Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — H1 2017 Earnings Presentation
40 slides from Vanquis Banking's earnings presentation, 2017
Slide 1: Understanding the big picture and our customers' needs
Understanding the big picture and our customers’ needs 2017 interim results
Slide 2: Today's presentation
2 2017 interim results | Provident Financial plc Today’s presentation Today’s presentation > Highlights and business overview Peter Crook > Financial review Andrew Fisher > Concluding remarks Peter Crook > Questions
Slide 3: Highlights and business overview
3 2017 interim results | Provident Financial plc Highlights and business overview Peter Crook – Chief Executive business overview Highlights and
Slide 4: Highlights
4 2017 interim results | Provident Financial plc Highlights Dividend maintained recognising group’s medium-term growth opportunities business overview Highlights and > Adjusted profit before tax1 reduced by 22.6% to £115.3m and adjusted basic EPS1 down by 22.6% to 60.3p > Reduction in home credit pr
Slide 5: Vanquis Bank
5 2017 interim results | Provident Financial plc Vanquis Bank Strong lift in Vanquis Bank’s first-half new account bookings business overview Highlights and Credit cards: > There continues to be strong demand from developing the underserved, non-standard credit card market > Marketing activity of co
Slide 6: Home credit: background to the operating model change
6 2017 interim results | Provident Financial plc Home credit Background to the change in the home credit operating model business overview Highlights and > Repositioning of home credit since 2013 was successful in maintaining profits and increasing returns in a mature market: - Successful deployment
Slide 7: Home credit: disruption during transition
7 2017 interim results | Provident Financial plc Home credit Disruption during the transition to the new operating model business overview Highlights and > Higher operational disruption than planned during the transition to the new operating model: - Agent vacancies running at around 12%, more than
Slide 8: Home credit: strategic rationale for the change
8 2017 interim results | Provident Financial plc Home credit Strategic rationale for the change in operating model business overview Highlights and > Confident in the strategic rationale for the change in operating model: - Enhanced customer experience through owning and managing every aspect of the
Slide 9: Satsuma
9 2017 interim results | Provident Financial plc Satsuma Excellent progress in developing further lending and digital capability at Satsuma business overview Highlights and > Changing customer preferences and dislocation from payday regulation driving growth in online lending: - Competitors investin
Slide 10: Moneybarn
10 2017 interim results | Provident Financial plc Moneybarn Moneybarn continues to deliver strong growth in new business business overview Highlights and > Competitive environment remains unchanged with around 10 active competitors: - Market supply remains below levels in 2007 - Demand for second-ha
Slide 11: Financial review
11 2017 interim results | Provident Financial plc Financial review Andrew Fisher – Finance Director Financial review
Slide 12: Group results summary
12 2017 interim results | Provident Financial plc Group Results summary Financial review Six months ended 30 June 2017 2016 Change £m £m % Vanquis Bank 100.1 99.8 0.3 CCD 6.3 43.5 (85.5) Moneybarn 16.9 13.6 24.3 Central costs (8.0) (8.0) - Adjusted profit before tax1 115.3 148.9 (22.6) Effective tax
Slide 13: Vanquis Bank results
13 2017 interim results | Provident Financial plc Vanquis Bank Results Financial review Six months ended 30 June 2017 2016 Change £m £m % Customer numbers (‘000) 1,645 1,448 13.6 Period-end receivables 1,476.8 1,280.8 15.3 Average receivables 1,440.6 1,252.1 15.1 Revenue 311.1 280.1 11.1 Impairment
Slide 14: Vanquis Bank customer numbers
14 2017 interim results | Provident Financial plc Vanquis Bank Customer numbers Financial review > New account bookings of 234k, 27% higher than 2016: Customer numbers and new account bookings (‘000) 1,800 400 - Strong momentum from internet channel, including 1,600 350 ‘Express Check’ New account b
