JP Morgan cuts Provident Financial target, but keeps dividend estimate

Analysts at JP Morgan slashed their target price on shares of Provident Financial but reiterated an 'overweight' stance, emphasising that recent negative issues impacting the firm's Home Credit unit were 'operational' in nature and unrelated to credit quality.

Financial Services

16,655.77

17:09 18/11/24

0.69%

114.10

FTSE 100

8,109.32

16:35 18/11/24

n/a

FTSE 350

4,473.50

17:09 18/11/24

n/a

FTSE All-Share

4,431.13

16:49 18/11/24

n/a

Vanquis Banking Group 20

39.00p

16:40 18/11/24

1.17%

0.45p

That followed meetings with the company's management and Provident's call with analysts.

So while JP Morgan admitted that the update from the company on its transition to a new operating model in Home Credit was "clearly disappointing" they decided to stick to their forecast for a flat dividend in fiscal year 2017.

That put the shares at a dividend yield of 5.6%.

Nevertheless, the analysts did cut their estimates for the company's profits before tax in fiscal years 2017 and 2018 by roughly 15% abd 11%, respectively.

JpP Morgan lowered its target price from 3,650p to 3,200p.

"Based on our sum-of-the-parts valuation, the current price is effectively ascribing no value to the Home Credit business, which we believe is not justified."