Vanquis Banking Group plc

Good morning, everyone. I'm Ian McLaughlin, Chief Executive of Angus Banking Group. Welcome to our 2024 Full Year Results webcast. As usual, I'm joined by our Chief Financial Officer, Dave Watts. Dave, welcome.

Thank you, Ian, and good morning, everyone.

So, as you can see on slide two, I'm going to kick off with a summary of 2024. Dave will then build on my comments and take you through our performance in more detail and update on the financial guidance that we're sharing this morning. I will then come back to outline why the management team, the board and I are confident that we have the right foundations and strategy in place that will ensure we successfully deliver on our plans for 2025 and beyond. And we'll then be happy to take your questions. So if I can take you to slide four, 2024 was a pivotal year in the turnaround of Vanquis and the strategic transformation of the bank is well progressed. We did face significant challenges both from industry wide headwinds and from some company specific issues that were identified and then resolved. But we have made meaningful changes that are already showing through in our results and that leave us well positioned for long term sustainable profitability. Resolving the issues that needed to be addressed did come at a financial cost. However, after completing the comprehensive balance sheet review that we undertook and discussed at our half-year results, we are now confident that we have a much cleaner and much less risky business from which we will grow profitably. While we moderated new business growth by more than we'd originally planned to do in 2024, we are now back to growth and we expect that to continue through 2025 and beyond. At this stage of a turnaround, demonstrating cost discipline is critical and we delivered ahead of what we had committed to on cost savings, achieving just over 64 million in savings by the end of 2024 against our original commitment of 60 million. We have already completed the actions to deliver the further 15 million of cost savings that we committed to for this year. So we're at a very strong position there. On top of that, we will deliver an additional 23 to 28 million of savings through the Gateway Technology Transformation Program. And I'll talk about Gateway in more detail later. Add all that up and you get to around 100 million of transformation cost savings by the time we have executed this phase of our strategic plan. Turning now to slide five and a summary of our financial performance for the year. Having reset guidance at our half-year results, our adjusted performance in the second half of the year was in line with the commitments that we made. Our net interest margin at 18.4% benefited from the repricing activities that we took in both credit cards and vehicle finance. Higher growth in second charge mortgages is a good thing, but as we've previously noted, given its lower risk profile, is written at a lower NIM than the rest of our book. Excluding second charge mortgages, our NIM increased 30 basis points year on year to 18.9%. After allowing for a reallocation of fraud costs, our adjusted cost income ratio at 64.2% was within the guided range of 62 to 65%. The adjusted return on tangible equity for the year was negative 7%, equating to a loss before tax of $34.8 million. The vehicle finance receivables review, other one-off items and increased complaint costs were meaningful drivers of this loss, all of which we covered with you at our half-year results. These impacts meant that we were prudent with our management of growth and our interest earning balances ended down the year at 4%. However, this trend reversed in the fourth quarter, where we saw our balances grow again, up 2% compared to the end of September. Our Tier 1 capital ratio ended the year at 18.8%, so within our guided range, and our capital levels support our growth plans. And finally, our retail funding increased significantly to more than 92% of our total group funding. This is a core strength of Vanquis now. Turning now to some of the operational highlights across our five key initiatives that we've discussed with you previously. And I'll start with customer proposition and insightful risk management. You can see these on slide six. Within credit cards, we adopted a measured approach to growth during the year. We've conducted detailed vintage analysis of our cards book and are now focusing on acquiring, retaining and developing our most engaged customers. We've exited unprofitable origination channels and implemented a much more robust approach to pricing based on this improved analysis of the risk profile of our customer cohorts. In vehicle finance, the review we conducted has given us a much clearer understanding of the credit profile of this portfolio. And we've meaningfully diversified our overall product propositions through growth in second charge mortgages and expansion in our savings range. And on savings, we're now offering customers more flexibility with retail notice accounts and easy access products, including an innovative new savings product through Snoop. And speaking of Snoop, it continues to be a strategic enabler for us. As well as really good growth in customer numbers, we're deploying the Snoop team and technology across the wider Vanquish business. Active Snoop users are up 25%, with 13% of Vanquis customers now also active users. That's doubled year on year, and they're benefiting from savings and budgeting tools and the new Snoop credit score feature. Snoop is also a core component of our not yet customer proposition. And just to remind you, our not yet proposition refers to our strategy of identifying potential customers who may not be immediately eligible for our products, but who could be in the future. So instead of declining them outright, we're now focusing on finding ways to support them with money management tools through Snoop or through referrals to previously announced partnerships with trusted partners like H&T Pawnbrokers and more recently, Fair Finance. By providing options to help them improve their financial well-being and resilience, we build loyalty with them and we create long-term customer relationships. Digitization of our customer proposition is essential and we have a lot more to do in this area. The launch of the new mobile app in mid 2025 will really enhance digital customer engagement. But two examples of what we've started in 2024 are the enhanced digital statement functionality for our customers and the integration of Snoop's bill switching capability into the Vanquish cards app. As well as making us more efficient, these sort of initiatives underpin customer satisfaction and this is reflected in our 4.2 out of 5 Trustpilot score for Vanquis and 4.4 out of 5 for Money Barn. Both of