Vanquis Banking Group plc

Good morning, everyone. I'm Ian McLaughlin, Chief Executive of Vanquish Banking Group. Thanks for joining us for our 2025 Half Year Results webcast and conference call. As usual, I'm pleased to be joined by our Chief Financial Officer, Dave Watts. Dave, good morning and welcome.

Thanks, Ian, and good morning, everyone.

So as you can see on slide two, I'm going to start with an overview of our performance for the first half of the year. Dave will then take you through the numbers in more detail. And after that, we'll be happy to take your questions. So if I can take us straight to slide four. Let me start by briefly looking back. And this is hopefully the last time I will mention 2024. But you know, for us, it was a challenging year. One where we addressed the issues of the past, reset the business, and laid the foundations for sustainable, profitable growth in the future. We also had external factors that we had to deal with in the form of CMC complaints and vehicle finance commissions and I'll update you on both of those in a moment. Importantly that reset is now behind us and the progress we're making shows that our plan is working. Profitability in both quarter one and quarter two obviously means we've returned to profit in the first half of the year. And we have now delivered three consecutive quarters of balance growth. Q4 last year, followed by Q1 and Q2 this year. All our products were profitable and overall customer balances have grown by 7%. We still have much to do, though. Gateway, our technology transformation program, is fully mobilized and remains on track for completion in mid-2026. It is a critical aspect of our plan, so I'll also come back to more detail on that shortly. Cost control remains a top priority for the management team with over half of the 15 million of the cost saving we committed to already delivered. So we're on track to deliver the savings that we committed to for full year 2025. On credit quality, customers continue to show resilience with risk performance, reflecting our responsible lending practices across all of our products. And finally, while there's more work ahead, we are making strong progress in modernizing our franchise and strengthening our customer proposition, as shown by the customer ratings and market recognition that you can see at the bottom of this slide. On slide five, we have the headlines on our financial performance and how we're tracking against the guidance that we set out for 2025. You can see the side by side view. In short, we believe we will achieve all areas of guidance for full year 2025. Gross customer interest earning balances ended the first half at 2.46 billion, giving us confidence to upgrade our guidance for the year end to greater than 2.6 billion. Net interest margin was 17.4% and we expect it to stay above 17% for the full year. As we evolve our product mix, we're focused on deploying capital for growth in the highest returning opportunities. Our core priority is to deliver a strong return on tangible equity and that has not changed. Our cost income ratio was 62.5% at the half year. While that is a substantial improvement year on year, it remains above our guidance of high 50s for full year 25. We expect to close this gap in the second half through higher income, further transformation cost savings and lower complaint costs. Again, I will touch on those in more detail shortly. Profit after tax of 5.6 million delivered a 3.1% return on tangible equity. So within our low single digit guidance range for the full year. And finally, we have the capital required to deliver on our plan. Let's now look at some of the operational highlights across the five key initiatives that we've shared with you in previous presentations, starting with our customer proposition and risk management approach that you can see on slide six. In our cards business, we launched more flexible, tailored products, supporting 6% balance growth in the first half. In vehicle finance, our upgraded decisioning engine helped improve our risk-adjusted margin to 9.7%. Our second charge mortgage book continues to grow well with balances reaching over $370 million. And we broadened our savings range to give customers more flexibility, including new ISA products and launching the Snoop Easy Access savings account. And speaking of Snoop, it continues to be a real strategic enabler, not just growing its user base, but also helping us to improve customer engagement and enhance the overall customer experience as we deploy both the Snoop team and the technology more broadly across the business. Active Snoop users were up 7% in the first six months, with a 12% increase in Vanquish customers using the app. Snoop also plays a key role in our not yet customer strategy. And you'll remember that that's supporting customers who might not qualify for credit from us today, but who could do so in the future. And instead of turning them away, we give them money management tools through Snoop which support them to build their financial confidence. Where appropriate, we also refer them to trusted partners like Fair Finance. And our partnership approach with Fair Finance is delivering real impact. In the first half of the year alone, we referred some 2,600 customers who Fair Finance then helped to access affordable credit and unlocked almost 10 million in unclaimed government benefits for them, in some cases transforming their financial position. By offering these kinds of solutions, we're helping people improve their financial well-being and resilience, which in turn builds trust, loyalty and long-term relationships with Fanquis. Supporting a better overall customer experience, in February we created a single customer view in our new service platform. This combined 15 separate legacy data sources, enabling our colleagues to deliver faster, more tailored, more accurate support to our customers. And in June, we brought that same commitment to life in our rebrand, reintroducing Vanquish to our customers as the bank that's got your back. And this is more than a logo or a campaign. It reflects how we show up for our customers and support them day in and day out in ways that other lenders either can't or won't. And that approach is making a difference. Our Trustpilot score remains rated great with over 80% of our reviews being at five stars, reflecting the real value customers place on the products, service and support that we provide to them. Turning to slide seven, I'll cover three key areas you can see on the left-hand column. Technology transformation, operational efficiency, and our people agenda. So let's start with technology. And as I mentioned earlier, our Gateway Technology Transformation Program remains on track. A recent milestone saw us load 30 billion rows of customer product and decisioning data onto our new IT platform, significantly enhancing our ability to generate insights and make smarter, faster decisions. This foundation is paving the way for upcoming launches, including our new mobile app and smarter credit card onboarding and decisioning tools, which will be launched over the