Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — Investor Day (March 2024)
85 slides from Vanquis Banking's investor day presentation, Mar 27, 2024
Slide 1: Strategy Seminar
Strategy Seminar 27 March 2024 1
Slide 2: Disclaimer – Cautionary Statement
DISCLAIMER – CAUTIONARY STATEMENT This document has been prepared by Vanquis Banking Group plc (the “Company”). It was prepared for the purpose of the presentation(s) given to the Company’s stakeholders at the Strategy Day on 27 March 2024. The information, statements and opinions contained in this
Slide 3: \Y> VANQUIS 2"
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Slide 4: Agenda
Agenda 14:00 – 14:15 Strategy Overview Ian McLaughlin 14:15 – 14:25 Focus on Customer Jill Armstrong 14:25 – 14:40 Technology Transformation Jem Walters 14:40 – 14:55 Financial Outcomes Dave Watts 14:55 – 15:15 Coffee Break Jill Armstrong Panel: John Natalizia 15:15 – 15:30 Customer Centricity Garet
Slide 5: Purpose
Purpose Our purpose is to deliver caring banking so our customers can make the most of life’s opportunities. 5
Slide 6: People
People Ian McLaughlin CEO Executive committee Dave Watts Jill Armstrong Ian Fielder Gareth Cronin Chief Operations Chief Financial Chief Customer Transformation Lead Officer Officer Officer Jem Walters John Natalizia Nicola Lipson Melanie Barnett Chief Technology CEO Snoop Chief People General Couns
Slide 7: Proposition
Proposition Credit Vehicle Loans Savings Snoop cards finance # Customers 1,376k 112k 44k 48k 234k Gross receivables Balances £1,476m £1,144m £118m £1,919m Data at end Dec 2023 7
Slide 8: Position
Position Growing customer demand Under financial Stretched but Affluent pressure managing Provision of credit reducing 34% 76% c.3m reduction in decrease in loans people who the non-prime to customers could be borrowing lending market with lowest money on the since 2019 credit rating black market 8
Slide 9: Structural advantages
Structural advantages Experience of colleagues Customer relationships Insight and data Strong capital Strong liquidity >80% retail funded 9
Slide 10: Other points to note
Other points to note Vehicle Claims finance management Independent discretionary company external risk commission complaint assessment arrangements volumes review 10
Slide 11: What are we changing
What are we changing From To • Customer needs led and integrated • Product led • Helping customers save money Customer proposition • Siloed • Increasingly diversified proposition • Poor pricing discipline • Meeting customers where they are • Strong risk management • Enhanced data and modelling Risk
Slide 12: Leveraging across the Group
Leveraging across the Group Team and experience Platform, capability and data Brand and mobile app Distribution and customer incubation 12
Slide 13: Our purpose
Our purpose To deliver caring banking so our customers can make the most of life’s opportunities Customer Serving our customers with differentiated solutions that meet their needs centricity Insightful Efficient Data driven, Great place risk organisation tech enabled to work management Financial Out
Slide 14: Customer thank-you message
I just wanted to personally thank you from the bottom of my heart. My daughter is in tears that you have done this for her. You have actually changed the course of her life and we are so, so grateful. Thank you so much. I hope you and your family have an amazing life! Debbie – Vanquis customer’s mum
Slide 15: VONQUIS
VONQUIS
Slide 16: Jill Armstrong
Jill Armstrong Chief Customer Officer Vanquis Banking Group: 2 months Financial services experience: 21+ years Leadership roles held at: Bank of Ireland UK GE Capital 16
Slide 17: Clear market need for borrowing
Clear market need for borrowing £2bn market credit deficit Increasing Falling supply demand Out of rejected customers: • Real income down 1.9% • Retrenchment of lenders • 19% ended up not borrowing since 2021 • Loan offer rate in • 17% targeted by loan sharks / • Consumer basket 17% near-prime down
Slide 18: Closing the credit deficit requires specific banking capabilities
Closing the credit deficit requires specific banking capabilities Often complex life situations Complex regulatory Lower financial requirements resilience Non-linear credit repayment journey 18
Slide 19: We are building a leading bank to serve those who need us most
We are building a leading bank to serve those Deep who need us most understanding of the customer Our purpose is to deliver caring banking so our customers can make the most of life’s opportunities Tailored Specialised proposition capabilities 19