these represent a great rating for the brands, clearly showing that our customers genuinely value what we do for them. Turning now to our remaining three key initiatives. So technology transformation, operational efficiency, and the people agenda, as you can see on slide seven. Importantly, as I said earlier, Gateway, our technology transformation program, is on track. We're rolling out this program in carefully planned phases and delivery to date includes putting in place a single customer contact center platform and the migration of all colleagues across the group onto one IT platform, which enables easier collaboration and better customer outcomes. Artificial intelligence is a key part of our technology agenda too, and Gateway enables this. I'll give you two examples of what we already have live. We've automated our complaints logging using AI, and that means we've meaningfully reduced handling costs and the backlog of complaints, which were down over 60% year on year. And we've developed AI-driven customer solutions through our Snoop open banking proposition, providing personalized insights to help our customers save money and improve their overall financial well-being. Turning to our people agenda, as we exited 2024, we completed an extensive outsourcing program, which now gives us access to a skilled team of 900 people in South Africa. And we can flex this capacity as required. This allowed us to reduce our UK headcount by 18%, lowering staff costs by £25 million year over year. And that cost saving is included in the total cost save numbers that I referenced earlier. We have streamlined our EXCO from 13 to 9, but we also made 22 senior level hires and internal promotions into leadership roles across key business areas for us like credit, products and risk. Despite the scale of the transformation delivered in 2024 and the tough decisions we've had to make that have impacted our people, our colleague engagement has improved. Our Great Place to Work Trust Index, which we conducted near the end of the year and which measures colleague engagement, increased from 53% to 60%. We have a way to go still, but that's a significant step forward in what was a very intense and challenging year for our people. We were also pleased to be ranked in the top decile of the Financial Times UK Best Employer Survey for 2024. We know we've more to do, but these are encouraging indicators. Now, before I hand to Dave to run you through the financial performance in more detail for 2024, I did want to comment directly on two external factors that you know have been an overhang for us. And let me start with the latest on complaints, and you can see this in slide eight. We have previously updated that complaint costs have been a material drag on the financial performance of Vanquish through 2024. At an eye-watering £47.4 million, the cost of complaints increased 66% year-on-year and represented 16% of the overall group adjusted cost base. Within this, FOS fees tripled year over year to £25 million, representing over half of our total complaint costs. And the key driver of this, as we've described before, was the flood of unmerited claims from CMCs, claims management companies, which is clear from the numbers. Only 11% of complaints submitted to the FOS by CMCs were actually upheld against vanquished last year. So while roughly 9 in 10 CMC-submitted FOS complaints were deemed unmerited and not upheld, we still had to pay the £650 fee for all 10 out of 10, plus having to absorb our own administration costs. That is not how this system is meant to work. As well as dramatically increasing our costs, this slows us up in dealing with genuine complaints and that's bad for customers. This is wrong and it needs to be fixed. And as part of that fix, we welcome the new FOS fee charging proposals for CMCs, which come into effect on the 1st of April this year. We expect this change to meaningfully reduce the volume of unmerited complaints that CMCs submit, given the £250 charge per claim that they will then carry. While we do applaud the FOS introducing the £250 CMC charge, it is not enough, as we, the lender, will still continue to pay a fee of £475 for each claim, even when it's not upheld against us. We ultimately believe the FOS plays an important role in resolving customer disputes, but we need to ensure that the mechanics of how this works are fair for all involved, and we will continue to engage with regulators to address complaint issues on an industry-wide basis, including the fair and proper assessment of CMC activities and their regulatory compliance. Also, just to note, we are progressing our court case against TMS Legal, the CMC responsible for the highest number of unmerited claims against us, and we will provide a progress update on this later in the year. Turning to the second overhang, which since the end of October has been the Court of Appeal judgment with respect to Mutor Finance Commission disclosures. The latest position for Vanquish is summarized for you on slide nine, but there are three very important points that I want to draw out on this. Firstly, I want to stress again that Vanquish never operated discretionary commission arrangements. And as a result, we're not in scope of the current FCA Motor Commissions Review. Secondly, in relation to the Court of Appeal ruling and the pending Supreme Court appeal process, we believe that our position is substantially differentiated on a number of grounds compared to the three cases that were the subject of the Court of Appeal judgment. This includes the fact that all our customers signed a pre-contractual document that confirmed that a commission will be paid. Not might be paid, not may be paid, but will be paid. Thirdly, 90% of our vehicle finance volumes were through independent finance brokers who were not directly linked to the car dealership and therefore fall outside the scope of the Court of Appeal judgment on unfair relationships. That obviously leaves 10% of our business that was through dealer brokers are in scope of the Court of Appeal judgment. The total commission payments potentially in scope paid out by Vanquist to dealer brokers from the start of 2013 to October 2024 totaled £23 million. Given this and the levels of uncertainty, the group has not provided for this matter, but has recognised a contingent liability in line with the accounting standard and agreed with our auditors and board. In conclusion, we hope for more certainty on the future application of the judgment from the Supreme Court in the summer. But in the meantime, I hope that is helpful clarification on the actual vanquished position. Right, I will come back to close, but for now, I will hand over to Dave, who will run through the 2024 financials and update you on our financial guidance. Dave, over to you.

