REG - Vanquis Banking Grp - Results for the year ended 31 December 2024
14/03/2025 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250314:nRSN6441Aa&default-theme=true
RNS Number : 6441A Vanquis Banking Group PLC 14 March 2025
Results for the year ended 31 December 2024
Turnaround on track, moving into profitable growth phase
London - 14 March 2025 - Vanquis Banking Group plc ('the Group' or 'Vanquis'),
the specialist bank, today published its results for the twelve months to the
end of December 2024.
Ian McLaughlin, Chief Executive Officer, commented: "2024 was a pivotal year
in the turnaround of Vanquis. We have made good progress implementing the
changes required to position the business for sustainable future growth,
despite substantial headwinds. We addressed underlying structural issues,
simplified our operating model, refreshed our strategy, expanded our product
range, and are on track to deliver our technology enhancements.
"Significant progress has been made on our cost saving commitments across the
year, with over £64 million of savings achieved by the end of 2024, exceeding
our £60 million target. We are set to deliver an additional commitment of
£15 million by the end of 2025. Our technology transformation programme,
Gateway, is due to complete by mid-2026, providing us with a scalable,
digital-first platform to support growth and delivering an additional £23-28
million in cost efficiencies.
"Vanquis plays an important role in UK banking. The customers we serve have
demonstrated financial resilience, our underlying credit quality has improved
and we have achieved greater clarity on cost of risk across portfolios. With
this backdrop, the Group returned to gross customer interest earning balance
growth in 4Q24.
"The foundations laid this year through our targeted strategies for efficiency
and our commitment to long-term, profitable growth mean we remain on track to
deliver low single-digit return on tangible equity (ROTE) in 2025. The
headwinds we have faced mean we now expect to achieve our goal of sustainable
mid-teens ROTE in 2027, with double-digits ROTE delivered in 2026.
"I am proud of the hard work put in by all our colleagues over this
challenging period. While the transformation continues, I am confident that
2024 will be remembered as the year we repositioned Vanquis for success."
Executive Summary
Deliberate actions were taken in 2024 to position the Group for sustainable
profitable growth in 2025.
· Balance sheet review: Adjusted loss before tax of £(34.8)m (2023:
profit of £17.3m) was impacted by the Vehicle Finance Stage 3 receivables
review in 1H24, completed in 2H24, along with one-off items, resulting in a
loss of £(31.7)m. These actions have created a cleaner and lower risk balance
sheet, giving greater clarity to the cost of risk across portfolios.
· Complaints: Complaint costs rose 66% to £47.4m, with Financial
Ombudsman Service (FOS) fees increasing £(16.7)m to £(24.8)m, driven by an
increase in unmerited Claims Management Company (CMC) claims, weighing on
performance.
· Balance growth: Managed new business growth accordingly, resulting in
a 4% decline in gross customer interest-earning balances to £2,308m. However,
balances increased by 2% in 4Q24.
· Cost efficiencies: Delivered £64.3m of transformation cost savings
by the end of 2024 and on track for an additional £15m of committed savings
by the end of 2025.
· Resilient funding: Retail funding rose to 92.1% (2023: 83.7%),
reinforcing the Group's strong liquidity position and deepening customer
engagement.
· Robust liquidity and capital: The Group remained highly liquid, with
a Liquidity Coverage Ratio (LCR) of 359% (2023: 1,263%) and a Tier 1 capital
ratio of 18.8% (2023: 19.9%), ensuring sufficient capital for future growth.
· Clear financial trajectory: On track to deliver low single-digit ROTE
in 2025. Now expect to achieve sustainable mid-teens ROTE in 2027 and low
double-digit ROTE in 2026.
· Vehicle Finance commission disclosures: Vanquis did not participate
in discretionary commission arrangements (DCAs). The future application of
the Court of Appeal judgment remains highly uncertain, but Vanquis believes
its position is differentiated on a number of grounds versus the three cases
subject to the judgment. From January 2013 to October 2024, c.10% of the
historical Vehicle Finance commission payments to intermediaries were to
dealer brokers, subject to the judgment. In accordance with IAS 37, the Group
has not provided for this matter.
· Moneybarn goodwill write-off: Statutory loss before tax of £(136.3)m
(2023: £(12.0)m) included a £(71.2)m (2023: £nil) goodwill write-off
related to Moneybarn. This does not impact the Group's capital position and
is not connected to the Vehicle Finance Stage 3 receivables review or the
Court of Appeal judgment regarding commission disclosures. The Group plans to
moderate new business growth in Vehicle Finance while investing in and
developing a new IT platform for Vehicle Finance as part of the Gateway
technology transformation programme, and prioritise growth in Second Charge
Mortgages and Credit Cards in the near term.
