Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — FY2021 Earnings Presentation
44 slides from Vanquis Banking's earnings presentation, Mar 31, 2022
Slide 1: FY'21 Results
FY’21 Results Provident Financial Group 31st March, 2022
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: 2021 was an important year for PFG
2021 was an important year for PFG: Strategic Financial ESG ✓ CCD closed on schedule and within budget: ✓Returned to receivables growth: ✓ Streamlined corporate governance: • Scheme of Arrangement sanctioned by the High • Customer spending and customer bookings • PRA approval to substantially align
Slide 5: FY'21 established a platform for growth
FY’21 established a platform for growth Receivables Recovery Lower Risk Increasing Profitability Strong Capital Position1 40.6% £1.7bn 17.7% £1.7bn £104m 34.2% £1.6bn 32.5% £64m 6.4% £23m 3.1% H2'20 H1'21 H2'21 H2'20 H1'21 H2'21 H2'20 H1'21 H2'21 H2'20 H1'21 H2'21 Net Receivables Impairment Rate Adj
Slide 6: Strong demand evident across the product lines
Strong demand evident across the product lines Credit Cards Vehicle Finance Personal Loans (21% Market Share1) (9% Market Share) (1% Market Share) H2'20 H2'20 £567m H2'20 £19m Net Receivables £1,075m H1'21 H1'21 £977m H1'21 £602m £16m H2'21 H2'21 £586m H2'21 £28m £1,063m H2'20 £28.1m H2'20 £8.6m H2'
Slide 7: Financial Review
Financial Review Neeraj Kapur Chief Finance Officer
Slide 8: Summary financials
Summary financials Continuing Group FY’21 FY’20 • Group adjusted PBT from continuing operations of £167.8m (FY’20: £27.8m) excluding CCD Net interest margin (£m) 486 554 • Group adjusted PBT of £72.3m (FY’20 adjusted loss before tax: £47.1m) includes CCD Impairment charge (£m) (51) (313) • Group sta
Slide 9: Group results
Group results • Receivables growth in H2’21 impacted by restrictions in Q4 FY’21 FY’20 Change £m £m % o Good momentum in 2022 year to date; expected to pick up across travel and non-discretionary spend Credit cards 174 40 340 Vehicle finance 29 11 165 • 2021 impairments included a c.£47m release of
Slide 10: Key performance indicators ('KPIs')
Key performance indicators1 (‘KPIs’) Shareholder KPIs FY’21 FY’20 FY’19 Cost KPIs2 FY’21 FY’20 FY’19 EPS (basic) 53.7 (14.6) 39.9 Cost of risk 3.1% 17.7% 12.9% EPS (adjusted)2 57.5 11.7 49.2 Cost of funding 3.0% 3.5% 3.2% RORE2 32.6% 6.3% 25.7% Cost to income ratio 55.1% 38.6% 33.9% ROTE2 27.7% 5.2%
Slide 11: Product Snapshot
Product Snapshot Average Net interest Adjusted Primary Products Brands receivables Customer margin Impairment Risk-adjusted net PBT/(LBT) (£m) numbers (‘k) (£m) (£m) interest margin (£m) (£m) FY’21 1,003 1,541 365 (4) 361 174 Credit Cards FY’20 1,207 1,667 439 (233) 205 40 FY’21 594 94 111 (45) 66 2
Slide 12: Credit card spending is back to 2019 levels
Credit card spending is back to 2019 levels Vanquis and Market1 credit card spend Vanquis spend by category indexed to 2019 1.2 (indexed at Feb’20) 1.6 1.0 1.4 0.8 1.2 1.0 0.6 0.8 0.6 0.4 0.4 0.2 0.2 0.0 0.0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Holidays & recreatio
Slide 13: Customer bookings
Customer bookings Credit card new bookings by quarter trend Vehicle finance new bookings by quarter trend 120k 14k 100k 12k 80k 10k 8k 60k 6k 40k 4k 20k 2k 0k 0k Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 • We continued to take a cautious view on
Slide 14: Credit issued recovered to 2019 levels
Credit issued recovered to 2019 levels Credit card spend returned Vehicle finance credit issued in-line to around pre-Covid levels with pre-Covid levels '19 '20 '21 '19 '20 '21 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec • As Covid restrictions ea
Slide 15: Collections performance robust overall
Collections performance robust overall Credit card collections remain below pre-Covid levels due to Vehicle finance collections notably above pre-Covid levels reductions in loan book size '19 '20 '21 '19 '20 '21 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oc
Slide 16: Delinquency rates improving
Delinquency rates improving Credit card delinquency rates have normalised Vehicle finance delinquency rates have improved and stabilised Dec'19 Mar'20 Jun'20 Sep'20 Dec'20 Mar'21 Jun'21 Sept'21 Dec'21 Dec'19 Mar'20 Jun'20 Sep'20 Dec'20 Mar'21 Jun'21 Sept'21 Dec'21 • Credit card delinquency trends re
Slide 17: Falling impairment trends