Thank you, Ian. I'm going to go to build on some of the key points that Ian has made. Slide 11 summarises my headlines for 2024 before I go into more detail later. Our financial performance was adversely impacted by the balance sheet review undertaken in 2024. This review accounted for £24 million of the loss recorded in the first half of the year and £7 million of the loss recorded in the second half of the year as the review was completed. When looking at year-on-year performance, I'd like to remind you that 2023 saw £75 million of impairment provision releases. Underlying credit quality has improved year-on-year. With the balance sheet review now complete, greater clarity on our portfolios has emerged, providing us with confidence in our growth plans from a credit risk perspective. Complaint costs were a material drag. However, focused cost management and over-delivery on transformation cost savings meant adjusted operating costs were 1% lower year on year. A key highlight is our successful retail funding strategy. It's now comprised over 92% of our total funding. Around 40% of our retail funding is in notice and easy access accounts, improving our pricing flexibility as interest rates change. Our actions in 2024 have delivered a cleaner, lower risk balance sheet with strong liquidity and capital positions to support our planned growth in 2025 and beyond. As shown on slide 12, our 2024 results were materially impacted by the operational turnaround of the business. Adjusted loss before tax was £34.8 million. £26.8 million in the first half of the year, reducing to £8 million in the second half. Statutory loss before tax was £119.3 million. This included a £71.2 million goodwill write-off related to the Money Barn business. This goodwill write-off has no capital impact and is unrelated to either the Vehicle Finance Receivables Review or the Court of Appeal Judgement. This simply reflects our near-term focus on growing second-charge mortgages and credit cards while we develop new vehicle finance solutions on our Gateway infrastructure. Our key performance metrics are set out on slide 13. The adjusted loss after tax of £24.8 million drove a return on tangible equity of negative 7%. On the plus side, asset yield increased by 60 basis points year on year. Net interest margin, or NIM, only reduced by 20 basis points to 18.4%, despite the dilution from growing lower margin, lower risk second-charge mortgages. Excluding this, NIM increased by 30 basis points to 18.9%. The key NIM drivers are set out on slide 14. Asset yield improvement added 1.2%, while higher income from the liquid asset buffer added 0.8%. A 4% reduction in gross interest earning balances, coupled with a higher proportion of second-charge mortgages, reduced NIM by 0.6%, while increased funding costs reduced NIM by 1.6%. Net interest income reduced by 4% in the second half of 2024 compared to the first half. NIM increased marginally half-and-half when stripping out the dilutive impact of second-charge mortgage growth. Slide 15 details our gross customer interest earning balances, which reduced 4% year on year. Credit card balances reduced by 10%, mainly in the first half of 2024, but stabilised in the second half due to proactive growth actions. Vehicle finance balances reduced by 11% due to increased stage three charge offs following the receivables review that we have already talked about. Personal loan balances declined by 68 million pounds as the portfolio ran off. The group has now agreed a sale of the personal loans portfolio. This is expected to generate a small gain on sale and a Tier 1 capital ratio benefit of circa 25 basis points. This sale is expected to complete by the end of the month. Second-charge mortgage balances grew by £214 million, mainly in the second half of the year. This followed the expansion of long-term forward flow arrangements agreed with our partners in May. Overall, we ended the year with receivables growing and a higher proportion in secured products. Slide 16 highlights the clean-up and the reducing risk profile of the balance sheet. Gross receivables fell 12% year-on-year, mainly due to the £219 million reduction from the Vehicle Finance Receivables Review. A new Vehicle Finance charge-off policy has been implemented. Two debt sales were completed in the second half of the year, and further debt sales are planned in 2025. This progress is in line with the established credit card debt sales programme, where further sales have reduced the credit card post-charge of assets to only £6 million. You should note that while vehicle finance gross receivables fell 28% in the year, live contract balances declined just 4%. This compares with the 86% decline for non-live contract balances. Across the portfolios, the mix of receivables has improved with a much higher share in Stage 1 and significantly fewer receivables in Stages 2 and 3. The improved quality of receivables is most notable in vehicle finance due to the actions already covered, but also due to a revised definition of default that reclassified approximately £200 million of receivables to Stage 1. Overall, net receivables have remained flat year on year as a lower expected credit loss provision is required on Stage 1 balances which have increased. Slide 17 summarises the year-on-year impairment charge movement. Impairment rose 15% due to the non-repeat of IFRS 9 model enhancements and other provision releases, totalling £75 million in 2023. Impairment from new originations fell 49% driven by lower new business volumes and higher quality balances. Backbook credit risk improved, leading to positive stage migrations and further impairment reductions. Following the cleanup actions taken in 2024, we now have a clearer understanding of our portfolios, giving us much more confidence to guide on the expected cost of risk by product as set out on the slide. Slide 18 highlights a 55% reduction in the expected credit losses, despite higher year-on-year impairment charges. The Vehicle Finance Receivables Review reduced expected credit losses by £331 million, including £266 million from Stage 3 balances. This, along with the mixed effects of higher growth in second-charge mortgages, has broadly halved the group coverage ratio to 10.8% at December 2024. The decline reflects fewer Stage 2 and Stage 3 receivables in both vehicle finance and credit cards, the latter due to increased debt sales. Fundamentally, we are comfortable with the resulting levels of coverage with credit cards at 12.2% and vehicle finance at 11.6%. Turning to adjusted operating costs on slide 19. Full year 2024 costs were 302.3 million pounds below the guided range and 1% lower year on year when adjusted for the fraud cost reclassification. £48.9 million of transformation cost savings were recognised in 2024, bringing the total to £64.3 million, including £15.4 million from 2023. Further actions already taken in 2024 will support the committed delivery of an additional £15 million of cost savings by the end of 2025. These savings help lower second half costs versus first half, improving the cost income ratio, a trend we expect to continue into 2025. Staff-related cost savings drove most of the reduction in the year, with cost and headcount down 17% and 18% respectively. Capacity to deliver has been retained, as roles have been outsourced to cheaper locations, while the operating model of the group has been simplified. These cost savings have offset inflation, full year SNOOP costs, one-off items and complaint costs, which I will cover on the next slide. Slide 20 illustrates in detail the material impact of complaint costs and specifically elevated FOSS fees that Ian has already highlighted. Total complaint volume rose by 26%, with CMC-driven cases up 43%. CMC complaints made up 93% of all lending origination cases, with two firms accounted for 70% of the volume. The most striking point to note