Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — FY2022 Earnings Presentation
43 slides from Vanquis Banking's earnings presentation, Mar 31, 2023
Slide 1: Vanquis Banking Group FY'22 Results
Vanquis Banking Group FY’22 Results 31st March, 2023
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: Significant strategic change delivered
Significant strategic change delivered 2018 2022 • Non-standard lender operating in the ✓ Fully repositioned as a specialist banking high-cost credit sector group with enhanced risk management framework • Poorly executed operational overhaul of We will deliver focused and home credit business… ✓ Low
Slide 5: Strong foundations laid in 2022
Strong foundations laid in 2022 Strategic Financial Customers Repositioned as a specialist Adjusted PBT of £127m Specific initiatives launched banking group for each product Strong receivables growth Credit risk profile reduced year-on-year New price points and offerings materially Capital requireme
Slide 6: Financial Review
Financial Review Neeraj Kapur Chief Finance Officer
Slide 7: Summary financials
Summary financials Continuing Group FY’22 FY’21 • Strong receivables growth across credit cards, Total income (£m) 481 483 vehicle finance and personal loans Impairment charge (£m) (66) (51) • Net interest margin increased by 0.5% to 21.0% Risk-adjusted income • Risk adjusted margin was broadly flat
Slide 8: Group results
Group results FY’22 FY’21 £m £m Credit cards 179 174 • Central costs reflect the roll out of the shared Vehicle finance 38 29 services model and investment in the growth of Personal loans (16) (9) the business. Central: • The Transformation & Change spend is designed - Central costs (30) (18) to enh
Slide 9: Key performance indicators ('KPIs')
Key performance indicators1 (‘KPIs’) Shareholder KPIs FY’22 FY’21 FY’20 Cost KPIs2 FY’22 FY’21 FY’20 EPS (basic) 32.8 53.7 (14.6) Cost of risk 3.2% 2.4% 13.9% EPS (adjusted)2 38.7 57.5 11.7 Cost of funding 2.9% 2.4% 2.7% RORE2 22.2% 32.3% 6.2% Cost income ratio 59.9% 54.8% 38.2% ROTE2 22.2% 32.2% 5.
Slide 10: Investing for growth – Group costs
Investing for growth – Group costs • Total adjusted Group operating costs including ongoing business investment increased to £288m (FY’21: £264m) • Total adjusted Group underlying operating costs, excluding business investment, were £251m (FY’21: £224m) • Ongoing business investment increased to £37
Slide 11: Product Snapshot
Product Snapshot Net Adjusted Customer Total income Impairment Risk-adjusted Primary Products Brands receivables PBT/(LBT) numbers (k) (£m) (£m) income (£m) (£m) (£m) FY’22 1,182 1,541 360 (17) 343 179 Credit Cards FY’21 1,063 1,541 362 (4) 358 174 FY’22 646 100 119 (41) 78 38 Vehicle Finance FY’21
Slide 12: Net Receivables and customer numbers
Net Receivables and customer numbers Net Receivables by product (£m) Customer numbers by product (‘000) 1,951 1,904 1,819 1,777 1,678 1,720 1,661 1,667 1,655 1,675 1,541 1,541 1,433 1,182 1,075 1,063 646 567 586 489 76 77 91 94 100 29 19 28 22 19 20 34 FY'19 FY'20 FY'21 FY'22 FY'19 FY'20 FY'21 FY'22
Slide 13: Credit card trends improving
Credit card trends improving Spend per customer able to spend1 Active customer spend by category indexed to 2019 2 £150 1.5 2019 H2 2020 H2 2021 H2 2022 H2 1.0 0.5 £100 - H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 Services Grocery / Food Retail Recreational & Travel Other Entertainment • Spend
Slide 14: Cost of risk trends reflect reduced credit risk profile of new customers
Cost of risk trends reflect reduced credit risk profile of new customers… Credit card cost of risk rates Vehicle finance cost of risk rates 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 • Lower credit card cost of risk rates reflecting th
Slide 15: As a result, historic coverage ratios no longer required
…As a result, historic coverage ratios no longer required Credit card coverage ratios Vehicle finance coverage ratios1 40% 30% 20% 15% 0% 0% H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2,22 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 1,465 1,433 1,174 1,075 978 1,063 1,035 1,182 462 489 516 567 6
Slide 16: Credit card asset quality
