6) - interest payable (0.2) (0.6) 0.4
Slide 6: Home-collected Credit – Income statement
PROVIDENT FINANCIAL PLC Home-collected Credit – Income statement 6 months ended 30 June 2012 2011 Change £m £m % Customer numbers (‘000) 1,771 1,803 (1.8%) Period-end receivables 787.8 785.5 0.3% Average receivables 783.5 784.3 (0.1%) Revenue 351.8 350.2 0.5% Impairment (135.4) (130.1) (4.1%) Revenu
Slide 7: Home-collected Credit – Revenue yield
PROVIDENT FINANCIAL PLC Home-collected Credit – Revenue yield 100% • Revenue yield moderated during first half of 98% 2011 reflecting increased focus on serving 96% good-quality existing customers who tend to 94% be served with slightly longer term products 92% • Consistent mix of business over last
Slide 8: Home-collected Credit – Impairment % revenue
PROVIDENT FINANCIAL PLC Home-collected Credit – Impairment % revenue 40% • Second quarter of 2011 benefited from 38% improvement to arrears following enhancement 36% to agent’s commission scheme in April 34% 32% • Consistent collections performance over past 30% 12 months 28% • Collections performan
Slide 9: Home-collected Credit – Impairment policy
PROVIDENT FINANCIAL PLC Home-collected Credit – Impairment policy • Based on last 12 weeks payment performance • Loans deemed impaired if more than 1 contractual weekly payment missed in previous 12 weeks • 95%+ provision against loans for which no payment received in last 12 weeks • Timely, realist
Slide 10: Home-collected Credit – IFRS disclosures
PROVIDENT FINANCIAL PLC Home-collected Credit – IFRS 7 disclosures As at 30 June 2012 2011 % of receivables % % In order 31.6 31.6 In arrears: - past due but not impaired 12.5 11.8 - impaired 55.9 56.6 Total 100.0 100.0 • Based on contractual arrears • Past due but not impaired includes customers wh
Slide 11: Vanquis Bank (UK) – Income statement
PROVIDENT FINANCIAL PLC Vanquis Bank (UK) – Income statement 6 months ended 30 June 2012 2011 Change £m £m % Customer numbers (‘000) 777 610 27.4% Period-end receivables 525.1 380.1 38.1% Average receivables 487.5 361.6 34.8% Revenue 127.7 99.3 28.6% Impairment (45.6) (38.9) (17.2%) Revenue less imp
Slide 12: Vanquis Bank (UK) – Above target risk-adjusted margin
PROVIDENT FINANCIAL PLC Vanquis Bank (UK) – Above target risk-adjusted margin • Risk-adjusted margin inherently stable due to 70% active management of: 60% – Credit line utilisation to minimise 50% contingent undrawn exposure (‘low and 40% grow’) 34.9% 30% – Revenue yield through appropriate pricing
Slide 13: Vanquis Bank – Impairment policy
PROVIDENT FINANCIAL PLC 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 ag
Slide 14: Vanquis Bank – IFRS disclosures
PROVIDENT FINANCIAL PLC Vanquis Bank – IFRS 7 disclosures As at 30 June 2012 2011 % of receivables % % In order 88.6 87.9 In arrears: - past due but not impaired - - - impaired 11.4 12.1 Total 100.0 100.0 • Favourable change in profile reflects record low delinquency for the business 13
Slide 15: Strong balance sheet
PROVIDENT FINANCIAL PLC Strong balance sheet As at 30 June 2012 2011 £m £m Receivables: - Home-collected Credit 787.8 785.5 - Real Personal Finance 1.7 3.9 - Vanquis Bank 525.1 380.1 Total receivables 1,314.6 1,169.5 Pension asset 24.6 58.9 Liquid assets buffer 45.5 10.8 Debt funding* (771.5) (930.6
Slide 16: Modest gearing levels
PROVIDENT FINANCIAL PLC Modest gearing levels 4.0 • Gearing at June 2012 of 3.1 times versus a banking covenant of 5.0 times 3.0 • Strong capital generation has funded dividends and growth as well as producing a modest 2.0 reduction in gearing 1.0 0.0 Jun-09 Jun-10 Jun-11 Jun-12 Dec-08 Dec-09 Dec-10
Slide 17: Diversified funding base
PROVIDENT FINANCIAL PLC Diversified funding base As at 30 June 2012 Facilities £m Banks Core bank group 383 Bonds and private placements Senior public bond 250 M&G term loan 100 Other sterling/euro medium term notes 40 Retail bonds 195 US private placements/residual subordinated loan notes 93 678 Va
Slide 18: Maturity profile of debt
PROVIDENT FINANCIAL PLC Maturity profile of debt 1,200 1,000 800 £m 600 400 200 0 Jun-12 Jun-13 Jun-14 Jun-15 Sep-12 Dec-12 Sep-13 Dec-13 Sep-14 Dec-14 Sep-15 Dec-15 Mar-12 Mar-13 Mar-14 Mar-15 Syndicated bank facilities Bonds Private placements • No further maturities in 2012 • 2013 and 2014 maturi
Slide 19: Profile and maturity of retail deposits
PROVIDENT FINANCIAL PLC Profile and maturity of retail deposits Cumulative Annual Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Total rates £m £m £m £m £m £m £m £m % Product 1 year 32.6 5.3 4.1 5.8 0.8 0.6 0.4 49.6 3.20-3.55 2 year 74.5 11.6 6.9 2.9 0.4 1.9 0.7 98.9 3.51-4.05 3 year 18.3 12.8 15.