is the increase in FOSS referrals. These spiked 245% to over 34,000, of which 90% were from the CMCs, yet their uphold rate was just 11%, highlighting the unmerited nature of most claims. It is this surge in CMC complaints that has seen FOSS fees triple to nearly £25 million. Despite higher volumes, customer remediation costs only rose by £2.3 million, while resource costs fell due to operational efficiencies. The FOS's new CMC charging from the 1st of April should curb unmerited claims and therefore lower cost complaints in 2025. Let's turn to the performance of the individual products, starting with credit cards on slide 21. Detailed vintage analysis showed older cohorts were high quality and more profitable. Our 2018 to 2023 business was significantly less profitable. The insight that this analysis has provided is ensuring that we are in a better position to grow higher returning segments going forward. In the second half of 2024, we focus on sustainable, profitable growth through disciplined portfolio management and optimised pricing strategies. This focus has increased asset yield by 3.2% to 27.9% and has raised the weighted average APR to 37.4%. The 10% reduction in interest earning balances reflected increased repayments, but also proactive credit risk management with a focus on growing higher margin segments and portfolio quality. In summary, we are now well positioned for more profitable growth in 2025 and beyond. with continued focus on optimising custom mix and risk-based pricing. As we have already covered, the vehicle finance performance in 2024, shown on slide 22, was significantly impacted by the necessary receivables review. The asset yield reduced by 1.9% to 16.1% as higher margin, non-performing statutory balances reduced. Credit tightening shifted the mix toward near-prime, lower APR products, lowering the weighted average APR despite repricing actions. The APR improved in the fourth quarter, with new business returning to 2023 APR levels. Impairment increased by £40 million year-on-year due to the receivables review and the non-repeated prior year provision releases, while underlying credit quality improved. A new lending decision engine will help us to better target higher margin customers. It is important to note that the Court of Appeal judgment on commission disclosures had no material impact on the business in the fourth quarter. Customer buying behaviour has remained unchanged despite the explicit disclosure of the commission amount. As you can see on slide 23, second-charge mortgages grew strongly after the expanded launch in May. Interest-earning balances reached £217 million by the end of the year. With a weighted average loan-to-value of circa 70%, the cost of risk remains low. As the portfolio matures, we would expect the reported 7% asset yield to increase marginally. Being a secure product, the RWA density is lower. Having quickly become a market leader in this product through our origination partnerships, we are excited by the potential for this business with the overall market growing healthily. As we have already highlighted, slide 24 illustrates that liquidity and funding are core strengths of Banquis. The bank remains highly liquid, with £667 million of excess, high-quality liquid assets at the end of the year. We're looking to improve returns from the liquid asset buffer and have purchased approximately £75 million of UK gilts so far in 2025. We completed a full early repayment of 174 million pounds of TFME funding during the year. Retail deposit funding grew by 25% to 2.4 billion pounds, increasing to over 92% of total funding. The changing mix of retail deposits give us more flexibility to reprice with base rate changes and should help drive a lower cost of funds. We believe we are now reaching the peak of funding cost for the Group, and we expect the cost of funds to reduce in 2025. As shown on slide 25, the Group ended the year with a Tier 1 capital ratio of 18.8%, up from the 18.7% in September. This equates to a near £100 million surplus over disclosed regulatory requirements. The year-on-year reduction was mainly due to the statutory loss after tax, which drove a 210 basis points reduction. First half RWA reductions improved the ratio by 160 basis points. However, second half RWA growth reduced the ratio by 20 basis points. This second half growth, coupled with capitalised technology investments, represented 60 basis points of capital deployment, which we expect to continue into 2025 and into 2026. Turning now to our updated financial guidance, starting on slide 27. we expect gross customer interest earning balances to grow to around £2.6 billion by the end of 2025 and to around £3 billion by the end of 2026. This is at the lower end of our previously guided range in March 2024, which was before the negative impacts of the subsequent Vehicle Finance Receivables Review. The mix of growth is expected to result in a NIM of greater than 17% in 2025 and greater than 16% in 2026. This is lower than the previous guidance, driven by the higher than originally planned growth in second-charge mortgages. We're also updating our Tier 1 capital ratio guidance to greater than 17.5%, which is lower than the previously guided range of 18.5% to 19.5%. This has been driven by the group's stronger and more stable financial position following the 2024 balance sheet cleanup and a lower risk business mix. We know we need to grow to drive sustainable long-term profitability. Therefore, capital needs to be deployed to drive growth in 2025 and in 2026. This capital level has been set after a thorough assessment of the board's risk appetite and our regulatory requirements. We expect our capital requirements to be re-evaluated in 2026 with the implementation of Basel 3.1 and the small domestic deposit taker regime. Our future capital level will also be influenced by the Board review of the Capital Allocation Framework and Dividend Policy in 2026. Our primary financial objectives unchanged. This will improve our roti over the next two years and into 2027 as shown on slide 28. We continue to guide to a low single digits roti in 2025 or delivering a low double digits roti in 2026. Our median term goal remains to deliver a mid-teens roti. This has been slightly delayed due to the depth of the turnaround in 2024 and our planned growth trajectory over the next two years, which means we now expect to achieve this goal in 2027. Linked to this, we now expect to deliver our previously guided cost-income ratio of 49% or lower in 2027. This is after reducing the ratio to the high 50s in 2025 and low 50s in 2026. Our cost-income ratio and ROTI improvements are expected to be driven by both income growth and cost savings, as you can see on the right-hand side of this slide. We expect ROTI improvement from income growth to come from a combination of interest-only lending growth, repricing and a lower cost of funds, partially offset by higher deposit balances. Cost improvement will be through a combination of already committed transformation cost savings and the expectation of lower complaint costs, partially offset by growth and inflationary cost increases. The key points of our updated guidance are summarised on slide 29. Most importantly, I'd like to highlight that previous guidance was on an adjusted basis, excluding transformation and other exceptional costs, amortisation of acquisition intangibles, and goodwill write-off. Today's guidance is all on a statutorily reported basis, as we expect these below-the-line impacts to be much less material going forward. The move to statutory reporting is an indication that we believe the significant impact of the operational turnaround from a financial perspective is now behind us. With that, I'll hand you back to Ian, who will take you through the strategic agenda to deliver this improved financial performance over the coming years. Thank you.

