Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — Provident Financial Group — H1 2021 Earnings Presentation
46 slides from Vanquis Banking's earnings presentation, Aug 11, 2021
Slide 1: H1’21 Results
H1’21 Results Provident Financial Group 11 August, 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 • Group adjusted profit before tax (PBT) from ongoing operations was £63.5m (H1’20 PBT: £4.9m) excluding CCD Capital headroom above TCR & combined buffers1 • Total Group adjusted PBT of £5.8m (H1’21 LBT: £32.7m) including CCD • Scheme of Arrangement for CCD sanctioned by the
Slide 5: Consumer Credit Division
Consumer Credit Division • 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 • Following the sanction hearing on 30 July, the Scheme was sanctioned on 4 August by the High Court Scheme status: • The Scheme w
Slide 6: PFG: a specialist bank, focused on three core products in growing markets
PFG: a specialist bank, focused on three core products in growing markets H1’21 Customer Net interest Primary Products Brands Est. market size FY’201 Loan book numbers Revenue yield Cost of funds margin ROA Sub/Near £4.6bn Prime (Debt Credit cards outstanding) £993m 1,537k 39.0% 2.8% 36.1% 10.8% (H1
Slide 7: The market opportunity for PFG
The market opportunity for PFG …Now targeting a >£16bn market1 • Specialist bank serving the underserved customer with a mid-cost market focus £2.9bn • Step change in our addressable market to c.£16bn • Customer growth driven by Covid-19 factors £8.6bn 3 £4.6bn • A return to pre-Covid levels could s
Slide 8: Credit Cards – Vanquis Bank
Credit Cards – Vanquis Bank • Vanquis Bank reported an adjusted PBT of £57.1m (H1’20: £11.8m) driven by lower impairment year-on-year as macroeconomic conditions improved • Customer expenditure trends improved progressively throughout the first six months of the Credit card receivables as at H1’21 y
Slide 9: Unsecured Personal Loans – Vanquis Bank
Unsecured Personal Loans – Vanquis Bank • Vanquis Bank is the only provider of unsecured loans in the sub-prime segment which also has a large-scale credit card customer base to leverage new lending opportunities • The plan is to broaden the loans proposition to better meet the needs of existing and
Slide 10: Vehicle Finance - Moneybarn
Vehicle Finance - Moneybarn • Moneybarn delivered an adjusted PBT of £15.5m (H1’20: £2.3m) driven by higher revenue, from the growth in the receivables book, and lower impairment. • Credit issued increased by 30% year-on-year as customer demand for used vehicles improved progressively as lockdown re
Slide 11: Regulation
Regulation • We recognise the importance of the relationships we have with our regulators. • During the Scheme of Arrangement for CCD, we worked collaboratively and openly with the PRA and FCA to deliver the best outcome for customers. • We have started the process of preparing our application to th
Slide 12: Summary
Summary • The first six months of 2021 saw improvements year-on-year across: • Customer demand • Credit quality • Impairment trends • We will move forward to execute our strategy of becoming the specialist bank for the underserved customer, focusing on the mid-cost segment of the market, across: • C
Slide 13: Financial Review
Financial Review Neeraj Kapur Chief Finance Officer
Slide 14: Summary financials
Summary financials Group (excl. CCD) H1’21 H1’20 • Group adjusted PBT from ongoing operations of £63.5m (H1’20: £4.9m) excluding CCD. Net interest margin (£m) 239 294 • Group adjusted PBT including CCD of £5.8m (H1’20 loss before tax: £32.7m). Impairment charge (£m) (51) (186) • Vanquis Bank and Mon
Slide 15: Group results
Group results H1’21 H1’20 Change £m £m % Credit Cards (Vanquis Bank) 57.1 11.8 384% Vehicle Finance (Moneybarn)1 15.5 2.3 574% Central costs (9.1) (9.2) 1% Adjusted ongoing profit before tax2 63.5 4.9 1,196% Amortisation of acquired intangibles (3.7) (3.7) - Exceptional items (46.3) 8.3 (658%) Home
Slide 16: Product Snapshot
Product Snapshot Average YTD Primary Products Brands receivables Net interest margin Impairment Risk-adjusted net Adjusted PBT/(loss) (£m) (£m) (£m) interest margin (£m) (£m) Credit Cards & H1’21 1,004 181.4 (30.8) 150.6 57.1 Unsecured Personal H1’20 1,341 244.8 (149.9) 94.9 11.8 Loans H1’21 588 54.