Falling impairment trends Credit card impairment rates Vehicle finance impairment rates 25% 16% 14% 20% 12% 15% 10% 8% 10% 6% 4% 5% 2% 0% 0% H1'18 H2'18 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'18 H2'18 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 • Credit card impairment rates reduced materially year-on-year
Slide 18: Coverage ratios remain robust
Coverage ratios remain robust Credit card coverage ratios Vehicle finance coverage ratios 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% H1'18 H2'18 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'18 H2'18 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 1,432 1,495 1,465 1,433 1,174 1,075 977 1,063 360 413
Slide 19: Positive momentum to receivables growth
Positive momentum to receivables growth Credit card net receivables increased 9% since H1’211 Vehicle finance net receivables increased 4% since FY'20 £1,433m £602m £586m £566m £1,174m £516m £1,075m £489m £1,063m £977m FY'19 H1'20 FY'20 H1'21 FY'21 FY'19 H1'20 FY'20 H1'21 FY'21 • Credit card receiva
Slide 20: Significant levels of capital boosted by Tier 2 issuance
Significant levels of capital boosted by Tier 2 issuance £707m total capital supports growth and investment £507m CET1 pre-funds growth, IFRS 9 unwind and buffers Capital Required1 Surplus CET1 Required1 Surplus 40.6% 20.8% 19.8% 29.1% 16.2% 12.9% £707m £363m £344m £507m £283m £224m • No ongoing cap
Slide 21: Regulatory capital management
Regulatory capital management Resilient and diversified capital base Well capitalised to support dividends and growth despite macro uncertainties Total: £707m, 40.6% Tier 2: £200m, 11.5% Total: £363m, 20.8% CRD buffer: £43m, 2.5% CET1: £507m, 29.1% TCR: £320m, 18.3% Resources Requirement The Group h
Slide 22: Well positioned with continuing prudent approach
Well positioned with continuing prudent approach Expected credit loss bridge • During 2021, ECLs reduced reflecting lower volumes year-on-year and a more benign macroeconomic backdrop • However, the Group’s balance sheet ended 2021 with a prudent 26.8% coverage ratio of 26.8% Coverage Ratio • Proact
Slide 23: Diversified funding mix across the Group
Diversified funding mix across the Group Liquidity and • At December 2021, the Group had a highly liquid position, with in excess of £300m held PFG funding (excluding retail deposits) (£m) Funding by both Vanquis Bank and the Group above Liquidity Coverage Ratio requirements, and Profile a ratio of
Slide 24: Funding maturity profile
Funding maturity profile • In line with the funding strategy to reduce reliance on the RCF the Group has repaid and Wholesale funding maturity profile (£m) removed the RCF early. This was achieved through the strong liquidity position built in 2021 and is well ahead of the contractual maturity in Ju
Slide 25: Financial outlook
Financial outlook Well capitalised for expected Impairment benefits in 2022 receivables growth • Ongoing release of provisions, including remaining overlays of • Core market growth expected across credit cards, vehicle c.£60m finance and personal loans • Business mix change towards lower risk credit
Slide 26: Strategy and Outlook
Strategy and Outlook Malcolm Le May Chief Executive Officer
Slide 27: PFG: a leading specialist bank focused on underserved markets
PFG: a leading specialist bank focused on underserved markets 1 2 3 Well positioned in growing …Underpinned by a customer- …Targeting sustainable returns addressable markets across… centric vision and strong B/S • Strong receivables growth over • Well capitalised for growth the medium-term • Credit
Slide 28: Growing addressable markets
Growing addressable markets Significant market opportunity of A return to pre-Covid levels would This grew to >£17bn at Dec 2021 >£16bn at Dec 2020 see our markets grow to c.£18bn £2.9bn £3.1bn £8.6bn £9.2bn £18bn £4.6bn £4.8bn Personal Loans Vehicle Finance Credit Cards 1 Based on PFG analysis of T
Slide 29: Customer-centric model underpinned by leading technology
Customer-centric model underpinned by leading technology Typical PFG Customer: Detailed customer Full Time Earning around the c.20% home Near- Have some ownership Prime/Mid-Cost insight1 Work national average savings Credit Score Brand new IT • Brand-new, state-of-the-art IT platform • It will be ca
Slide 30: Credit cards: building back to pre-Covid receivables