Thank you, Dave, for that detailed run-through. Look, to summarise and conclude, and I won't dwell on slide 31, but I do want to look forward with you to where Vanquis is going. Our strategy, and that includes our purpose, our proposition and our key initiatives, remains unchanged from what we shared last March. We will continue to execute against it. We plan to become the most trusted and inclusive specialist bank in the UK and believe that the opportunity to meet the banking needs of the underserved UK adult population is extensive and it's important. It's important to the government's agenda for growth and it's even more important for the customers themselves. Slide 32 summarises how we meet those needs. We have the foundations in place now. Our core existing product proposition across savings, credit and money management. And you'll be familiar with this. We have a balanced mix of asset and liability products and serve our customers through various channels. And we're focused on long-term sustainable profitability and on optimising our deployment of capital across the portfolios. In credit cards, growth will be driven by product expansion, deeper engagement, and retention. And we actually launched four new offerings to customers at the start of this year as part of this, and the initial take-up has been really encouraging. In vehicle finance, the Gateway program will deliver a new IT platform that will be complete by mid-2026. And we plan on measured new business growth in vehicle finance in the meantime. As mentioned before, and as Dave has explained, the launch of our second charge mortgage proposition has been successful and you should expect balance growth to continue at a broadly similar rate going forward. And finally, in savings, you'll see an ongoing shift from fixed term products to retail notice and easy access accounts via both Vanquis and the Snoop savings platform. I've already talked to the progress being made in our technology transformation program gateway. And this is fundamental to the execution of our strategy over the next two years and to the long term growth and success of the bank. And we remain on track to complete the program in mid 2026. A huge thanks to all our teams that are working flat out to deliver this. On slide 33, you can see that phased rollouts have delivered significant progress so far with more enhancements to come. Beyond cost savings in technology and operations, this strengthens risk management, accelerates product delivery, enhances operational efficiency, and most importantly, improves customer experience. Slide 34 I thought would be useful for you because it starts to summarise what the vanquished proposition of the future will look like once Gateway is fully implemented. Not only will this drive much better customer insights, retention and operational improvements, but it will be the enabler for the true rollout of our marketplace proposition. It will allow us to develop new product solutions and get them to customers much more quickly. Now, we will not need or perhaps want to build all the products that our customers need on our own systems and balance sheet. And Gateway will allow us to expand our partnership network to offer solutions to customers in an agile way. Personal insurances would be a good example. We'll be able to connect trusted partners to our customer platform using APIs, but we will still own the customer relationship. As you can see, I am very excited about the potential that Gateway unlocks for Vanquis. So look, in summary, 2024 was a challenging but a defining year for Vanquis. Tough actions were taken as we refreshed our strategy, redefined our customer proposition, and simplified the organization for greater efficiency. As we've said, we exceeded our transformation cost savings target, delivering more than we committed. We've repositioned the business and moved into a phase of sustainable, profitable growth. Our turnaround, while challenging at times, remains firmly on track. Our customers remain resilient with robust underlying credit quality. And delivering for our customers and meeting their needs remains at the heart of everything we do. Our retail funding strategy favouring customer deposits has strengthened our liquidity profile, as Dave explained, and it's deepened customer engagement, a core strength of this business now. And we exited 2024 with a cleaner, lower risk balance sheet. Our focus looking forward is on three priorities that will underpin our success. Firstly, sustainably growing balances and optimizing mix to maximize the return on capital deployed. Secondly, delivering the Gateway Technology Transformation Program. And finally, developing the products we provide and ensuring customers remain at the heart of everything we do. We know there'll be more challenges ahead, but this management team can, has, and will continue to deliver. And we look ahead to the opportunities before us with confidence and with optimism. Vanquis is now simpler, stronger, focused on what matters, and is on a sustainable path towards delivering consistent shareholder returns and continuing to make a meaningful, positive impact on the lives of our customers. Dave and I will now be happy to take your questions. And while we do that, I will leave you with some quotes on the screen from some of our customers. And you can see in their words what our tremendous Vanquish colleagues are doing to serve our customers day in, day out, and to truly help them to make the most of life's opportunities. Operator, we'll hand to you now for questions.

Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad now. If for any reason you want to remove your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. If you are joining us on the webcast, please use a Q&A box on your browser. Our first question is from Gary Greenwood from Shaw Capital. The line is now open. Please go ahead.

Morning, Gary.

Oh, hi. Thanks for taking my question. Morning. I've got a couple, if I can. So can I link, really? So clearly, the first one is just on your growth trajectory, which has obviously been moderated. But I just wanted you to contextualize that, really, in terms of the size of the market opportunity and whether that market opportunities still as large as you previously thought it was, or indeed if it's actually maybe got a little bigger post the budget. And then secondly, just with regards to the growth in second charge mortgages, which looks to be prioritized at the moment, just to invite you to talk about why you see that as so attractive. What are the customers like that you're lending to there? Why are they borrowing? So just a little bit more colour around that if you can. Thank you.

Gary, thank you. Two really helpful questions. If I take them in the order you gave them. So, yeah, look, it was a challenging year, as I said. I can't remember how many times I've used the word challenging in that presentation, but we do see the opportunity as big, if not even bigger, as you said, as we did when we talked at our half-year results or even back when I started at the beginning of 2023. And depending how you cut it, there are up to 24 million customers in the UK who at some stage struggle to access credit from the mainstream lenders. And that's who we're there to serve. So we do see the opportunity as extensive. We've got about 1.7 million of those customers so far. So the upside opportunity for us is there. definitely there so we're feeling good about that if we turn then to your point on mix and second charge mortgages um in particular you know we we are as i've said we've got a balanced portfolio here so we're growing in savings we're back to growth in cards vehicle finance has been very difficult to track through and obviously a lot of uncertainty until we get to the other side of the supreme court hearing but second charge mortgages is one where that market is growing And actually it fits really nicely into where we serve customers. So we've got a couple of thousand customers on the books now. Impairment is next near to zero. So that's really encouraging though it is early days for a mortgage book. But interestingly, 60% of the customers that we've done second charge mortgages for are using them for debt consolidation. So right in that core customer group of sort of stretch, but managing. So they're restructuring their finances. And 85%, so another 20, have partial debt consolidation in the second charge mortgage. So we really like the market. We're market leaders in terms of volume now. So that's pretty good from a launch in May, which proves we can launch products well and get them to growth. And we do feel that we are serving a lot of our core customers in that space as well. Thanks very much. Thanks, Gary.

Thank you. Our next question is from Ray Mail from Panyol Liberum. The line is now open. Please go ahead.

Morning, Ray. Morning. Thanks. Just coming back on that point on growth, I mean, although you've moderated the end point in terms of receivables, obviously you've sold personal loans, which presumably was in the prior prior target. But can you, what words can you tell us to reassure the market about why compound growth of 14% is going to be delivered? Because it's obviously faster than you've been doing more recently. And then, I mean, the other challenge this morning has been obviously the shifting in the ROE target. Can you help us talk through the movement in the ROE target between the impact of a faster rate of growth, this 14% receivables growth and then the IFRS 9 drag because of that. The move to statutory rather than adjusted profits and any other issues within there as well.

Yeah, thank you, Ray. Look, I'll get Dave maybe just to comment on personal loans because that is an important one in terms of cleaning up the portfolio that we've got. I think the very simple answer to your question, Ray, is we've had so much to sort out through 2024 that we've been prudent about making sure that where we are growing and we, as I said, we are back to growth from Q4 that's continued into Q1. So we're pleased about that. But it's measured growth. We spent a huge amount of time unpicking the portfolios that we had in this business to understand what profitable engaged customers looked like and to make sure that we were adjusting the book to reflect that and our flow of forward new business to reflect the customers that we want to bring into the book, that we can help them and serve them well, but they actually generate the right sort of returns. So we are feeling that we have cleared the decks now and that we can concentrate on growth, but the right type of growth at the right rate. So we're feeling pretty good about that. Obviously, it's disappointing to push our guidance out a bit, but it is a reflection of all the things that we discussed at the first half last year that we have had to resolve and deal with. And as you said, there's a balance when it comes to growth of new credit business that the IFRS 9 drag means that we want to do that in a measured way. But we do see a real opportunity, as I said, in answer to Gary's question. The market space is there, and we are already growing, which is good. And I think that gives us that confidence to move from an adjusted to a statutory basis as well, which is a reflection that we believe that the sword out of the back book is behind us. But Dave, I don't know if you want to add anything to those points.