Slide 15: Vanquis Bank receivables
15 2017 interim results | Provident Financial plc Vanquis Bank Receivables Financial review 1,600 > Receivables growth of 15.3% to June 2017: 1,400 1,200 - Growth in customer numbers of 13.6% 1,000 - Good performance from the credit line increase £m 800 600 programme to established customers 400 - C
Slide 16: Vanquis Bank risk-adjusted margin
16 2017 interim results | Provident Financial plc Vanquis Bank Risk-adjusted margin (RAM) Financial review > Business model supports stability of RAM: 70% - ‘Low and grow’ strategy 60% - High credit line utilisation significantly reduces 50% volatility of credit losses 40% 30.0% 35.0% > Vanquis Bank
Slide 17: Vanquis Bank risk-adjusted margin
17 2017 interim results | Provident Financial plc Vanquis Bank Risk-adjusted margin (RAM) Financial review > RAM moderated from 32.4% to 31.4% over the last 70% 12 months: 60% Improvement in delinquency +0.6% 50% 40% Reduction in revenue yield from product mix and further -1.6% 30% reduction in ROP
Slide 18: Vanquis Bank arrears profile
18 2017 interim results | Provident Financial plc Vanquis Bank Arrears profile Financial review At 30 June (% receivables) 2017 2016 In order 93.6 93.3 In arrears: - Past due but not impaired - - - Impaired 6.4 6.7 Total 100.0 100.0 > More modest improvement in arrears profile than previous years Im
Slide 19: CCD results
19 2017 interim results | Provident Financial plc CCD Results Financial review Six months ended 30 June 2017 2016 Change £m £m % Customer numbers (‘000) 801 875 (8.5) Period-end receivables 501.4 510.6 (1.8) Average receivables 515.8 497.9 3.6 Revenue 258.4 255.2 1.3 Impairment (115.5) (70.4) (64.1)
Slide 20: CCD reduced effectiveness during transition
20 2017 interim results | Provident Financial plc CCD Reduced effectiveness during transition to the new home credit operating model Home credit collections performance relative to 2016 Financial review 6% > Original guidance of £15m reduction in first half 4% profits due to higher impairment: 2% -%
Slide 21: CCD customer numbers
21 2017 interim results | Provident Financial plc CCD Customer numbers Financial review > Customer numbers stabilised through second half 1,600 of 2016 1,400 > Reduced effectiveness during the transition to the 1,200 1,000 new operating model: ‘000 800 - Lower customer retention 600 400 - Reduced ne
Slide 22: CCD receivables
22 2017 interim results | Provident Financial plc CCD Receivables Financial review > CCD receivables are 1.8% lower than June 2016 10% > Reduced effectiveness during the transition to the Year-on-year receivables movement 5% new operating model (0%) (5%) - £35m year-on-year reduction in home credit
Slide 23: CCD risk-adjusted margin
23 2017 interim results | Provident Financial plc CCD Risk-adjusted margin (RAM) Financial review > Significant expansion in RAM from repositioning of 110% home credit since 2013 100% 90% > Annualised RAM reduced from 81.1% at June 2016 80% to 69.0% at June 2017 70% 81.1% 69.0% 60% > Modest reductio
Slide 24: CCD arrears profile
24 2017 interim results | Provident Financial plc CCD Arrears profile Financial review At 30 June (% receivables) 2017 2016 In order 42.6 44.5 In arrears: - Past due but not impaired 11.6 10.8 - Impaired 45.8 44.7 Total 100.0 100.0 > Deterioration in arrears consistent with adverse collections perfo
Slide 25: Moneybarn results
25 2017 interim results | Provident Financial plc Moneybarn Results Financial review Six months ended 30 June 2017 2016 Change £m £m % Customer numbers (‘000) 46 36 27.8 Period-end receivables 343.8 264.4 30.0 Average receivables 325.1 245.9 32.2 Revenue 49.9 36.3 37.5 Impairment (13.3) (7.0) (90.0)
Slide 26: Moneybarn new business volumes
26 2017 interim results | Provident Financial plc Moneybarn New business volumes Financial review > First-half new business volumes show year-on-year 14 growth of 15%: Half yearly new business volumes (000) 12 - Benefit of group funding and product 10 development 8 - Investment in platform and peopl
Slide 27: Moneybarn receivables