Slide 20: Alignment of dividend policy, gearing and growth
PROVIDENT FINANCIAL PLC Alignment of dividend policy, gearing and growth High ROE businesses Dividend Gearing Growth Policy 3.5x versus covenant Supports c.£140m Cover ≥ 1.25x of 5.0x receivables growth p.a 19
Slide 21: Strong capital generation
PROVIDENT FINANCIAL PLC Strong capital generation 12 months ended 30 June 31 December 2012 2011 £m £m CCD 115.4 107.3 Vanquis Bank 28.1 14.8 Central (20.0) (12.0) Capital generated 123.5 110.1 Dividends payable (96.9) (93.0) Capital retained 26.6 17.1 Gearing (times) 3.1 3.3 • Strength of capital ge
Slide 22: Regulatory update
PROVIDENT FINANCIAL PLC Regulatory update • Draft Financial Services Bill published in January 2012 – Bill framed to enable a ‘lift and shift’ approach to credit regulation – Consumer Credit Act regime retained but OFT replaced with Financial Conduct Authority – Government committed to securing pass
Slide 23: Vanquis Bank – UK
PROVIDENT FINANCIAL PLC Vanquis Bank – UK Customer numbers (‘000) Average balance (£) 1,200 1,000 1,100 900 1,000 800 900 800 700 700 600 600 500 500 400 400 300 300 200 200 100 100 - - Jun-10 Jun-11 Jun-12 Jun-10 Jun-11 Jun-12 Dec-09 Dec-10 Dec-11 Dec-09 Dec-10 Dec-11 • Vanquis Bank has the potenti
Slide 24: Vanquis Bank – Poland
PROVIDENT FINANCIAL PLC Vanquis Bank – Poland • Market opportunity: – 38 million population with under-served non-standard market of up to 15 million – Stable economy and regulatory environment – Very good feedback from customer forums on card proposition – Strong leverage off UK systems platform, p
Slide 25: Consumer Credit Division
PROVIDENT FINANCIAL PLC Consumer Credit Division • The business is continuing its programme of initiatives to deliver sustainable growth, including: – Expanding the geographic footprint through the creation of more branches – Ongoing product innovation, including the imminent launch of the One Card
Slide 26: Outlook
PROVIDENT FINANCIAL PLC Outlook • Stable performance of CCD and strong growth and returns being delivered by Vanquis Bank provide sound basis for delivering good quality growth for 2012 as a whole • Strong, diversified funding base that allows the group to meet contractual debt maturities and execut
Slide 27: Appendix
PROVIDENT FINANCIAL PLC APPENDIX 26
Slide 28: Home-collected Credit – Providing a valued community service
PROVIDENT FINANCIAL PLC Home-collected Credit – Providing a valued community service • Community based model – business conducted face-to-face by agents who typically live in the communities they serve • Provides access to credit for those who might otherwise be financially excluded • Endorsement fr
Slide 29: Home-collected Credit – Providing a valued community service
PROVIDENT FINANCIAL PLC Home-collected Credit – Providing a valued community service Easter Holidays Christmas Typical uses of Home-collected Credit: • Seasonal expenditure • One-off purchases (e.g. major appliances or unexpected car repairs) • Day-to-day living expenses 28
Slide 30: Home-collected Credit – Business dynamics
PROVIDENT FINANCIAL PLC Home-collected Credit – Business dynamics Simple, transparent • Small (typically £500), short-term (typically 1 year) and affordable (typically financial products £17 per week) unsecured loans • Fixed weekly repayments that do not change, even if payments are missed. No hidde
Slide 31: Vanquis Bank – Revolving, VISA-branded credit card
PROVIDENT FINANCIAL PLC Vanquis Bank – Revolving, VISA-branded credit card • Developed organically, rolled-out in 2005 • Holds a banking licence and regulated by the FSA • Broke even in 2007 • Strong profits growth through the economic downturn • Around 800,000 UK customers • Small credit lines focu
Slide 32: Vanquis Bank – Business dynamics
PROVIDENT FINANCIAL PLC Vanquis Bank – Business dynamics Low and Grow • Customers are introduced with a small credit limit (typically £250) strategy • Growth in balance, dependent upon performance, to average credit line of circa £950 Targeted customer • Typical customers are non homeowners with an
Slide 33: Contact details
PROVIDENT FINANCIAL PLC Contact details Provident Financial plc No. 1 Godwin Street Bradford BD1 2SU United Kingdom Contact: Gary Thompson – Group Financial Controller and Head of Investor Relations Telephone: 011-44-1274-351019 E-mail: gary.thompson@providentfinancial.com Website: www.providentfina
Provident Financial — Non-Deal Roadshow (September 2012) on 6ix