Vanquis Banking Group plc

Hello and welcome to Provident Financial Interim Results 2022. My name is Suzanne and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over to your host, Malcolm LeMay, Group Chief Executive Officer of Provident Financial, to begin today's conference.

Thank you. You can all hear me.

Thank you very much for joining the presentation for our 2022 interim results. As is our normal process, I'll take you through the importance of our strategic repositioning of PFG as a specialist banking group over the last few months and how that helps us to support our business, our customers through these rather uncertain times and also give you the strategic highlights of the first half of the year. Then I'll hand over to Neeraj who will take you through the financials in more detail. Once he's done that, I'll return to update you on our strategy now before we take questions at the end. So turning, if I may, to slide four. As I said at our preliminaries, 2021 was a year of significant transformational change for PFG. We are now a specialist banking group focused on the provision of credit cards, vehicle finance and loans to mid-cost and near prime customers, with significant opportunities to grow customer numbers and receivables in what we believe is a £17 billion market. We now have completely left the high cost short term credit market with the closure of CCD and the finalisation of the scheme of arrangement. Growth is a key focus for the group and in the short term taking into account both prudently and sensibly. Following the closure of our consumer credit division, the group's risk profile has reduced dramatically. And this is reflected in our half one results and will also be the case going forward with lower impairment and delinquency trains than we have historically had within the group. Costs is a big area of focus as we implement our new target operating model. Equally investment, and here we're investing in our core strengths and efficiency initiatives, which are expected to result in cost reductions from 2023 onwards. consistent with our cost-to-income target ratio of 40% from the end of 2024. The Group's capital position and access to low-cost funding are a significant competitive advantage for us. It will not only allow us to support our customers grow prudently, but also underpin our dividend and broader shareholder distribution policy, which I'll come on to later. I'd like to remind you that we are in discussions with the regulators regarding our capital requirements following the closure of CCD and also the ability for us to use deposits to help fund our growth outside the direct bank. So in summary, Taking into account the key points I've made, BFG is now uniquely positioned as a specialist banking group with the right products in the right markets, with a strong capital position to deliver sustainable growth and returns for its shareholders. Slide five. Well, the highlights for the first half of 2022. here show, with customer numbers up at over 1.6 million and receivables in excess of 1.7 billion. In terms of impairments, as you can see the trend improving year on year to roughly 4.7% cost to risk, illustrating my earlier point that the risk profile of the group has now fundamentally changed and reduced. Given our repositioning, we expect impairment trends to remain stable in the second half and to be sustained at lower levels than historically have been associated with the group. And we'll talk more about that in the R&D section. Costs. Investment is up as we've invested in our platform, people and created the new loans offering. The target operating model here we have invested to deliver cost efficiency, competitive advantage and future growth opportunities. As I've said, we have a very strong capital and liquidity position with a CET1 ratio of 27.3% and we'll keep you updated regarding our discussions with the regulator in regard to our regulatory capital requirements following the closure of CCD. Turning to our dividend, reflecting the strong growth in the first half and the confidence I have in the future growth prospects of the group, we are declaring an interim dividend of five pence per share. And finally, on regulatory matters, our scheme of arrangement will be finishing at the end of July with all redress paid, and the FCA have now closed their investigation into lending in CCD with no further action to be taken. Now, I've included slide six to show how the exit from the high-cost short-term credit market through the closure of CCD has fundamentally changed the risk profile of the group. The graph on the right-hand side shows how since 2019, our average customer credit score has significantly improved. As we focus on providing credit to customers with APRs of 15% to 50% only, and now serve customers, many of whom are homeowners and who are on national average earnings. This key change, the closure of CCD, and the focus on better quality credit customers has meant our risk-adjusted returns have improved And as I've said, going forward through the brooding of credit cards, vehicle finance and loans, PFG will now only offer APRs going from 15% to 50%, as I've said, with the target market in excess of £17 billion. In the light of this decision, following the conclusion of our two successful loan pilot products, we've decided not to continue offering loans at 65% and 85% APR and will only offer loans at the top end to 50% APR. Slide seven. Customers in our market have always weathered economic challenges better than those in the primary space. As you can see from the graph on the left-hand side, it shows our credit customer base, how our credit customer base performed during the global financial crisis. And also our move to mid-cost and net prime customers have, in my view, made our customer base even more resilient. Clearly the uncertain times we are in, the economic times we're in are uncertain and of course we will support our customer base through them but I'm confident as a group that we're prepared for that. Our customers have delevered through Covid, we've seen no evidence of increased delinquencies or default rates and we expect our impairment trends to remain stable in the second half of the year. We also have a very strong balance sheet with proven provisioning for any potential cost of living impact. So in my view, as you can see on page eight, we are, I believe, one of the biggest ESG banking groups around. We offer credit to around 25% of the UK adult population that are underserved by the high street banks. In the past, you've heard me speak often about the group's social purpose, which is to help put people on a path to a better everyday life. Well, it's in times like this that you need to live it, just like we did during the pandemic. We have, as I said, provisioning in place for the cost of living impact, but helping your customers is clearly more than just provisioning. Now, I believe our customers will actually be impacted, as I've said, less than some of the prime cohorts by the cost of living crisis for the reasons I mentioned earlier. But we are still preparing and have many forbearance initiatives ready to go, if required, and have increased our customer communications to ensure our customers know what help and advice is available if needed. So I'll pause there. Thank you for listening. I'll hand over to you, over to Neeraj, who will take us through the numbers. So, Neeraj.