Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — FY2020 Earnings Presentation
44 slides from Vanquis Banking's earnings presentation, May 10, 2021
Slide 1: FY'20 Results
FY’20 Results Provident Financial Group 10 May, 2021
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: Highlights and Overview
Highlights and Overview • The Group responded effectively to the challenges of Covid-19, enabling it to continue supporting its customers • Group adjusted profit before tax and impairment for FY’20 Capital headroom above TCR & combined buffers was £313m (FY’19: £497m) • Group adjusted loss before ta
Slide 5: Product Snapshot
Product Snapshot FY'20 Customer Revenue Cost of Net interest Primary Products Brands Est. market size FY’201 Loan book numbers yield funds margin ROE/ROA Sub/Near £4.6bn Prime (Debt ROE Credit cards outstanding) £1.1bn 1,667k 39.0% 2.8% 36.2% 8.9% (FY’19: (FY'19: (FY'19: (FY’19: (FY’19: £1.6bn (FY’1
Slide 6: Credit Cards – Vanquis Bank
Credit Cards – Vanquis Bank • Vanquis Bank reported adjusted profit before tax for FY’20 of £38.0m (FY’19: £173.5m) despite challenges of Covid-19 • Vanquis Bank’s liquidity at the end of December was c.£800m; PRA VREQ Credit card receivables as at December removed allowing dividends to the Group to
Slide 7: Unsecured Personal Loans – Vanquis Bank
Unsecured Personal Loans – Vanquis Bank • We have an existing unsecured personal loan book within Vanquis Bank with a receivables book of £19m and c.18.5k customers • The Group will build on its existing expertise in this segment to cater to a Personal loans receivables as at December broader set of
Slide 8: Vehicle Finance - Moneybarn
Vehicle Finance - Moneybarn • Moneybarn reported adjusted profit before tax for FY’20 of £10.9m (FY’19: restated £21.1m) despite challenges of Covid-19 • Moneybarn continued lending throughout 2020 and took market share as a result Customer receivables as at December • Record new lending during FY’2
Slide 9: Consumer Credit Division
Consumer Credit Division • Operational review of CCD launched in November 2020 which concluded that CCD needed to: o Address the issue of rising volumes of customer complaints Credit issued in the home credit market, o Evolve its offering to meet changing customer preferences 2014 to 2020: • Therefo
Slide 10: Collaborative approach to evolving regulation
Collaborative approach to evolving regulation • The Group’s divisions collaborate on all regulatory developments to ensure best practice is implemented consistently • The Group implemented FCA Covid-19 guidance, providing forbearance and tailored support for those customers who needed it o Moneybarn
Slide 11: Summary
Summary • The operational changes made in H1’20 were effective meaning consistent support to our customers throughout • The Group has launched a Scheme of Arrangement for CCD. First Court hearing in April was successful and allows creditors to begin voting on the Scheme • Looking to the future: o Ou
Slide 12: Financial Review
Financial Review Neeraj Kapur Chief Finance Officer
Slide 13: Summary financials
Summary financials • Group adjusted profit before tax and impairment for FY’20 was £313m (FY’19: £497m) • Group adjusted loss before tax for FY’20 was £47m (FY’19: adj. PBT of £153m) H2’20 H1’20 • Vanquis Bank and Moneybarn remained profitable for 2020 as Net interest margin (£m) 327.6 408.7 a whole
Slide 14: Updated Group Structure
Updated Group Structure PLC • The Group reorganised its corporate structure by incorporating a new intermediate holding company Provident called Provident Financial Holdings Limited Financial Holdings Limited • The new corporate structure establishes a buffer to protect the Group’s balance sheet, re
Slide 15: Group results
Group results FY’20 FY’19 Change £m £m % Adjusted profit before tax and impairment3 313.0 497.3 (37.1%) Credit Cards (Vanquis Bank)1 38.0 173.5 (78.1%) Vehicle Finance (Moneybarn)2 10.9 21.1 (48.3%) Home Credit & HCSTC (CCD – discontinued in FY‘21) (74.9) (20.8) (260.1%) Central costs (21.1) (21.0)
Slide 16: Product Snapshot
Product Snapshot Average Net interest Risk-adjusted Adjusted PBT Adjusted Primary Products Brands receivables margin Impairment net interest pre-impairment PBT/(loss) (£m) (£m) (£m) margin (£m) (£m) (£m) Credit FY’20 1,233.9 447.0 (239.9) 207.1 277.9 38.0 Cards & Unsecured Personal FY’19 1,459.9 549
