Providing credit
to those who would otherwise
be financially excluded

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Customer case studies

Group overview

The group has three divisions, covering five different areas of the non-standard market.

Provident Financial Group

Vanquis Bank

Vanquis Bank

(Est 2002)

Vanquis Bank is the leading supplier of credit cards in the non-standard credit market. We provide new customers with a low credit limit and only increase it when we have sufficient experience of the customer handling their account responsibly. We maintain a high level of contact with customers, from the initial call welcoming the customer to Vanquis Bank and continuing throughout our relationship.

  • 1.4m UK customers
  • 1,386 Employees
  • £185.5m UK profit before tax
  • £250 - £3,500 Range of credit limits

Consumer Credit Divison

Provident

(Est 1880)

Provident offers home credit loans, typically of a few hundred pounds, through a network of 5,500 local agents who call each week at 0.9 million customers' homes in the UK and Ireland. Agents are primarily paid commission on what they collect, not what they lend, so it is in their interest not to lend more than customers can repay. The total amount repayable is fixed at the outset, so there are no extra charges whatsoever.

  • 0.9m Customers
  • 2,160 Employees
  • £105.4m UK profit before tax
  • £100 - £2,000 Loan range

Satsuma

(Est 2013 (Start up))

We give new customers a small-sum, short-term loan and collect repayments by continuous payment authority once a week, on a day agreed with the customer. Just like our other businesses we adopt a low and grow approach to lending. Our UK-based call centre is always there to discuss any issues customers may have. Just like our home credit product, the total amount repayable is fixed at the outset, so there are no extra charges whatsoever.

  • 49,000 UK customers
  • £100 - £1,000 Loan range

Glo

(Est 2014 (Start up))

glo is our guarantor loans product serving customers who are unable to access mainstream credit from banks and building societies with larger amounts of affordable credit over longer durations. The loan is guaranteed by a family member or friend with a sound credit record who supports the customer if their circumstances change.

  • 4,000 Customers
  • £1,000 - £7,000 Loan range

Moneybarn

Moneybarn

(Est 1992)

Moneybarn is the market leader in the provision of vehicle finance for people in the non-standard credit market. Moneybarn is able to help those who may have had problems with credit in the past but who are now over them to get to work, take their children to school and live their lives.

  • 31,000 Customers
  • 151 Employees
  • £21.3m Profit before tax
  • £4,000 - £25,000 Loan range

Financial highlights

We have consistently delivered strong returns and sustainable growth since the demerger of our international business in 2007. Our success can also be measured by our high levels of customer satisfaction and the wider contribution we make to society through our corporate responsibility programme.

Peter Crook, Chief Executive

2015 has been another excellent year for the group. Our financial performance has been very strong and we have made further progress in developing the group into a broader non-standard credit market lending business.

Peter Crook, Chief Executive

Business model

  • Obtaining funds
  • Managing credit risk
  • Taking credit risk
  1. Secure longer-term, lower rate funding
  2. Develop tailored products to meet customers' needs
  3. Attract target customers
  4. Assess affordability and credit worthiness
  5. Lend responsibly
  6. Collect repayments due
  7. Manage arrears and customer difficulties
  8. Pay for funds and generate surplus capital to deploy

How we operate
across our products
and services

Business model chart

Secure longer-term, lower rate funding

01 Secure longer-term, lower rate funding

  • Borrow long and lend short.
  • Maintain diverse range of funding sources.
  • Maintain borrowing facilities to provide headroom for the following 12 months.
  • Investment grade credit of BBB with a stable outlook.
  • Strong relationships with core banks.

Develop tailored products to meet customers’ needs

02 Develop tailored products to meet customers' needs

  • Provide financial access for those who would be otherwise financially excluded.
  • Simple, transparent products.
  • 135 years of serving non-standard customers.
  • High levels of customer satisfaction.
  • Specialist business model.

Attract target customers

03 Attract target customers

Typical customer:

  • Mixed employment status.
  • Low to average incomes.
  • Limited indebtedness.
  • High levels of customer satisfaction.
  • Live in rented accommodation or social housing.
  • Average age of between 25 and 50 years old.

Channels to market:

  • Multi-channel approach – Business to Consumer (B2C), Business to Business (B2B).
  • Strong brand loyalty.
  • Marketing expertise.
  • Broker relationships.

Assess affordability and credit worthiness

04 Assess affordability and credit worthiness

  • Bespoke underwriting developed over a number of years.
  • Use of external bureau data to supplement in-house data.
  • Leading-edge technology.
  • Strong data analytics based on long history.
  • Specialists in assessing non-standard customers.