0% 100% 50% £0 £1,200 Jan-19 Jan-19 Mar-19 Mar-19 £490 May-19 May-19 <=26.5 Jul-19 Jul-19 Higher Risk Sep-19 Sep-19 Nov-19 Nov-19 Jan-20 Jan-20 Mar-20 Mar-20 May-20 May-20 Jul-20 Jul-20 26.5<=29.5 Sep-20 Sep-20 Nov-20 Nov-20 Jan-21 Jan-21 Booking mix Average Limit Mar-21 Mar-21 May-21 May-21 Jul-21
Slide 17: Vehicle finance asset quality
£0 £1,200 0% 50% 100% Jan-19 Jan-19 £561 Mar-19 Mar-19 May-19 May-19 Jul-19 Jul-19 Sep-19 Near Prime (NP1) Sep-19 Higher Risk Nov-19 Nov-19 Jan-20 NP2 Jan-20 Mar-20 Mar-20 May-20 NP3 May-20 Jul-20 Jul-20 Sep-20 NP4 Sep-20 Nov-20 Nov-20 Jan-21 T1A Jan-21 Mar-21 Booking mix Mar-21 May-21 T1B Average d
Slide 18: Personal loans asset quality
800 900 20% 40% 80% 0% 100% 60% Jan-19 Jan-20 847 Mar-19 Mar-20 May-19 Jul-19 May-20 Sep-19 Jul-20 Higher Risk Nov-19 Sep-20 Jan-20 0--5 Mar-20 Nov-20 May-20 Jan-21 Jul-20 10--15 Mar-21 Sep-20 Nov-20 May-21 Jan-21 15--20 Jul-21 Mar-21 Booking Mix Sep-21 May-21 Jul-21 Nov-21 20--25 Sep-21 Jan-22 Nov-
Slide 19: Reduction in Capital Requirements
Reduction in Capital Requirements Total TCR + combined buffer Total TCR + combined buffer 21.8%, £395m 15.4%, £278m Total Capital Requirement (TCR) + Combined Buffer3 CCyB: £18m, 1.0% CCoB: £45m, 2.5% TCR: Reduction: £332m, £117m, 6.4% Pre C-SREP New 2 Reduction 18.3% 21.8% 15.4% 6.4% CCyB: £18m, 1.
Slide 20: Regulatory capital resources
Regulatory capital resources £707m £97m (£20m) (£39m) £679m (£54m) (£13m) (£54m) £625m Tier 2: Tier 2: £200m £200m Tier 2: £200m CET1: £507m CET1: £479m CET1: £425m 31 Dec 2021 IFRS 9 transition Adjusted PAT Exceptional/ Dividends Intangible Assets 31 Dec 2022 Final IFRS 9 1 Jan 2023 unwind disconti
Slide 21: Tier 1 position (fully loaded post-IFRS 9 unwind)
Tier 1 position (fully loaded post-IFRS 9 unwind) Tier 1 Surplus: Utilisation of £113m, 6.5% capital inc. growth 20% CET1 Tier 1 Surplus: (CET1 Surplus: £201m, 11.3% £175m, 9.9%) Tier 1 Req.: (CET1 Surplus: Other Tier 1 £312m, 17.2% £241m, 13.5%) AT1 Capacity: £62m, Resources2 3.4% Tier 1 Requiremen
Slide 22: Highly liquid and stable funding position
Highly liquid and stable funding position Strong LCR with significant excesses over requirement… … wholesale unsecured bond maturities in 2023 already pre-funded from existing excesses Retail bonds LCR % Excess HQLA over LCR requirement 2023 £60m £104m Senior bonds 2,830% TFSME £164m Moneybarn secur
Slide 23: Strategic transformation to banking model
Strategic transformation to banking model Transition to a primarily retail funded banking group model will be completed in 2023 Consolidated Group committed facilities including retail deposits (excluding fees and accrued interest), £m 254 164 200 174 200 200 200 2021 2022 174 2023* £1,963m 1,010 £1
Slide 24: Financial outlook
Financial outlook Growth and quality Capital generative business • Capitalising on competitive advantages across • Focusing on the lower risk mid-cost and near-prime capital, funding and liquidity markets of approximately 14m people… • Continued focus on credit quality whilst accelerating • …resulti
Slide 25: Strategy and Outlook
Strategy and Outlook Malcolm Le May Chief Executive Officer
Slide 26: Vanquis Banking Group today
Vanquis Banking Group today Vehicle Personal Second charge Diverse product Credit cards 1.5m customers finance loans mortgages offering… £1.2bn receivables 100k customers 34k customers (pilot phase) £646m receivables £76m receivables …with a customer-led strategy to build Our Purpose Our Vision Our
Slide 27: Target addressable market growth
Target addressable market growth • The Group’s estimated target +15% addressable1 market of consumers has increased by approximately 15% since 13.6m 2018 11.8m • Growth in addressable markets going forwards to be driven by: o Ongoing impact of the pandemic on household finances increasing inwards mo
Slide 28: Product growth initiatives
Product growth initiatives Market size Market share in 2023 1 Growth initiatives in 2023 in 2022 (consumers) • Leverage bank platform with access to capital & funding Group 10.0% 13.6m • Capitalising on growth in its addressable markets • Second charge mortgage offering as pilot phase develops • New
Slide 29: Second charge market
