Vanquis shares tumble as it swings to first-half loss

Shares in Vanquis Banking Group were plunging on Friday, after the company swung to losses in its first-half financial results.

The FTSE 250 company said adjusted profit before tax from credit cards totalled £33.9m in the period, down from £75.8m year-on-year, while vehicle finance generated £15.6m in profits, down from £20.2m.

Personal loans recorded a loss of £9.3m - a slight improvement from a loss of £10.7m in the first six months of 2022.

Second-charge mortgage reported a marginal loss of £0.3m.

Central costs and bank interest income amounted to a loss of £30.5m, compared to a profit of £28.1m a year earlier, while bond coupons including Tier 2 reported a loss of £14.9m - a drop from the loss of £2.9m in the first six months of 2022.

The group said its adjusted loss before tax from continuing operations for the period totalled £5.5m, swinging from a profit of £54.3m at the same time last year.

Its statutory loss before tax from continuing operations stood at £14.8m, compared to a profit of £46.9m year-on-year, while its overall statutory loss before tax was £14.5m, down from a profit of £46.9m.

Underlying profit before tax came in at £6m, sliding from £74.3m in the first half of 2022.

Vanquis said its adjusted return on tangible equity was -1.7%, compared to 18.1% a year ago, while adjusted basic losses per share from continuing operations were 1.4p, compared to earnings of 15.4p in 2022.

Basic losses per share from continuing operations amounted to 4.1p, in contrast to earnings of 12.7p in 2022.

The board declared that the interim dividend would remain constant, at 5p per share.

Looking ahead, Vanquis said that in the face of persistently high inflation and rising interest rates, it would will focus on disciplined receivables growth and underwriting high-quality customers in its markets.

It said it expected its net interest margin to remain attractive for the year, adding that it would continue to implement customer-facing initiatives, improve customer offerings, and address cost-base inflation.

The group said it expected improved impairment and cost-of-risk profiles in the 2023 and 2024 financial years, due to a focus on quality.

It said its underlying cost-income ratio objective for 2024 remained unchanged, but the timing would be influenced by its net interest margin, as well as volume dynamics.

“The group performed well during the first six months of 2023,” said chief executive officer Malcolm Le May.

“We maintained our focus on disciplined receivables growth amid uncertain macroeconomic conditions, tight cost controls given persistently high inflation, and continued business investment to establish an operating platform for the future.

“I am also pleased to report that the board is recommending an interim dividend of 5p per share.”

Le May said the group's focus on enhancing asset quality, while operating in growing mid-cost and near-prime markets, enabled it to deliver “attractive but disciplined” receivables growth of 26% year-on-year.

“This resulted in an adjusted loss before tax of £5.5m, reflecting primarily the IFRS 9 impact of strong loan book growth, together with unplanned inflation driving higher costs.

“Given the focus on lower-risk mid-cost and near-prime markets in recent years, delinquency and arrears rates were broadly stable during the period despite a more challenging macroeconomic backdrop than anticipated at the start of the year.

“Our commitment to customer support is unwavering and we will continue to help our customers during this period of high inflation and beyond.”

At 0837 BST, shares in Vanquis Banking Group were down 27.07% at 132p.

Reporting by Josh White for Sharecast.com.