Lend responsibly

05 Lend responsibly

  • Small-sum, short duration.
  • 'Low and grow' approach to lending. Starting customers on low amounts before growing lending as customers demonstrate they can manage repayments.
  • High standards of regulation and compliance.
  • Affordable weekly/monthly repayments.
  • No hidden charges.

Collect repayments due

06 Collect repayments due

  • Maintain regular and close contact with customers.
  • High-tech contact centres.
  • Experienced and well-trained collections teams.
  • Multiple methods of repayment.
  • Compliant remuneration arrangements for contact centre staff and commission policies for home credit agents.

Manage arrears and customer difficulties

07 Manage arrears and customer difficulties

  • Regular contact and ongoing dialogue throughout the customer journey.
  • Multiple forbearance methods.
  • Sympathetic approach.

Pay for funds and generate surplus capital to deploy

08 Pay for funds and generate surplus capital to deploy

  • High ROA businesses generate surplus capital.
  • Distribute 80% of earnings in dividends.
  • 20% equity retained sufficient to fund future growth in receivables.
  • Maintain low level of gearing at 3.5 times or below.

Strategy

The group has four key strategic objectives which are measured through a number of key performance indicators (KPIs), both financial and non-financial.

  1. 01 Growing high-return
    businesses in non-standard
    markets
  2. 02 Generating
    high
    shareholder
    returns
  3. 03 Maintaining a secure
    funding
    and capital
    structure
  4. 04 Acting responsibly
    and
    with integrity in
    all we do

01 Growing high-return
businesses in non-standard
markets

Growing high-return businesses in non-standard markets

  • Maintain strong growth in Vanquis Bank within the UK non-standard credit card market, whilst seeking opportunities to utilise the existing business model to expand into other markets and products;
  • Maximise returns within the Provident home credit business whilst developing the Satsuma online loans business to generate sustainable growth;
  • Develop the glo guarantor loans business to be capable of delivering the group's target returns;
  • Continue to unlock the growth potential within Moneybarn in the non‑standard vehicle finance market; and
  • Extend our product offerings to ensure that we have the appropriate range of products for our chosen markets.

Our focus for 2016

Continue to invest in the customer acquisition programme, to progress the business towards its medium-term guidance of up to 1.8m customers with an average balance of £1,000. Further develop channels to market, the product proposition and potential other revenue sources. Maintain a tight stance on underwriting and credit line increases. Deliver a RAM in the range of 31% to 32%, after allowing for the impact of the changes made to the ROP product in the third quarter of 2013 and European legislation reducing interchange fees in 2015. Roll out the glo guarantor loans product, following a successful pilot in 2015. Obtain the change of permission approval from the FCA.

02 Generating
high
shareholder
returns

Generating high shareholder returns

  • Generate sustainable growth in profits and dividends to deliver increasing shareholder returns; and
  • Maintain a dividend cover of at least 1.25 times.

Our focus for 2016

  • Deliver further earnings per share and total shareholder return growth.
  • Maintain a minimum dividend cover of at least 1.25 times.

03 Maintaining a secure
funding
and capital
structure

Maintaining a secure funding and capital structure

  • Maintain borrowing facilities which, together with Vanquis Bank's retail deposits programme, meet contractual maturities and fund growth over at least the next 12 months;
  • Maintain a maximum gearing ratio of 3.5 times to ensure alignment with the minimum dividend cover target of 1.25 times and the group’s growth plans, whilst maintaining a comfortable surplus of regulatory capital over the capital requirements set by the Prudential Regulation Authority (PRA); and
  • Continue to diversify the group’s sources of funding.

Our focus for 2016

  • Maintain capital and gearing at prudent levels;
  • Continue to manage the flow of retail deposits in Vanquis Bank to ensure an appropriate amount of headroom is maintained on the group’s committed facilities;
  • Review and consider issues into the retail bond and private placement markets to support growth in Moneybarn, Satsuma and glo; and
  • Manage regulatory capital and liquidity in accordance with PRA regulations.

04 Acting responsibly
and
with integrity in
all we do

Acting responsibly and with integrity in all we do

  • Operating our core business of lending to our customers in a responsible and sustainable manner, putting their needs at the heart of everything we do;
  • Acting responsibly and sustainably in all our stakeholder relationships in order to:
  • Create a working environment that is safe, inclusive and meritocratic;
  • Treat our suppliers fairly; and
  • Support our communities.

Our focus for 2016

  • Maintain or improve customer satisfaction levels in all businesses;
  • Maintain an investment of 1% of group profit before tax in the community through various community programmes, money advice programmes and social research; and
  • Continue to place positive customer outcomes at the forefront of our product and service offering.