Yeah, morning Ray. On the personal loans, I think this is a good positive action by the organisation. What it's done is this portfolio is in runoff. What we've done now is brought that forward, realised a small gain, freed up capital which we can deploy into other better returning products, which is what we're all about. How do we deploy our capital properly for profitable growth in place there? Secondly to the the marketplace concept we're trying to move towards is we now look to create a partnership arrangement with another provider where we have customers who need a personal loan we can refer that onto them and earn a potential small fee without using capital to deliver that on behalf of our customers.

Hope that helps Ray.

Great thank you. Yeah no that's great. Can I ask one quick supplementary which is how you see the cost of complaints developing over the next couple of years if we do get, with all the changes with FOSS, to what extent has that already started to curtail new complaints being made?

Yeah, look, it's one that's under close watch. I mean, obviously, we've got a structural change, as I described in my presentation from the 1st of April. That is really helpful. As I said, we don't think it goes far enough, but we still welcome it. And that will have a material impact. I mean, the numbers that Dave and I quoted about the cost of complaints and FOS fees in particular, I think we described as eye-watering. I think that's probably understating it. So I always look for structural changes rather than hope on these things. And the fact that CMCs will now have to pay that £250 fee for an unmerited or not upheld complaint, I think, will make a significant difference. Obviously, we're waiting to see what their behaviours are. And I should say, you know, I do talk about CMCs as if they're a homogeneous group. There are some really good CMCs out there as well, and we welcome their help. But it's the ones that are generating the vast amount of unmerited complaints that have been a big drag. A big pressure on our cost base that we're looking forward to seeing that resolve itself as we go through. And obviously the vehicle finance court of appeal ruling that I referred to interplays with that because CMCs may or may not be involved in whatever happens there. And there was a very helpful. update from the FCA that was effectively excluding CMCs potentially, albeit only at a consultation level at this stage. So we've got a bit of uncertainty still there, but it's uncertainty on a positive pathway is the way I would describe it. So it may be slightly better or slightly worse, but it's still going to be better than last year. That's our hypothesis. Again, Dave, anything you want to add on that?

Probably a couple of things, Ian, if you don't mind. The £250 has to be paid up front by the CMC when they submit the complaints in place there. And then secondly, if you've got a situation where the uphold rate is a 1 in 10 uphold rate, that's quite a high cost that they have to absorb to do that up front. So therefore, we've laid outward expectation for that, the cost to be reduced going further forwards. But clearly, we need to look at the behaviour of both of our customers and our CMCs over the next months to see how they react to the new charging mechanism, which we welcome

Great, thank you. Thanks, Ray.

Thank you. Our next question is from Ed Fifth from KBW. Your line is now open. Please go ahead.

Morning, Ed.

Yeah, morning, everybody. I just had a couple of questions, actually. When I... Think back to 12 months ago when you did your big strategy day. I guess I can think off the top of my head, there were certainly two or three massive uncertainties in terms of motor finance address. People were talking anything up to 100 million. The FOS was on an upward trajectory and out of control. Your day three review balances, there were some big numbers coming out of that as well. I can't really see anything similar where we're sitting today and yet your share price would suggest that things have got worse and I'm just trying to square so my first question is to try and square those two you know are there similar uncertainties I mean 23 million of commission on redress against 360 tangible books seems to be I mean that's not immaterial but it's not far off so I'm just trying to get a sense of where we stand today When you look at your tangible book, where can you see the big hits that are going to come? I guess relative to where we were 12 months ago and where we are today, I guess that's my first question. And then my second question, everybody seems to be talking about growth, but it seems to me that the most fantastic investment at the moment would be for you to buy your own shares, which I guess you couldn't do a year ago because you had these massive uncertainties and I guess the regulator wouldn't have let you. Does there come a point when you start thinking to yourself, you know, I can buy, I mean, I think you're trading on less, what, about two times consensus, 26 earnings, and you could buy your own shares, but I can't believe there's a single investment that's better than that. So at what point do you start saying to yourself, yes, we're doing good for the community, we're, you know, we're being good citizens, we're providing the underserved with financial products, but ultimately we're using shareholders' money for that, and, you know, shareholders are not a charity, and Ultimately, we just have to start giving the money back and moving on. Thanks very much.

Ed, thank you. Two good questions there. I mean, on the first one about uncertainties versus where we are a year ago, I mean, Dave, you can comment on this as well, but I feel we are in a fundamentally stronger position than we were 12 months ago. We had emerging issues, whereas now we've got crystallised issues and they're in the rearview mirror rather than in front of us. As I said in my comments, I mean, I'm sure there'll be other challenges that will emerge, but I can't imagine they will be of quite the scale of what we've had to deal with through 2024. So we are feeling, as I described, optimistic as we look forward. And turning to your second point, I think this interplays to what should we do with our capital. It's almost back to Gary's question. We see such an opportunity in front of us. And it's always a trade-off and a matter for the board about how we deploy that capital. But we do understand the question. We get it quite regularly about share buybacks. But our plan is to deliver our plan. We think we'll create really strong, sustainable value by deploying our capital into serving the needs of our customers. And I hear you on the shareholders are not a charity. And goodness, I said last March, I really feel for our shareholders who have been with us for quite a big, amount of time through this journey. But we do feel we're on a great path now, and a path that can deliver the returns that everybody's looking for. And we're starting to see that in our numbers. I described Q4 and Q1 growth. So that is our plan as we stand at the minute. Dave?