Slide 17: Key performance indicators (‘KPIs’)
Key performance indicators (‘KPIs’) Shareholder KPIs H1’19 H1’20 H1’21 Cost KPIs1 H1’19 H1’20 H1’21 EPS (basic) 15.6 3.5 17.0 Cost of risk 12.1% 20.1% 6.4% EPS (adjusted)1 26.6 2.3 18.9 Cost of funding1 3.3% 3.4% 3.2% RORE 16.5% 3.8% 19.5% Cost to income ratio1 31.1% 31.8% 47.3% ROTE 11.5% 2.4% 10.3
Slide 18: Key performance indicators (‘KPIs’)
Key performance indicators (‘KPIs’) 30.0 24% 25% 19.5% 26.6 16.5% 25.0 21% 20% 20.0 18.9 11.5% 17.0 15% 10.3% 15.6 9.5% 15.0 8.4% 12% 10% 10.0 3.8% 3.1% 5% 2.4% 5.0 3.5 2.3 0.0 0% H1’19 H1’20 H1’21 H1’19 H1’20 H1’21 RORE ROTE ROA EPS (basic) EPS (adjusted) Risk-adjusted net-interest margin (RHS) • S
Slide 19: Credit card spending back to pre-Covid levels
Credit card spending back to pre-Covid levels Vanquis and Market1 Credit Card Spend – indexed at Feb'20 Vanquis Spend By Category H1’21 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jan Aug Feb Jan Aug Mar Apr May Sep Feb Nov Dec Mar Apr May Sep Jan Feb Apr Nov Dec Mar May Jul Jul Jun Oct Jun Oct Jun '19 '20
Slide 20: Customer bookings improved during H1’21
Customer bookings improved during H1’21 Credit Card New Bookings by Month Trend1 Motor Finance New Bookings by Month Trend 21k 3k Jan'21 Feb'21 Mar'21 Apr'21 May'21 Jun'21 Jan'21 Feb'21 Mar'21 Apr'21 May'21 Jun'21 • Credit card bookings improved as restrictions lifted and following the success of th
Slide 21: Credit issued above H1’20 levels
Credit issued above H1’20 levels Credit card credit issued has returned to pre-Covid levels Motor finance credit issued above pre-Covid levels '19 '20 '21 '19 '20 '21 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun • Credit card credit issued improved as restrictions lifted and H1’21 levels were abo
Slide 22: Collections performance robust overall
Collections performance robust overall Credit card collections slightly below pre-Covid levels due to Motor finance collections notably above pre-Covid levels average book size '19 '20 '21 '19 '20 '21 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun • Collections from credit card customers in absolut
Slide 23: Falling impairment trends in H1’21
Falling impairment trends in H1’21 Impairment Rates 22.3% 19.4% 20.1% 17.7% 14.1% 13.7% 6.1% 6.8% 6.4% 1 Credit Card Vehicle Finance Group H1’20 H2’20 H1’21 H1’20 H2’20 H1’21 H1’20 H2’20 H1’21 1,202 1,094 993 516 567 602 1,718 1,661 1,595 Net Receivables • Underlying delinquency and a smaller receiv
Slide 24: Coverage ratios remain robust
Coverage ratios remain robust Coverage ratios 31.5% 30.2% 27.9% 28.7% 27.4% 25.5% 22.8% 23.5% 20.8% 1 Credit Card Vehicle Finance Group H1’20 H2’20 H1’21 H1’20 H2’20 H1’21 H1’20 H2’20 H1’21 1,202 1,094 993 516 567 602 1,718 1,661 1,595 Net Receivables • Coverage of the credit card receivables book i
Slide 25: 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 Jun'21 Dec'19 Mar'20 Jun'20 Sep'20 Dec'20 Mar'21 Jun'21 • Delinquency rates across both credit cards and vehicle finance continued to improve during H1’21 • We remain
Slide 26: ECL driven by significant deterioration in the macroeconomic outlook
ECL driven by significant deterioration in the macroeconomic outlook Expected credit losses have remained flat1 Assumed UK unemployment 2021 2022 Peak Base 6.0% 5.9% Average Base 5.4% 5.5% • The Group’s coverage ratio rose to 28.7% at the end of H1’21 vs. 25.5% at H1’20 • Total ECLs outstanding rema
Slide 27: Future growth potential
Future growth potential Credit Card net receivables decreased 9% since FY’201 Vehicle Finance net receivables increased 6% since FY'20 £1,462m £602m £1,202m £1,094m £993m £567m £516m FY'19 H1'20 FY'20 H1'21 H1'20 FY'20 H1'21 • Credit card receivables were impacted by lower customer acquisition and r
Slide 28: Regulatory capital
Regulatory capital Capital ratio meets regulatory requirements over the next three Resilient and appropriate capital base including absorption of expected reductions years TCR CET1 TCR + CRD & CRD ratioCET1 buffers buffers 34.0%34.3% 1 20.8%20.8% • Regulatory capital assessed over a three year view
Slide 29: Diversified funding mix across the Group
Diversified funding mix across the Group Liquidity • Highly liquid position, with in excess of £200m held by both Vanquis PFG non-bank funding (£m) and Bank and Group above Liquidity Coverage Ratio requirements, and a Total: £715m Funding ratio of 472% at Group. This represents more normalised liqui
Slide 30: Wholesale funding maturity profile – update
