Yahoo Finance Provident Financial soars on looming subprime loans surge
Doorstep lender Provident Financial is eyeing the chance to win new business as unemployment increases during the pandemic despite its own accounts being driven into the red.
Provident and its rivals target consumers who banks deem too risky to lend to and expect a surge in demand if there is a rise in unemployment as the furlough scheme ends in October.
Malcolm Le May, Provident’s chief executive, said the number of people locked out of borrowing from mainstream banks could rise 10pc to 20pc from the current total of between 10m and 12m people.
“Demand is likely to increase while supply is dropping,” he said, adding that some rivals were struggling to access capital to lend to consumers.
Provident shares soared by almost a fifth to 234p but are still some way off their 464p level at the start of the year.
Mr Le May called on the Government to help non-bank lenders as well as banks, which have handed out billions of pounds of state-backed business loans. “People need to borrow. It's important that this segment of society can carry on.”
Provident’s car loan division, Moneybarn, handed out a record 4,500 loans in July with about 40pc of loans going to key workers.
Mr Le May said the average car loan was about £8,000 and that drivers seemed to be buying cars to avoid commuting on public transport.
Subprime lenders were hit hard by the pandemic as they had to offer payment holidays to swathes of customers and initially faced difficulty collecting repayments.
Provident’s doorstep lending division now makes 81pc of debt collection remotely as the pandemic accelerates the shift to doing business digitally.
Provident pledged to repay furlough money received from the Government. The company is consulting on an estimated 300 redundancies.
Mr Le May said: “We have a moral responsibility not to use that money if we don't need it.”
The company cancelled its interim dividend as it reported a better than expected £28m pre-tax loss for the first half compared to a £43m profit a year earlier. It pencilled in a £240m charge for impaired loans, up from £166m a year ago.