Slide 20: Target customer cohorts and their needs
We have identified our target customer cohorts and their needs Three key customer needs Stretched but Help me managing borrow healthily 19m (37%) UK adult population Help me feel in control of my everyday spending 4m 10m (8%) (19%) Help me build Important customer Under financial a financial safety
Slide 21: Our future proposition
Our future proposition Help me Help me build Help me feel in control a financial borrow healthily of my everyday safety net spending Credit Vehicle 2nd charge Loans Savings cards finance mortgages Single Vanquis app 21
Slide 22: Building long term customer relationships
Building long term customer relationships From To • Reliance on affiliate channels • Improve customer retention • High decline rate in direct • Grow direct channels • Nascent partnership strategy • Expand partnerships • Underinvestment in brand • Leverage Snoop • “Not yet” approach to credit • Say “
Slide 23: Launching new partnerships
Launching new partnerships 23
Slide 24: Our roadmap
Our roadmap We are here Customer vision 2023 2024 / 25 2026+ Foundations Brilliant basics Beyond banking • Snoop acquisition • Upgrade capabilities • Single Vanquis app • Single customer function and journeys • Predictive in-life • Confirmed target • Launch new propositions customer management cohor
Slide 25: Jem Walters
Jem Walters Chief Technology Officer Vanquis Banking Group: 6 months Financial services experience: 20+ years Leadership roles held at: Snoop Virgin Money 25
Slide 26: Key messages
Key messages Our technology transformation strategy (‘Gateway’): • Clearly defined • Progressing well • Low execution risk • Phased implementation • £25-30m investment, complete in 2 years • Significant benefits • £23-28m annual cost savings from 2026 26
Slide 27: The story so far and what's next
The story so far and what’s next 2022 / 23 2024 / 25 2025 / 26 Investment £40m £20-25m £5m Foundations Credit cards, Decommission RESET & open market vehicle finance three legacy platforms loans & existing market loans £23-28m pa cost savings Incremental benefit realisation Execution risk reduces 27
Slide 28: Benefits across the board from the new platform
We see benefits across the board from the new platform Customer Risk Operations Tech Basic Increased High Lower Green Clicks Data centre Cloud self-service self-service declines declines screens Standard Dynamic Limited Wider score Multiple One system Waterfall Agile pricing pricing score bands band
Slide 29: What Gateway will do for our customers
What Gateway will do for our customers Improved capability Customer benefits How we will measure success Increased self-service More empowered Customer satisfaction Dynamic pricing Better deals Average retention rates Highly personalised insights More reasons to stay % straight through processing Di
Slide 30: Reduced operating costs of £23-28m from 2026
Reduced operating costs of £23-28m from 2026 Operations Technology £8-11m pa £15-17m pa Increased self-service Lower demand Old tech New tech Process automation Higher productivity Three platforms One platform Optimised Digitisation Lower fulfilment cost Lower resource cost operating model Real and
Slide 31: Dave Watts
Dave Watts Chief Financial Officer 31
Slide 32: Financial outcomes
Financial outcomes 1 Sustainable growth Gross customer receivables and income 2 Maintaining risk-based margins Net Interest Margin (NIM) 3 Improving efficiency Costs 4 Ultimately, rebuilding healthy returns Adjusted ROTE and guidance 32
Slide 33: Gross customer receivables
1 Gross customer receivables Credit cards Vehicle finance Loans 2nd charge mortgages 12-14% Ambition 5% 1-2% • Grow receivables1 8-12% CAGR • Diversify the balance sheet 34% 48-53% • Secured lending to become 61% more meaningful 33-37% • Non-linear growth Growth guidance £2.35bn £3.0-3.5bn Cards Mid
Slide 34: Income
1 Income Credit cards Vehicle finance Loans 2nd charge mortgages Snoop 5-10% 4% Drivers • Balance sheet growth 25% 20-25% • Appropriate pricing 71% 70-75% • Optimised funding mix • Potential base rate tailwinds • Snoop non-interest income £488.8m £570-600m Total income Total income 2023 2026 34
Slide 35: Net Interest Margin
2 Net Interest Margin From To Drivers 19% • Repricing Excluding 2nd charge mortgages • Enhanced customer segments 19% • Optimised funding mix >17% Including 2nd charge mortgages • Potential base rate tailwind • Potential capital efficiencies • Indicative product NIMs1 (Credit cards 24-26%; Vehicle f
Slide 36: Cost