next three months. we've had a significant amount of technical debt to address. And introducing this modern infrastructure now sets the stage for a more digital, customer-focused experience. And while we're enhancing customer experience, we've also been driving operational efficiency across the business, expanding digital self-service, integrating AI, and strengthening our control frameworks to make our processes more efficient. And we're seeing the impact through reduced complaints, tighter fraud controls, and expanded debt sales, all of which are contributing to our cost transformation. Alongside that, we've reshaped our operating model. In 2024, we completed a significant outsourcing programme that reduced our staffing costs by £25 million and our headcount by 18% year over year. As a result, our UK headcount has remained broadly flat over the last six months. Encouragingly, colleague engagement has continued to improve with our mid-year pulse survey showing a five-point increase rising to 65%. And we believe that reflects growing confidence from our colleagues. And while we know there's more to do, there's a real sense in the business that we've turned a corner and we're now heading in the right direction. While we've been focused on turning around the business, there have been two external challenges that we've talked to you about before and that you know have weighed on the bank. These are CMC complaint volumes and motor finance commissions. So let's start with complaints and the recent positive developments on this. And you can see the detail here on slide eight. As we flagged in our Q1 trading update, complaint costs were tracking in line with our expectations. Since the FOS fee reforms that came into effect in April, we've seen a sharp drop in unmerited referrals from claims management companies. And I'm pleased to say that trend has continued. CMC complaints referred to the FOS remain negligible. And we've also seen a fall in the volume of CMC complaints submitted directly to us. As a result, complaint costs in the first half were £16 million, which is 36% lower year on year. And with a lower run rate in Q2 than in Q1. So this supports our expectation that complaint costs in the second half will be lower again. Now, we do recognise the importance of the FOS in resolving customer disputes, but it's critical that that process works fairly for all parties, and that's why we support the government's planned review aimed at reforming the FOS. And more broadly, we continue to engage with regulators on industry-wide solutions, particularly around proper oversight of CMCs and their practices. And finally, a quick update on our High Court case against the money solicitor TMS. They're the claims management company behind the largest number of unmerited complaints against us. Following success at the recent strikeout hearing, we're now continuing to progress our case to the High Court. Turning to the second external overhang, the Supreme Court judgment on Motor Finance Commission disclosures and the FCA's intention to consult on a compensation scheme. And we're on slide nine now. Firstly, we welcome the clarity provided by the judgment from the Supreme Court and the conclusion that dealer brokers did not owe fiduciary duties to their customers. We believe our liability in relation to this matter is limited, and as a result, we haven't taken a provision. However, in line with accounting standards and with agreement from our auditors and board, we have disclosed a contingent liability. While we continue to work closely with the FCA, I wanted to share the number of reasons why we believe vanquished exposure is less than others. Importantly, as we've said many times before, Vanquish never operated discretionary commission arrangements or DCAs. And we are therefore not in scope for this element of any FCA redress scheme. However, the FCA have said they intend to consult on whether certain non-DCAs should be included as part of a redress scheme. They list the factors that they intend to consider, which are consistent with those that the Supreme Court took into account when assessing an unfair relationship in the Johnson case. Against each of these factors, Vanquish's position is clearly differentiated. We have outlined the rationale for this on the slide, but I would emphasize the following. Our average vehicle finance commissions as a percentage of the total credit charge is around 13%, much lower than the Johnson case, which, as you know, was 55%. We did not operate a right of first refusal arrangement with broker dealers. And in fact, in many cases, we were more like the lender of last resort. Customers signed pre-contractual documentation confirming that they understood a commission would be paid. As a result of all this, we do feel our position is clearly differentiated and look forward to more clarity emerging through the FCA consultation process. Vanquis remains committed to the vehicle finance market and we're confident in the continued strategic transformation of the business for the reasons that we show on slide 10. Through our Money Barn subsidiary, we support an underserved customer segment in line with our overall purpose as a bank. We help customers finance affordable, often older vehicles that are essential to their daily lives. The most common type of car we finance is a nine-year-old Ford Focus with some 70,000 miles on the clock. So we finance essential travel for our customers, not luxuries. This end of the market is resilient with strong demand and limited direct competition, which allows us to price appropriately for risk and maintain a broader credit appetite. And although the average loan size is lower at around £9,200, our weighted average APR is over 29%, reflecting that risk profile and that supports strong unit economics. After resolving the well-documented challenges in our vehicle finance book that we shared with you in 2024, I'm pleased to report that our vehicle finance business returned to marginal profitability in the first half. This is a positive step, though we've more to do and scaling and cost to serve remain key focus areas. To support this, we're investing in a new onboarding and servicing platform through Gateway. It will reduce manual work, lower costs and improve both the customer and the broker experience. In the near term, we're managing new lending volumes carefully as we complete the IT platform build. So balances are down 4% year-to-date, but improved portfolio visibility has enabled sharper pricing, lifting our risk-adjusted margin to 9.7%. The long term opportunity here remains compelling. The market is expected to grow by six billion over the next five years, creating a financing need of around nine billion by 2030. And we're positioning this business for sustainable, profitable growth with a clear roadmap, a large addressable market and a differentiated model for us that plays to our strengths. Right, that wraps up my section for now. I'll be back later for the Q&A session. But in the meantime, let me hand you over to Dave, who will take you through our financials in more details. Dave.