Just to reiterate the comments you've made there, Ian, we don't see any big hits coming along, hence the reason why we've moved to statutory reported basis in our guidance from there. So, yeah, we feel very comfortable that's behind us. It's now all about profitable growth. We've seen it started coming through in the fourth quarter, 2% growth of receivables there. It's coming through in January and February. So we need to monetise the opportunity we have in front of us.

If I'm looking at your whatever it is, 360 tangible book, something like that, the only way you justify your current share price if there aren't big hits ahead of you is if one assumes that in 12 months' time you're going to be rolling forward your targets another 12 months and you're persistently going to be delivering low single-digit returns forever. I mean, I guess that's the context of my question. I mean, at what point, if that was to happen, if we were to be six to 12 months down the line and you were seeing that happen again, is that the stage at which you then say, okay, guys, look, we haven't destroyed any tangible books, so let's call it a day and start returning the cash?

Look, it's a perfectly reasonable question, Ed. I don't think it's right for us to get drawn into that. I mean, as I said, our plan is our plan of record that we've put out. Our focus is on delivering that plan. And if you look at what we've done in terms of sorting out the back book, getting our costs under control, getting our pricing discipline in, I think you will see why we want to have the time now to demonstrate the returns on that. I'm not even going to contemplate a scenario where that doesn't work, frankly. Our focus as a management team is making that work and that's what you'll see us do.

If I can add there Ian, I mean, sorry Ed, our guidance is clear. We've got low single digits in 2025. We see it being low double digits in 2026 and moving to mid-teens roti in 2027. Why is that? We are going to deploy our capital over the next couple of years to get growth. You have the natural, unfortunate impact of IFS 9 up front where you take the cost up front. So that's why it's a low to start off with. It should build over the coming two years.

Thank you, Ed. Great. Thanks so much.

Thank you. As a reminder to ask a question, it is star followed by one. Our next question is from Portia Patel from Canaccord, Genoese. The line is now open. Please go ahead.

Morning, Portia.

Morning. Morning. Thank you for taking my question. I've got two, please. Firstly, just going back to receivables. I wondered if you could provide a rough expected split of receivables in 2026 as you did in the strategy update. I think at that time you were targeting 50% of the book credit cards. This is roughly 33% vehicle, 17% second charge, but it sounds from the commentary today like you are emphasizing second charge more prominently. So an update on that would be very helpful. I wondered with respect to vehicle finance, now that you've cleaned up the receivables back book, you have no exposure to discretionary commissions issue, your exposure to the hidden commissions investigation seems limited. Why wouldn't you choose to capitalize on the disarray in vehicle finance with respect to some of your peers and target stronger growth in this area?

Portia, thank you. Two super questions. I'll come to Dave in a second on the receivable split. But we've been very clear that our guidance is 2.6 billion from where we are now by the end of 25 and then 3 billion by the end of 2026. The mix between that will always be dynamic. But we have a plan. You're right, second charge mortgages we like has launched probably slightly better than we anticipated it. We've got a really good partnership in place there and a market that is in itself growing. So we do see opportunity that we want to take there. Likewise, your point on vehicle finance. I mean, fundamentally, the biggest bit of our book is our cards business. And we are really focusing on making sure that we're growing receivables in the right way on that. But vehicle finance is an interesting one. I mean, we'll be back, I think it's 15th, 14th, 15th of May, Dave? 14th of May. 14th of May to update on Q1. But we're pleased with what we're seeing in vehicle finance year to date. I'll do that as a bit of a teaser, maybe, Portia, to your question. There is an opportunity there. And while we haven't got the tech that we want to build that business on deployed yet, that will be mid-2026, we are actually seeing some pretty good performance coming through and that gives us some options about where do we want to deploy capital and how do we want to manage that mix between our asset products. But Dave, anything you want to add?

Just a couple of points to add there, Portia, and thanks for your question. If you think about when we provided that guidance on the 27th of March, that was before the review we've undertaken the vehicle finance portfolio obviously that was a negative when we uncovered those issues at half-year which we reported on that is now firmly behind us on that one there but it does change the actual dynamic and growth as Ian's already said we are going to deploy our capital for the best returns we can get and that's what we will do We also want to do that on a better technology, which we've got scheduled to come through in sort of mid part of 2026 for vehicle finance in place there. Looking at second charge mortgages with our partnership in place there, we're now in a leading proposition position. We've added on circa £30 million per month. It's a good return associated with it. And it's nice to be in a leading position on a product.

Thank you, Portia.

Thank you. That's helpful. Thank you. We currently have no further audio questions, so I'll hand over to James for any webcast questions.

Yep. Thank you, Becky. There's actually no questions on the webcast, so I'll hand back to Ian to close.

Okay. Look. We are pleased as to the efforts we put in to get ourselves to where we are. I'm confident, as I said in my remarks earlier, that 2024 will be remembered as the year where Vanquish did the things to get itself back fit to perform again and will prove that over the coming quarters. The benefits are multiple that comes out of Pricing, cost savings, cleaning the balance sheet up. We are simpler, stronger and better positioned for growth now. And you can see that in the numbers. It's not a hope. It's actually tangibly coming through in Q4 and Q1. So I'd like to thank you for all your support. Thank you for the questions. They're always really helpful. Look forward to meeting you over the next couple of days. And thank you for your participation today. So Becky, thank you. And we will hand the call over to close now.