Group financial results
Income Statement (£m) 2024 2023 (Restated(1)) Change %
Interest income 565.4 556.0 2
Interest expense (145.4) (113.4) (28)
Net interest income 420.0 442.6 (5)
Non-interest income 38.5 46.2 (17)
Total income 458.5 488.8 (6)
Impairment charges (191.0) (165.5) (15)
Risk-adjusted income 267.5 323.3 (17)
Adjusted operating costs (302.3) (306.0) 1
Adjusted (loss)/profit before tax (34.8) 17.3
Exceptional costs (24.1) (21.4) (13)
Amortisation of acquisition intangibles (6.2) (7.9) 22
Goodwill write-off (71.2) - (100)
Statutory loss before tax (136.3) (12.0)
Tax credit 17.0 0.3
Statutory loss after tax (119.3) (11.7)
Balance Sheet (£m) Dec-2024 Dec-2023 (Restated(1)) Change %
Gross customer interest earning balances 2,308 2,401 (4)
Average gross customer interest earning balances 2,286 2,376 (4)
Gross receivables 2,416 2,739 (12)
Net receivables 2,155 2,159 -
Closing tangible net asset value (TNAV) 359 394 (9)
Average tangible equity 377 418 (10)
Selected key metrics(2) (%) 2024 2023 (Restated(1)) Change
Asset yield(3) 22.7% 22.1% 0.6%
Net interest margin (NIM)(4) 18.4% 18.6% (0.2)%
Total income margin (TIM)(5) 20.1% 20.6% (0.5)%
Cost of risk(6) (8.4)% (7.0)% (1.4)%
Risk-adjusted margin (RAM)(7) 11.7% 13.6% (1.9)%
Adjusted cost: income ratio(8) 65.9% 62.6% (3.3)%
Statutory cost: income ratio(8) 88.1% 68.6% (19.5)%
Adjusted ROTE(9) (7.0)% 1.9% (8.9)%
Statutory ROTE(9) (31.7)% (2.8)% (28.9)%
Selected per share metrics (p) Change %
Adjusted basic earnings per share (EPS)(10) (9.7) 4.5
Dividend per share - 6.0 (100)
TNAV per share(11) 140 155 (10)
Capital, liquidity and funding metrics Dec-2024 Dec-2023 (Restated(1)) Change
Tier 1 ratio(12) 18.8% 19.9% (1.1)%
Risk weighted assets (RWAs) (£m) 1,835 1,976 (7)
High quality liquid assets (HQLA) (£m) 947 682 39
Liquidity coverage ratio (LCR) 359% 1,263%
Retail deposits (£m) 2,399 1,925 25
Retail funding (% of all funding) 92.1% 83.7% 8.4%
2024 Financial Highlights
Income Statement
· Net interest income decreased 5% to £420.0m, leading to total
income decreasing 6% to £458.5m, driven largely by higher cost of funds.
o Despite reduced interest earning balances, interest income increased 2% to
£565.4m driven by re-pricing initiatives in Credit Cards and Vehicle Finance,
and increased Liquid Asset Buffer income. This was partially offset by the mix
effect of growing lower-risk and lower-margin Second Charge Mortgages.
§ Asset yield increased 60 basis points to 22.7% driven by the repricing
initiatives.
o Interest expense increased by 28% to £145.4m, as maturing fixed term
deposits were refinanced at higher market rates.
o The combination of these factors drove a reduction in NIM to 18.4% (2023:
18.6%). Excluding Second Charge Mortgages, NIM was 18.9%, reflecting the
benefit of the repricing initiatives.
· Impairment charges increased 15% to £191.0m driven by the
Vehicle Finance Stage 3 receivables review and the non-repeat of £74.5m of
prior year post model adjustment (PMA) and model redevelopment releases.
Credit risk remained broadly stable in the underlying book, with lower
origination charges in line with reduced new business volumes.
o Cost of risk increased 140 basis points to 8.4%, with the prior year cost
of risk of 7.0% having benefited from PMA and model redevelopment releases in
2023.
· Risk adjusted income decreased 17% to £267.5m, driving a RAM of
11.7% (2023: 13.6%).
· Adjusted operating costs decreased 1% to £302.3m.
o This reflected a year-on-year increase in transformation cost savings of
£48.9m, in total delivering greater than £60m of savings committed to by the
end of 2024.
o These savings were largely offset by increased complaint costs driven by
higher FOS fees due to an increase in unmerited claims received from CMCs,
one-off items linked to the comprehensive balance sheet review of £10.2m, and
increased costs linked to growth initiatives and inflation.
o This delivered an adjusted cost: income ratio of 65.9% (2023: 62.6%).