Second charge market Gross new lending volumes per annum1 £1,253m £1,110m £1,069m £1,024m £844m £874m £727m £597m £445m £326m £277m £286m 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 • Growing market. The second charge mortgage market has grown rapidly since the financial crisis, with
Slide 30: Group capital management framework
Group capital management framework Strong • Strong capital position with reduction in capital requirements received from the PRA Regulatory • Approval of large exposure waiver will support retail deposit funding across the Group Capital and • Access to low-cost retail deposits enables falling cost o
Slide 31: Outlook
Outlook • Strong momentum across all loan books during Q4’22 which continued in the first two months of FY’23 with asset quality remaining high • For 2023, Vanquis Banking Group: o Will continue to focus on credit quality whilst accelerating receivables growth for FY’23 versus FY’22 o Anticipates sp
Slide 32: Questions
Questions • Appendix • Contacts
Slide 33: Appendix
\Yo VANQUIS ex" Appendix
Slide 34: Our strategy is underpinned by our Purpose
Our strategy is underpinned by our Purpose • Our Purpose is supported by our Mission which is backed up by our Strategic Priorities • Investing in our Communities. We invested £1.4m in our community and money advice programs in 2022 • Helping families. During the year, we launched a free school unif
Slide 35: Group results – continuing operations
Group results – continuing operations FY’22 FY’21 Change £m £m % Customer numbers (‘000) 1,675 1,655 1 Period end receivables 1,904 1,678 14 Gross average receivables 2,039 2,076 (2) Interest income 487 474 3 Interest expense (59) (49) 20 Net fee and commission income 44 57 (23) Other income 8 — — T
Slide 36: Group results – statutory balance sheet
Group results – statutory balance sheet1 FY’22 FY’21 Change Assets £m £m % Cash and balances at central banks 465 718 (35) Amounts receivables from customers2 1,896 1,678 13 Pension asset 31 112 (72) Goodwill and other intangibles 135 124 9 Other assets 129 93 39 Total assets 2,656 2,725 (3) Liabili
Slide 37: Credit cards results
Credit cards results FY’22 FY’21 Change £m £m % Customer numbers (‘000) 1,541 1,541 — Period end receivables 1,182 1,063 11 Gross average receivables 1,332 1,379 (3) Interest income 333 329 1 Interest expense (22) (25) (12) Net fee and commissions income 44 57 (23) Other income 5 — — Total income 36
Slide 38: Vehicle finance results
Vehicle finance results FY’22 FY’21 Change £m £m % Customer numbers (‘000) 100 94 6 Period end receivables 646 586 10 Gross average receivables 657 671 (2) Interest income 141 138 2 Interest expense (22) (27) (19) Net fees and commissions income — — — Other income — — — Total income 119 111 7 Asset
Slide 39: Personal loans results
Personal loans results FY’22 FY’21 Change £m £m % Customer numbers (‘000) 34 20 70 Period end receivables 76 28 171 Gross average receivables 51 26 96 Interest income 13 7 86 Interest expense (1) (1) — Net fee and commission income — — — Other income — — — Total income 12 6 100 Asset yield 25.7% 28.
Slide 40: Capital (C-SREP reconciliation)
Capital (C-SREP reconciliation) Pre C-SREP New Requirement Change Total Capital Requirement 18.3% 11.9% (6.4%) TCR + Combined Buffer1 21.8% 15.4% (6.4%) CET1 Requirement 13.8% 10.2% (3.6%) Tier 1 Requirement 17.2% 12.4% (4.8%) £62m £40m (£22m) AT1 Capacity 3.4% 2.2% (1.2%) £83m £54m (£29m) Tier 2 Ca
Slide 41: Expected credit loss bridge
Expected credit loss bridge Expected credit loss (ECL) (£m) 26.8% Coverage 24.1% • During the year, ECLs reduced marginally Coverage reflecting a reduction in realised risk of Ratio Ratio default expected back in 2021 which is 26.8% Coverag partly offset by an increased cost of living e risk for con
Slide 42: Alternative performance measure calculations
Alternative performance measure calculations Alternative Performance Measures Method of Calculation Basic earnings per Share (EPS) Profit after tax for the 12 months ended 31 December, divided by the weighted average number of shares in issue Profit after tax, excluding the amortisation of acquisiti
Slide 43: Investor Relations contact
Investor Relations contact Owen Jones, Group Head of Investor Relations Telephone: +44 (0)7341 007842 Email: owen.jones@vanquisbankinggroup.com Website: www.vanquisbankinggroup.com