Consumer lender Provident Financial (PFG) dips 0.4% to £28.55 as slowing growth in its auto lending business weighs on investor sentiment.
Moneybarn, Provident’s motor finance business, grew lending 35% in the year to 31 December, down from 43.7% in the first half. Provident chief executive Peter Crook flagged weaker demand for loans in the second-hand car market in the final three months of 2016.
There was also a slowdown in Provident's Consumer Credit Division (CCD), according to Numis analyst James Hamilton, which was offset by higher-than-expected growth in its Vanquis Bank credit card unit.
GROWTH SLOWING
'Provident is a good business with a great track record operating in a sustainably high margin, high return market segment where it is a market leader,' writes Hamilton.
'It does however command a very substantial premium to the specialist lenders sub-sector and the growth profile is clearly slowing.'
Provident chief executive Crook says the UK’s largest subprime lender will still deliver profit in line with analyst estimates of £334m when it reports full-year results on 28 February.
RESULTS AS EXPECTED
‘I am pleased to report that each of our businesses continued to trade well through the final quarter of the year and the group is expected to report 2016 results in line with expectations,’ says Crook.
Provident's share price decline was in line with a fall on the FTSE 100 of around 0.3%.
| EARNINGS ESTIMATES | |||
| Provident Financial - Key metrics (£m) | |||
| 2015 | 2016e | 2017e | |
| Revenue | 1,113 | 1,186 | 1,291 |
| Profit before tax | 293 | 335 | 356 |
| Adjusted EPS | 160p | 172p | 185p |
| Dividend per share | 120p | 131p | 142p |
| Source: Reuters, 16 Jan 2016 (year-end 31 Dec) | |||
LENDING SECTOR ROUND-UP
In the same sector, Non-Standard Finance (NSF) today said it delivered 19% growth across its three key lending businesses in the past 12 months. Shares in NSF also declined by around 1% to 54p.
Rival Secure Trust Bank (STB), which sold its Everyday Loans unit to NSF in early 2016, said on Friday 13 January it was halting unsecured consumer loans because of rising concerns of a borrowing boom and falling borrowing standards.
As part of the transaction with NSF, Secure Trust owns 7.4% of the shares of its rival.