· Statutory loss before tax was £(136.3)m (2023: £(12.0)m),
reflecting adjusting items of £(101.5)m (2023: £(29.3)m).
o Adjusting items included exceptional items of £(24.1)m (2023: £(21.4)m),
of which £(21.1)m (2023: £(17.0)m) were transformation costs linked to the
operational turnaround of the business and rightsizing the headcount and
property footprint of the Group, amortisation of acquisition intangibles of
£(6.2)m (2023: £(7.9)m) and write-off of Moneybarn goodwill £(71.2)m (2023:
£nil), which does not impact the Group's capital position.
· Adjusted loss before tax was £(34.8)m (2023: profit of £17.3m).
o Adjusted performance improved in the second half of the year with an
adjusted loss before tax of £(8.0)m, following a first half adjusted loss
before tax of £(26.8)m, driven by the Vehicle Finance Stage 3 receivables
review and other one-off items.
· Adjusted RoTE was (7.0)% (2023: 1.9%).
Balance Sheet
· Gross customer interest-earning balances decreased 4% to
£2,308m:
o Credit Card balances decreased 10% to £1,278m, as growth from
originations were more than offset by higher repayments, lower spend by
existing customers and outward balance transfers.
§ The reduction in Credit Card balances stabilised in 2H24.
o Vehicle Finance balances reduced 11% to £765m, driven by an updated
charge-off policy communicated with 1H24 results and refined in 2H24,
resulting in balances being reclassified from Stage 3 impaired loans to
post-charge-off assets in anticipation of future debt sales. Two debt sales
were completed in 2H24.
o Second Charge Mortgage balances grew to £217m (December 2023: £3m)
following the successful expanded launch of the product in May 2024.
o Personal Loan balances reduced to £49m (December 2023: £116m) due to the
run-off of the existing portfolio.
· Net receivables were stable at £2,155m (December 2023:
£2,159m), reflecting the underlying growth in interest earning balances
driven by reduced impairment allowance now required on the Vehicle Finance
portfolio and growth in lower-risk Second Charge Mortgages.
Capital, Liquidity and Funding
· Tier 1 ratio reduced to 18.8% (December 2023: 19.9%). The reduction
was largely driven by the statutory loss after tax excluding the impact of the
Moneybarn goodwill write-off and amortisation of acquisition intangibles which
do not impact capital, partially offset by a 7% reduction in RWAs to £1,835m.
o The Tier 1 ratio increased 0.1% in 4Q24.
· Increased surplus liquidity, as HQLA increased 39% to £947m. This
resulted in excess HQLA over the liquidity coverage ratio (LCR) 100% minimum
of £667m (December 2023: £627m), reflecting an LCR of 359% (December 2023:
1,263%).
· Retail funding increased to 92.1% of all funding (December 2023:
83.7%), as retail deposits increased 25% to £2,399m and Term Funding Scheme
for SMEs (TFSME) was fully repaid.
Outlook and Guidance
2024 was a pivotal year for Vanquis Banking Group, with a number of challenges
and deliberate actions taken to drive future sustainable profitability,
impacting financial performance. In addition to external pressures, the
Group addressed structural issues, including a comprehensive balance sheet
review and reappraisal of customer propositions across products. These
actions have resulted in a cleaner and lower risk balance sheet, driving much
more clarity on profitability at the Group and individual product level.
Having taken these actions in 2024, the Group is now in a position where
guidance can be set on a statutory basis, as adjusted performance is expected
to be much more closely aligned with statutory performance going forward.
Accordingly, the guidance outlined below for 2025 and 2026 is on a statutory
basis rather than on an adjusted basis, which excluded exceptional costs,
amortisation of acquisition intangibles and goodwill write-off in 2024.
· Given the 4% decline in gross customer interest earning balances in
2024, FY26 balances are expected to be at the lower end of the previously
guided range of £3.0bn to £3.5bn, reaching c.£2.6bn by the end of 2025.
The growth is expected to be delivered through Second Charge Mortgages and
Credit Cards, with measured new business growth in Vehicle Finance in the
near-term. With balances having increased 2% in 4Q24, growth continued in
January and February 2025.
· To drive sustainable long-term profitability, the Group needs to grow
interest earning balances. This growth comes with initial capital deployment
through RWA growth and impairment build under IFRS 9 until the portfolio
seasons, at which point income generation increases. The Group continues to
guide to a low single-digit ROTE in 2025. The trajectory of interest earning
receivables growth means the Group now expect to achieve sustainable mid-teens
ROTE in 2027, with low double-digits ROTE delivered in 2026.
· A greater portion of growth in gross customer interest earning
balances is expected to come from lower-risk and lower-margin Second Charge
Mortgages, driving NIM guidance of greater than 17% in 2025 and greater than
16% in 2026. This is lower than the previous guidance of greater than 17% in
2026 driven by the mix effect.
