Profit warning, CEO gone, shares smoked: UK subprime lender Provident Financial is in crisis

CEO Peter Crook is resigning with immediate effect. Provident Financial

LONDON — Shares in Provident Financial, a UK-based door-to-door lender, fell more than 43% on Tuesday after the company cut its dividend, issued a profit warning, announced the resignation of its CEO, and announced the regulator is investigating part of its business.

Bradford-based subprime lender Provident warned investors it expects to make a loss of between £80 million and £120 million. Provident told investors in June to expect a reduction in profit of £60 million — but still a profit.

The huge reversal in fortunes is down to a big change to Provident’s business that has gone awry. Debt collection rates plummeted from 90% in 2016 to 57% after the company changed from using self-employed agents to full-time “customer experience managers.” Customers are also borrowing £9 million a week less.

Provident offers door-to-door loans to subprime borrowers who would usually be turned away from traditional lenders. It also owns online lender Satsuma, which is advertised on TV.

The company says progress on adopting its new business model has been “too weak” and it has fallen “a long way short of achieving [its] objectives.” It blamed IT system issues for some of the failings.

As if the collapse in repayments wasn’t enough, Provident also announced on Tuesday that the Financial Conduct Authority is investigating repayment plans offered on the company’s Vanquis credit card, Provident said in a statement on Tuesday. The product makes around £70 million of gross revenue annually.

The board scrapped the dividend and CEO Peter Crook decided to step down “with immediate effect.” He has been replaced by Manjit Wolstenholme in the role of executive chairman.

Wolstenholme says in a statement:

“I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business. Protecting the group’s capital base through withdrawing the interim dividend and in all likelihood the full-year dividend is the appropriate response to maintain the highly valuable franchises of Vanquis Bank, Moneybarn and Satsuma. My immediate priority is to lead the turnaround of the home credit business.”

Shares are down by 48.94% as of 8:20 a.m. UK time. Here’s the chart:


The crash will come as a boon to short-sellers who have been circling the company. The Sunday Times reported last week that investment firms AQR, Systematica, and Lansdowne Partners all disclosed significant short positions in August to the markets regulator.

Provident’s shares have been under pressure for several months. The share price is now at a five-year low:

Provident financial
Provident Financial shares are at a 5-year low.