Credit cards: building back to pre-Covid receivables Capitalise on core market growth opportunities post-Covid Near-prime product expansion, e.g. price points, features and balance transfers Enhance the digital capability of the business, e.g. new mobile App Credit cards strategy Drive brand awarene
Slide 31: Vehicle finance: investing in a platform for growth
Vehicle finance: investing in a platform for growth Capitalise on core market growth opportunities post-Covid New asset class and product expansion, e.g. leisure vehicles, near-prime Vehicle finance Work collaboratively with the introducer network to provide offerings to customers tailored to their
Slide 32: Personal loans: growing into a significant market opportunity
Personal loans: growing into a significant market opportunity Grow receivables book by Open Market growth and product expansion Increase penetration of loans to existing customers across the Group Personal loans Leverage the expertise and competitive advantage that ‘Gateway’ IT platform brings strat
Slide 33: Group capital management framework
Group capital management framework Strong Regulatory • Strong capital position; 2022 ICAAP application to reflect closure of CCD Capital and Funding • Approval of large limit waiver will support retail deposit funding of vehicle finance Position • Well-funded with access to low-cost retail deposits
Slide 34: Outlook
Outlook • Macroeconomic uncertainty and heightened market volatility likely to persist in the short-term… • …but, PFG remains well placed: o In growing addressable markets of >£17bn PFG is a leading specialist bank o Underpinned by a strong, well capitalised balance sheet… focused on underserved mar
Slide 35: Questions
Questions • Appendix • Contacts
Slide 36: Appendix
Appendix
Slide 37: Discontinued operations: CCD
Discontinued operations: CCD • The Scheme of Arrangement (‘the Scheme’) for CCD was approved by over 98% of creditors who attended and voted at the Scheme meeting on 19 July 2021. Following the hearing on 30 July 2021, the Scheme was sanctioned on 4 Scheme status: August 2021 by the High Court. The
Slide 38: Group results – continuing operations
Group results – continuing operations FY’21 FY’20 Change £m £m % Customer numbers (‘000) 1,635 1,759 (7) Period end receivables 1,678 1,661 1 Average receivables 1,616 1,767 (7) Revenue 535 615 (13) Interest expense (49) (61) 20 Net interest margin 486 554 (12) Revenue yield 33.1% 34.8% (2) Cost of
Slide 39: Group results – statutory balance sheet
Group results – statutory balance sheet1 FY’21 FY’20 Change Assets £m £m % Cash and balances at central banks 718 920 (22) Amounts receivables from customers 1,678 1,800 (7) Pension asset 112 80 40 Goodwill and other intangibles 124 117 6 Other assets 93 161 (42) Total assets 2,725 3,078 (11) Liabil
Slide 40: Credit cards results
Credit cards results FY’21 FY’20 Change £m £m % Customer numbers (‘000) 1,541 1,667 (8) Period end receivables 1,063 1,075 (1) Average receivables 1,003 1,207 (17) Revenue 390 472 (18) Interest Expense (25) (33) 26 Net interest margin 365 439 (17) Revenue yield 38.8% 39.1% - Cost of funding 2.5% 2.8
Slide 41: Vehicle finance results
Vehicle finance results FY’21 FY’20 Change £m £m % Customer numbers (‘000) 94 91 3 Period end receivables 586 567 4 Average receivables 594 533 11 Revenue 138 134 3 Interest (27) (25) (10) Net interest margin 111 109 1 Revenue yield 23.2% 25.1% (2) Cost of funding 4.6% 4.6% - Net-interest margin 18.
Slide 42: Personal loans results
Personal loans results FY’21 FY’20 Change £m £m % Customer numbers (‘000) 20 19 8 Period end receivables 28 19 47 Average receivables 19 27 (29) Revenue 7 9 (20) Interest (1) (1) (14) Net interest margin 6 8 (23) Revenue yield 38.1% 33.8% 4 Cost of funding 4.2% 2.6% (2) Net-interest margin 33.9% 31.
Slide 43: Alternative performance measure calculations
Alternative performance measure calculations Alternative Performance Measures Method of Calculation Adjusted basic earnings per share (EPS) Profit after tax, excluding the amortisation of acquisition intangibles and exceptional items, divided by the weighted average number of shares in issue Return
Slide 44: Contact details
Contact details Contact: Owen Jones, Group Head of Investor Relations Telephone: +44 (0)7341 007842 Email: owen.jones@providentfinancial.com Website: www.providentfinancial.com