Slide 17: Key performance indicators ('KPIs')
Key performance indicators (‘KPIs’) Shareholder KPIs FY’20 FY’19 Cost KPIs1 FY’20 FY’19 EPS (basic) (32.9) 30.1 Cost of risk1 18.6% 15.8% EPS (adjusted) (11.0) 44.1 Cost of funding1 3.7% 3.3% RORE1 (5.2%) 20.0% Cost to income ratio1 52.4% 42.8% ROTE1 (4.9%) 18.7% ROA1 0.8% 7.5% Capital & Liquidity K
Slide 18: Customer spend: Vanquis
Customer spend: Vanquis Vanquis and Market1 Credit Card Spend – indexed at Feb'20 Vanquis spend by category 1.4 Market Spend Vanquis Spend +4% +4% -1% -39% -30% 1.2 FY'19 FY'20 1 0.8 0.6 0.4 0.2 0 Dec Sep Oct Dec Jun Aug Sep Oct Jun Aug Nov Nov Jul Jul Feb Mar Apr May Feb Mar May Apr Jan Jan Retail
Slide 19: Payment holidays
Payment holidays Proportion of customers on a payment holiday 23.1% 1 Credit Card Home Credit Short Term Loans Vehicle Finance 4.2% 3.1% 2.0% 1.3% 3.5% 0.5% 0.1% Mar'20 Apr'20 May'20 Jun'20 Jul'20 Aug'20 Sep'20 Oct'20 Nov'20 Dec'20 • Across the Group, only 0.7% of customers were on an active payment
Slide 20: Increase in impairment driven by Covid-19
Increase in impairment driven by Covid-19 Impairment rates 45.1% 38.9% 28.6% 19.4% 19.5% 18.6% 18.0% 15.8% 13.6% 12.5% 13.6% 10.4% Credit Card 1 Vehicle Finance Home Credit & HCSTC Group H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 1,462 1,202 1,094 489 515 567 249 147 139
Slide 21: Robust coverage ratios
Robust coverage ratios Coverage ratios 71.6% 69.4% 58.1% 34.0% 34.7% 30.2% 28.6% 27.4% 23.2% 22.8% 21.1% 16.3% 1 Credit Card Vehicle Finance Home Credit & HCSTC Group H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 H2’19 H1’20 H2’20 1,462 1,202 1,094 489 515 567 249 147 139 2,200 1,864 1,800 N
Slide 22: Delinquency rates improving
Delinquency rates improving Credit card delinquency rates Vehicle finance delinquency rates Dec'19 Mar'20 Jun'20 Sep'20 Dec'20 Mar'21 Dec'19 Mar'20 Jun'20 Sep'20 Dec'20 Mar'21 • Credit card delinquency rates picked up in March 2020 but have since improved significantly and stabilised • Vehicle finan
Slide 23: ECL driven by significant deterioration in the macroeconomic outlook
ECL driven by significant deterioration in the macroeconomic outlook Expected credit losses have risen by £84m Assumed UK unemployment 2021 2022 Peak Upside 6.2 5.0 Peak Base Case 7.9 6.7 £14m £239m (£241m) £73m Peak Downside 10.1 8.5 £957m £882m Peak Severe 12.7 10.4 Dec'19 Impact of Debt sale Unde
Slide 24: Receivables fell due to Covid-19 impact
Receivables fell due to Covid-19 impact Credit card net receivables decreased 25% since FY’19 1 Vehicle Finance net receivables increased 16% since FY’19 £1,462m £567m £515m £489m £1,202m £1,094m FY'19 H1'20 FY'20 FY'19 H1'20 FY'20 CCD’s net receivables decreased 44% since FY’19 The Group’s net rece
Slide 25: Regulatory capital
Regulatory capital Resilient and appropriate capital base including the Capital ratio meets regulatory requirements over transitional relief the next three years TCR CET1 & CRDTCR + ratioCET1 CRD buffers (11) 675 34.3% 34.2% buffers 20.8% 20.8% • Regulatory capital assessed over a three year view •
Slide 26: Opportunity to improve the capital stack
Opportunity to improve the capital stack Headroom Headroom Improvement in Headroom capital mix & efficiency through Tier 2 (25%) Tier 2 Tier 2 (25%) CET1 AT1 (19%) Requirement CET1 (56%) CET1 (75%) Current Optimal Post introduction of Tier 2 CET1 needed in meeting requirement AT1 Tier 2 Headroom abo
Slide 27: Diversified funding mix across the Group
Diversified funding mix across the Group Liquidity • Highly liquid position, with liquid assets of £800m held by Vanquis PFG funding (£m) and Funding Bank above Group Liquidity Coverage Ratio requirements, and a Profile 2,281 ratio of 2,830% 79 2,030 69 • Cash and undrawn liquidity at non-Bank Group
Slide 28: Strategy and Outlook
Strategy and Outlook Malcolm Le May Chief Executive Officer
Slide 29: Our purpose: 'We help put people on a path to a better everyday life'
Our purpose: ‘We help put people on a path to a better everyday life’ Blueprint embedded across the Group: Unifying Purpose: unifies and gives colleagues long term direction Increased Strategic drivers: critical focus on pillars to delivering purpose more sustainable Behaviours: continuously busines
Slide 30: Product offering evolution