27 2017 interim results | Provident Financial plc Moneybarn Receivables Financial review > Year-on-year receivables growth of 30.0% 400 350 - Average loan value reduced to £8,000 versus 300 £8,200 in 2016 reflecting further modest shift in 250 mix to lower value, higher yielding vehicles £m - Receiv
Slide 28: Group balance sheet
28 2017 interim results | Provident Financial plc Group Balance sheet At 30 June 2017 2016 Financial review £m £m Goodwill 71.2 71.2 Acquisition intangibles 53.8 61.3 Receivables: - Vanquis Bank 1,476.8 1,280.8 - Home credit 471.7 490.0 - Satsuma 25.2 12.6 - glo 4.5 8.0 - Moneybarn 343.8 264.4 Total
Slide 29: Group gearing
29 2017 interim results | Provident Financial plc Group Gearing Financial review 4.0 > Gearing of 2.7 times comfortably within appetite of up to 3.5 times: 3.0 - Versus banking covenant of 5.0 times > Uplift from 2.3 times at June 2016 reflects: 2.0 - Reduced capital generation due to one-off reduct
Slide 30: Diversified funding base
30 2017 interim results | Provident Financial plc Group Diversified funding base At 30 June 2017 £m Financial review Banks 450 Bonds and private placements: - Senior public bond 250 - M&G term loan 80 - Other sterling/euro medium-term notes 20 - Retail bonds 270 Total bonds and private placements 62
Slide 31: Maturity profile of debt
31 2017 interim results | Provident Financial plc Group Maturity profile of debt Financial review 1,200 1,000 800 £m 600 400 200 - Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Sep-17 Sep-18 Sep-19 Mar-18 Mar-19 Syndicated bank facilities Bonds Private placements > 2012 retail bond of £120m matures in O
Slide 32: Retail deposits programme
32 2017 interim results | Provident Financial plc Vanquis Bank Retail deposits programme Financial review Retail deposits maturity profile 1,200 Retail deposits outstanding (£m) 1,000 800 600 400 200 - Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 > Retail deposits represent 72% of Vanquis Bank’s receivables (
Slide 33: Alignment of dividend policy, gearing and growth
33 2017 interim results | Provident Financial plc Group Alignment of dividend policy, gearing and growth Financial review High returns businesses Dividend Gearing Growth policy ≤ 3.5x versus covenant Supports receivables growth Cover ≥ 1.25x of 5.0x of £300m+
Slide 34: Capital generation
34 2017 interim results | Provident Financial plc Group Capital generation 12 months ended 30 June Financial review 2017 2016 £m £m Vanquis Bank 134.7 168.8 CCD 25.6 87.0 Moneybarn 8.2 (0.2) Central (21.5) (6.8) Capital generated1 147.0 248.8 Dividends declared (196.5) (180.7) (Deficit)/surplus (49.
Slide 35: Concluding remarks
35 2017 interim results | Provident Financial plc Concluding remarks Peter Crook – Chief Executive Concluding remarks
Slide 36: Regulation
36 2017 interim results | Provident Financial plc Regulation Group Concluding remarks Transfer of regulation to the FCA > Vanquis Bank and Moneybarn are fully authorised by the FCA > CCD continues to operate under an interim permission, in the context of the migration of the home credit business to
Slide 37: Regulation
37 2017 interim results | Provident Financial plc Regulation Group Concluding remarks FCA high-cost credit review > The FCA are conducting a market-wide review of high-cost credit in 2017 > The group has responded to information requests and maintained a constructive dialogue with the regulator to a
Slide 38: Outlook
38 2017 interim results | Provident Financial plc Outlook Group Concluding remarks > Vanquis Bank, Moneybarn and Satsuma continue to experience strong demand from a combination of product innovation and enhanced distribution against unchanged credit standards > These three businesses are trading in
Slide 39: Questions
39 2017 interim results | Provident Financial plc Questions Peter Crook – Chief Executive Questions Andrew Fisher – Finance Director
Slide 40: Contact details
40 2017 interim results | Provident Financial plc Contact details Group Contact details Provident Financial plc No.1 Godwin Street Bradford BD1 2SU Contacts: Gary Thompson – Group Financial Controller and Head of Investor Relations Vicki Turner – Senior Group Finance and Investor Relations Manager T