3 Cost 2023 2024 2026 Adjusted cost £298m £305-320m - Cost: Income ratio 61% 60-63% 49% or lower Savings £60m £23-28m Efficiency Strategic levers Operational • Rightsizing • Tech enablement • Finalising our in-flight offshoring programme • Customer self-service & automation • Operating model • Legac
Slide 37: Cost mix
3 Cost mix Manufacturing Customer support Functions1 Customer 7% 8-10% • Greater focus on Customer 24% 38% 20-25% 30-35% • Lower manufacturing through tech update • Customer support cost constant 31% 30-35% • Cost discipline in Functions 2023 2026 1. Functions includes staff bonus 37
Slide 38: Adjusted ROTE growth
4 Adjusted ROTE growth Income Cost Evolving Greater Mid-teens efficiency non-interest income 2-3% Receivables Lower cost growth and of funds 2-3% pricing 1-2% 5-7% 3.2% 2023 2026 Supported by non-linear receivables growth 8-12% CAGR 38
Slide 39: Guidance summary
4 Guidance summary* Transition to mid-teens ROTE in 2026 FY23 FY24 Guidance FY26 Target NIM (Exc. 2nd charge mortgages) 19.0% 19% 19% NIM (Inc. 2nd charge mortgages) 19.0% >18% >17% Cost: Income ratio 60.9% 60-63%** 49% or less Retail funding (% of all funding) 83.7% >85% >85% CET1 ratio 20.5% 19.5–
Slide 40: VONQUIS
VONQUIS
Slide 41: Jill Armstrong
Jill Armstrong Chief Customer Officer Vanquis Banking Group: 2 months Financial services experience: 21+ years Leadership roles held at: Bank of Ireland UK GE Capital 41
Slide 42: Gareth Cronin
Gareth Cronin Transformation Lead Vanquis Banking Group: 4.5 years Financial services experience: 23+ years Leadership roles held at: Aviva Allied Irish Banks 42
Slide 43: John Natalizia
John Natalizia Chief Digital Officer / CEO, Snoop Vanquis Banking Group: 6 months Financial services experience: 25+ years Leadership roles held at: Virgin Money MBNA / Bank of America KPMG 43
Slide 44: Ian Fielder
Ian Fielder Chief Operations Officer Vanquis Banking Group: 4.5 years Financial services experience: 35+ years Leadership roles held at: Lloyds Banking Group HBOS Virgin Money 44
Slide 45: VONQUIS
VONQUIS
Slide 46: Customer Centricity: Customer insight
Customer Centricity Customer insight Jill Armstrong Chief Customer Officer 46
Slide 47: Customer Centricity: Role of Snoop
Customer Centricity Role of Snoop in delivering our vision John Natalizia Chief Digital Officer / CEO, Snoop 47
Slide 48: Snoop: view all accounts in one place
Snoop helps customers save money View all their accounts in one place 48
Slide 49: Snoop: get help managing money
Snoop helps customers save money Get help with managing money 49
Slide 50: Snoop: personalised content to help save
Snoop helps customers save money Access personalised content that can help them save 50
Slide 51: Snoop: create a budget in seconds
Snoop helps customers save money Create a budget in seconds 51
Slide 52: Snoop: now provides a credit score
Snoop helps customers save money …and now Snoop also provides a credit score 52
Slide 53: Snoop helps customers save money
Snoop helps customers save money View all their Get help with Voted ‘Innovation of accounts in managing one place money the Year’ — Financial Services Forum 2023. Our platform has Create a processed over £100bn budget of transactional data. Access in seconds personalised …and now content that Snoop
Slide 54: Leveraging Snoop for Vanquis
Leveraging Snoop for Vanquis Lower acquisition cost Customer Revenue understanding Snoop as an enabler Experienced team for Vanquis Data driven Digital platform App development 54
Slide 55: Customer Centricity: Helping customers from a credit perspective
Customer Centricity Helping customers from a credit perspective Gareth Cronin Transformation Lead 55
Slide 56: Better customer outcomes
Better customer outcomes Customer Before Arrears Credit card £1,900 Apply Remote and adversarial with £2,000 limit balance Forbearance £2,000 balance sheet provision Vanquis After Customer Financial safety net building and borrowing more healthily Deploy Snoop Credit card £1,900 to save £120pm Partn
Slide 57: Customer Centricity: Integrated customer experience
Customer Centricity Integrated customer experience John Natalizia Chief Digital Officer / CEO, Snoop 57
Slide 58: Snoop and Vanquis
Snoop and Vanquis Together forming a broad and appealing proposition unmatched by rivals Merging capabilities… To fulfil key customer needs… Core banking capabilities Help me borrow healthily Help me feel in control of my everyday spending Help me build a Open banking and financial safety net money
Slide 59: Integrated customer proposition
Integrated customer proposition 59