Product offering evolution Market size (outstanding debt) Illustrative product portfolio based on av. APR £0.4bn £0.2bn High-Cost Mid-Cost Credit Credit Vehicle Finance Vehicle Finance £1.6bn Credit Card Credit Card £8.6bn Personal Loans Personal Loan £4.6bn Home Credit Home Credit HCSTC HCSTC Highe
Slide 31: Vision for the Future
Vision for the Future • New product development • Core market card growth Unsecured Credit • New card innovation and • Platform development Personal cards partnerships Loans • Cost efficiency • Cost and digital focus • Regulatory focus • Core market growth, distribution • Capital and cost efficiency
Slide 32: Outlook
Outlook • Our credit card and vehicle finance offerings have reported improving trends for Q1’21 as customer behavior has normalised post lockdown restrictions • Macroeconomic uncertainty persists but there are reasons to be optimistic: PFG remains committed to delivering long-term, o Well capitalis
Slide 33: Questions
Questions • Appendix • Contacts
Slide 34: Appendix
Appendix
Slide 35: Group results – P&L
Group results – P&L FY’20 FY’19 Change £m £m % Customer numbers (‘000) 2,070 2,319 (10.7%) Period end receivables 1,800 2,200 (18.2%) Average receivables 1,933 2,184 (11.5%) Revenue 808 996 (18.9%) Interest (72) (72) 0.7% Net interest margin 736 924 (20.3%) Revenue yield 41.8% 45.6% (3.8%) Cost of f
Slide 36: Group results – Balance sheet
Group results – Balance sheet FY’20 FY’19 Change Assets £m £m % Cash and balances at central banks 920 354 159.9%.. Amounts receivables from customers 1,800 2,198 (18.1%).. Pension asset 80 78 2.6%.. Goodwill and other intangibles 117. 115. 1.7%.. Other assets 162 163 (0.6%).. Total assets 3,078 2,9
Slide 37: Credit Cards (Vanquis Bank) results
Credit Cards (Vanquis Bank) results1 FY’20 FY’19 Change £m £m % Customer numbers (‘000) 1,667 1,720 (3.1%) Period end receivables 1,094 1,462 (25.1%) Average receivables 1,234 1,460 (15.5%) Revenue 481 581 (17.1%) Interest (34) (31) (9.6%) Net interest margin 447 550 (18.7%) Revenue yield 39.0% 39.8
Slide 38: Vehicle Finance (Moneybarn) results
Vehicle Finance (Moneybarn) results FY’20 FY’19 Change £m £m % Customer numbers (‘000) 91 77 18.7% Period end receivables 567 489 15.8% Average receivables 533 477 11.8% Revenue 134 120 11.9% Interest (25) (28) 13.4% Net interest margin 109 91 19.7% Revenue yield 25.1% 25.1% — Cost of funding (4.6%)
Slide 39: Home Credit & Short Term Loans results
Home Credit & Short Term Loans (CCD – discontinued in FY’21) results FY’20 FY’19 Change £m £m % Customer numbers (‘000) 311 522 (40.3%) Period end receivables 139 249 (44.2%) Average receivables 166 247 (32.9%) Revenue 192 295 (34.9%) Interest (10) (10) (6.2%) Net interest margin 182 286 (36.3%) Rev
Slide 40: Our ESG credentials
Our ESG credentials • The Board and senior management elected to a 20% pay cut for three months from April and the Group repaid all furlough support received from HMRC • The Group committed c.£1.2m to its Social Impact Programme in 2020 • PFG’s Social Impact Funds allocated £265k to 44 small organis
Slide 41: Scheme of Arrangement timeline
Scheme of Arrangement timeline 15 Mar’21 22 Apr’21 Mid-May’21 Mid-Jul’21 Late Jul’21 Feb’22 H1’22 Claims Payments First Court Claims Portal Scheme Second Court PSL Issued submission made and Hearing Opens Meeting Hearing deadline Scheme terminated Scheme Scheme is website Customers to effective if C
Slide 42: Group results footnote
Group results footnote 1. Includes Vanquis Loans which accounted for under 2% of net receivables (Dec’20). 2. 2019 comparatives have been restated to retrospectively reflect the Moneybarn accelerated IFRS 9 point of default from the termination a customer contract to when the customer has missed 3 c
Slide 43: Alternative Performance Measure Calculations
Alternative Performance Measure Calculations Alternative Performance Measures Method of Calculation Profit after tax, excluding the amortisation of acquisition intangibles and exceptional items, divided by the Adjusted basic earnings per share (EPS) weighted average number of shares in issue Annuali
Slide 44: Contact details
Contact details Provident Financial plc No.1 Godwin Street Bradford BD1 2SU Contacts: Owen Jones, Group Head of Investor Relations Vicki Turner, Group Financial Controller Telephone: +44 (0)7341 007842 Email: investors@providentfinancial.com Website: www.providentfinancial.com 44