Provident Financial says regulatory issues resolved, reiterates NSF rejection

FTSE 250 doorstep lender Provident Financial said on Wednesday that it has "substantially resolved" its regulatory issues with the Financial Conduct Authority as it outlined its growth plans after rejecting a £1.3bn takeover offer from smaller rival Non-Standard Finance.

The company said the Vanquis Bank refund programme was more than 99% implemented, while Moneybarn has made "significant" progress with the FCA. In addition, the group has completed the search for a new Vanquis chairman and has agreed to appoint a new managing director next month.

The FCA fined credit card provider Vanquis Bank £1.97m last year for failing to disclose the full price of its repayment option plan.

Provident reiterated its view that NSF’s bid - which has the backing of just over 50% of the company’s shareholders - should be firmly rejected, and said management is in the process of developing and implementing "a number of planned growth and efficiency initiatives" across each of the group's divisions.

"As well as undervaluing the group and its prospects, the offer presents significant operational and execution risks due to the changing regulatory environment, NSF's track record of value destruction and NSF's limited experience across the full breadth of Provident's businesses.

"In addition, the offer has major strategic flaws and appears to be based upon a misguided view that the regulatory approach to Provident would be different if the group was owned by NSF."

At 0955 GMT, the shares were down 0.5% to 597.00p.

Canaccord Genuity said there is nothing in Provident’s statement that dissuades it from the view that NSF’s offer is the best option for PFG shareholders.

"We do not see NSF's offer as ideal. We have a number of concerns/questions regarding the proposal and it certainly carries risk, one of which is funding strength, as it is for PFG as a standalone," the broker said.

"However, in the absence of a competing offer for PFG, in whole or part, which we think is very unlikely, we believe this is the best alternative for PFG shareholders and would recommend they accept the offer."

Numis took a different view, however, arguing that unless you are a large shareholder in NSF wanting to inject some liquidity into your underperforming asset, the Provident offer is not a good one.

"We fail to see any significant deal synergies from the NSF offer for Provident with the potential for negative synergies for non-NSF holders of Provident. We see the sale of Moneybarn and Satsuma (or closure) as strategically inappropriate, as well as being very poorly timed.

"Furthermore, the suggested IPO of the NSF HCC business for us demonstrates a lack of market understanding."