Slide 60: Snoop makes everyone better off
Snoop makes everyone better off Strong growth since Trebled volume of 250,000 joining Vanquis – Vanquis customers users c.30k new customers using Snoop over per month in Q1 2024 the last quarter 8 out of 10 users tell Deep customer 9 out of 10 users us that Snoop has understanding with say that Snoo
Slide 61: Customer Centricity: Delivering great customer outcomes
Customer Centricity Delivering great customer outcomes Ian Fielder Chief Operations Officer 61
Slide 62: Customer Centricity: Clarity on complaints
Customer Centricity Clarity on complaints Ian Fielder Chief Operations Officer 62
Slide 63: 2023 complaints by category
2023 complaints by category 39% Service 61% Lending process 63
Slide 64: 2023 lending process complaints by source
2023 lending process complaints by source Customer CMCs 9% 35% CMCs 91% 65% #2-50 Claims CMC Management #1 Companies (CMCs) 64
Slide 65: Lending process complaints and upholds by year written
Lending process complaints and upholds by year written Complaints % Uphold % Complaints received <1.4% 1.4% 1.3% 1.2% 1.1% 0.7% 0.2% 0.1% 0.1% 0.1% 0.0% 0.2% 0.0% <0.2% upheld 2018 2019 2020 2021 2022 2023 Complaints received and upholds as a % of business written Complaints % is lending process com
Slide 66: Customer message on unauthorised claims
Hi, I've not authorised anyone to act on my behalf. I am a Vanquis customer, always pay on time and have no issue with you. I am satisfied with the service you provide. I have contacted these "solicitors“, who I did not instruct, to stop this and remove my details. Pamela – Vanquis customer 66
Slide 67: Customer Centricity: Clarity on complaints
Customer Centricity Clarity on complaints Ian Fielder Chief Operations Officer 67
Slide 68: Customer Centricity: Delivering great customer outcomes
Customer Centricity Delivering great customer outcomes Ian Fielder Chief Operations Officer 68
Slide 69: VONQUIS
VONQUIS
Slide 70: Sustainable Growth: Growth in key business areas
Sustainable Growth Growth in our key business areas Jill Armstrong Chief Customer Officer 70
Slide 71: Key growth enablers
Key growth enablers • Multiple product offerings Cards • Digitise existing customer management • Analytics to drive engagement and retention • Enhance product offering Vehicle finance • Extend asset classes • Enhance distribution • Deliver Gateway functionality Loans • Review opportunity for future
Slide 72: Sustainable Growth: How Snoop supports growth
Sustainable Growth How Snoop supports growth John Natalizia Chief Digital Officer / CEO, Snoop 72
Slide 73: How will Snoop support sustainable and efficient growth
How will Snoop support sustainable and efficient growth for Vanquis Growth Efficiency Low cost Customer acquisition growth Low cost Revenue execution 73
Slide 74: Sustainable Growth: Risk management support for growth
Sustainable Growth Risk management support for growth Gareth Cronin Transformation Lead 74
Slide 75: VONQUIS
VONQUIS
Slide 76: PwC independent review of risk function
PwC independent review of risk function The Risk function has made tremendous progress over the last 3 years. The Review found a well-established Risk function with a clear mandate that is aligned to the current needs of Vanquis Banking Group and its key stakeholders. PwC external quality assessment
Slide 77: Risk management
Risk management A key strategic enabler Skills and capabilities Greater customer Cost satisfaction Increased reduction acquisition Higher efficiency Operating model Culture and processes Capital efficiency 77
Slide 78: VONQUIS
VONQUIS
Slide 79: Efficient Organisation: Operations support
Efficient Organisation Operations support Ian Fielder Chief Operations Officer 79
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Slide 81: Efficient organisation: operations support
Efficient organisation Operations support Optimisation Transformation • Collections strategy in credit cards, • Self-service functionality loans and vehicle finance for customers • Further opportunities in forward • Automation of processing work flow debt sales • Single customer servicing across mul
Slide 82: VONQUIS
VONQUIS
Slide 83: Questions?
Questions? 83
Slide 84: Summary
Summary • 2023 results establish firm foundations to rebuild the business • Our business matters • Expanded target market of 19m ‘stretched but managing’ consumers • Favourable market conditions: £2bn deficit between demand and supply • Increasingly diversified and differentiated customer propositio
Slide 85: VONQUIS
VONQUIS