Wholesale funding maturity profile – update • The chart shows the Group’s maturity profile post refinancing of the Maturity Profile - after securitisation & RCF extension (£m) RCF and Moneybarn securitisation. • Beyond the maturity of a £65m retail bond in September 2021, no further wholesale maturi
Slide 31: Strategy and Outlook
Strategy and Outlook Malcolm Le May Chief Executive Officer
Slide 32: PFG: a specialist bank for the underserved
PFG: a specialist bank for the underserved 1 2 3 Focused on attractive core mid- …Underpinned by a strong …Targeting to deliver cost markets… balance sheet… sustainable returns • Diversified funding with retail • Board update on dividend • Credit cards and wholesale policy at FY’21 • Vehicle finance
Slide 33: Well-positioned to deliver in growing markets
Well-positioned to deliver in growing markets Credit cards Vehicle finance Personal loans c.£1bn receivables book c.£600m receivables book c.£16m receivables book • Strong capabilities across • Improved funding profile • Unique market offering underwriting and collections • Platform & IT investment
Slide 34: Strategic and operational initiatives
• Investing in the future with our IT and talent: o Invested £7m in a new Group IT platform capable of housing multiple products o Strengthened the executive team significantly with new hires ▪ CRO, CTO, Divisional MDs, Group Treasurer • Expanding our customer offering with new products and digital
Slide 35: Outlook
Outlook • Proceed with managed run-off and closure of CCD business during H2’21 • Macroeconomic uncertainty will remain but we see scope for cautious optimism PFG, the specialist bank for the • Coverage ratios will be assessed over the course of 2021 underserved customer, remains committed to • The
Slide 36: Questions
Questions • Appendix • Contacts
Slide 37: Appendix
Appendix
Slide 38: Group results – P&L
Group results – P&L H1’21 H1’20 Change £m £m % Customer numbers (‘000) 1,829 2,154 (15.1%) Period end receivables 1,637 1,865 (12.2%) Average receivables 1,681 2,037 (17.5%) Revenue 317 444 (28.6%) Interest (31) (36) 13.3% Net interest margin 286 408 (30.0%) Revenue yield 37.7% 43.6% (5.9%) Cost of
Slide 39: Key performance indicators (‘KPIs’) including CCD
Key performance indicators (‘KPIs’) including CCD Shareholder KPIs H1’21 H1’20 H1’19 Cost KPIs1 H1’21 H1’20 H1’19 EPS (basic) (19.6) (9.2) 8.6 Cost of risk 10.6% 23.4% 15.4% EPS (adjusted) 1 (3.1) (10.1) 22.2 Cost of funding1 3.7% 3.5% 3.3% RORE (20.6%) (8.8%) 7.7% Cost to income ratio1 60.1% 45.5%
Slide 40: Group results – Statutory Balance sheet
Group results – Statutory Balance sheet H1’21 H1’20 Change Assets £m £m % Cash and balances at central banks 486 1,043 (53.4%) Amounts receivables from customers 1,637 1,865 (12.2%) Pension asset 93 118 (21.7%) Goodwill and other intangibles 112 112 0.1% Other assets 142 166 (14.5%) Total assets 2,4
Slide 41: Credit Cards (Vanquis Bank) results
Credit Cards (Vanquis Bank) results1 H1’21 H1’20 Change £m £m % Customer numbers (‘000) 1,537 1,694 (9.3%) Period end receivables 993 1,202 (17.4%) Average receivables 1,004 1,341 (25.1%) Revenue 196 261 (25.1%) Interest (14) (16) 12.9% Net interest margin 181 245 (25.9%) Revenue yield 39.0% 38.9% 0
Slide 42: Vehicle Finance (Moneybarn) results
Vehicle Finance (Moneybarn) results H1’21 H1’20 Change £m £m % Customer numbers (‘000) 94 82 14.8% Period end receivables 602 516 16.5% Average receivables 588 505 16.5% Revenue 69 64 7.3% Interest (14) (13) (6.0%) Net interest margin 55 51 7.7% Revenue yield 23.4% 25.4% (2.0%) Cost of funding 4.8%
Slide 43: Home Credit & HCSTC (CCD) results
Home Credit & HCSTC (CCD) results H1-21 H1-20 Change £m £m % Customer numbers (‘000) 198 379 (47.6%) Period end receivables 42 147 (71.3%) Average receivables 89 191 (53.7%) Revenue 52 118 (55.8%) Interest (6) (5) (32.6%) Net interest margin 46 114 (59.4%) Revenue yield 118.2% 123.8% (5.6%) Cost of
Slide 44: Group results footnote for slide 15
Group results footnote for slide 15 1 The 2020 June comparatives have been restated to incorporate the changes in Moneybarn accounting policies in relation to the definition of default reflected in the 2020 financial statements 2Adjusted profit before tax from ongoing operations is defined as adjust
Slide 45: Alternative Performance Measure Calculations
Alternative Performance Measure Calculations Alternative Performance Method of Calculation Measures 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 46: 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 46
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