· The cost: income ratio guidance of high 50s percent in 2025 and low
50s percent in 2026 reflects the commitment to deliver transformation cost
savings as previous outlined and assumes a reduction in complaint costs in
both years. The previous 2026 cost: income ratio guidance of 49% or lower
was on an adjusted basis and the new guidance reflects a change in
presentation of fraud costs from impairment to operating costs. The Group
continues to expect the statutory cost: income ratio to be 49% or lower in
2027 and will be driven by both continued cost reductions and increased
income.
o Having delivered £64.3m of transformation cost savings by the end of
2024, the Group remains on track to deliver a further £15m of savings by the
end of 2025, and £23-28m of savings through the Gateway programme, which
remains on track for mid-2026 completion.
· Given the cleaner balance sheet and more stable financial position of
the Group, with a lower risk mix of business, the Board has made the decision
to operate the business with a Tier 1 ratio of greater than 17.5%. This
reflects the capital requirements of the Group and the deployment of capital
to build interest earning balances, enabling the growth required to deliver an
appropriately scaled business in the medium to long-term.
o The Group will continue to ensure an adequate buffer to regulatory
requirements is maintained, which will be reset in 2026 with the
implementation of Basel 3.1 and the Small Domestic Deposit Takers (SDDT)
regime due to come into effect on 1 January 2027. The Group's capital
requirements are also due to be reviewed by the Prudential Regulation
Authority (PRA) in 2025 as part of the triennial Capital Supervisory Review
and Evaluation Process (SREP) and the future Tier 1 ratio level will be
influenced by the Board review of the capital allocation framework and
dividend policy in 2026.
· The Group has agreed the sale of its Personal Loan portfolio. As at
31 December 2024, the portfolio consisted of £49m of gross customer interest
earning balances and £44m of net receivables. The transaction is expected to
generate a small gain on sale, with a proforma Tier 1 capital ratio benefit of
c.25bps in 1Q25.
2025 Statutory Guidance 2026 Statutory Guidance
Gross customer interest earning balances c.£2.6bn c.£3.0bn
ROTE Low single digits Low double digits
NIM >17% >16%
Cost: income ratio High 50s Low 50s
Tier 1 ratio >17.5%
Capital Management and Dividend
· With the focus on deploying capital to support growth initiatives,
the Board of Directors has decided not to declare a dividend for 2024 (2023:
6.0p per share).
· The Board intend to revisit the capital allocation framework and
dividend policy following full delivery of the strategy in 2026.
2024 Operational Highlights
Customer proposition and insightful risk management update
· In Credit Cards, successfully repriced products across the
portfolio. The business comprehensively reviewed customer cohorts by risk
profile, vintage and acquisition channel. This review drove proactive volume
management and as a result, growth actions were moderated to ensure the future
sustainable profitability of the portfolio.
· In Vehicle Finance, in addition to a successful repricing
exercise, the Group completed a review of Stage 3 receivables, and although
this resulted in a write-down of the value of these receivables, the actions
taken are now driving more clarity on the cost of risk of the portfolio.
· The Second Charge Mortgages proposition had a successful launch
and continued to gain momentum, supported by a forward flow agreement with
Interbridge Mortgages and an expanded partnership with Selina Finance.
· The Group advanced its marketplace proposition through agreements
with H&T Pawnbrokers and Fair Finance.
· In Savings, the Group enhanced its ability to provide
cost-effective funding with an expanded product range that includes retail
notice accounts and easy access accounts, including a new, innovative savings
proposition from Snoop.
· Within Snoop, active users increased 25% to 293,000. Enhanced
AI driven customer solutions via the open banking proposition, including the
credit score feature, attracted new users. Its bill-switching capability was
seamlessly integrated into the Vanquis app, enhancing convenience and
engagement for customers.
Technology transformation, operational efficiency and people update
· Key Gateway programme milestones achieved include:
o Further digitised customer engagement through enhancements to self-service
tools, such as digital statement functionality, improving customer experience
and reducing costs.
o A single customer-centric contact centre platform servicing multiple
products.
o Replacing the Vehicle Finance lending decision engine, improving customer
underwriting and reducing risk.
o Moving colleagues onto one IT platform, resulting in improved colleague
and customer experience, and reducing costs.
· Development of the new Vanquis mobile app is on plan for
implementation in 2Q25, further digitising the customer service proposition.
· Enhanced cost-effective outsourced complaints handling capability,
with AI automated complaint logging, reducing unprocessed complaints to 5,600
at year end (December 2023: 14,400).
· The Operations outsourcing programme was completed and further Cloud
enablement was deployed, driving savings and providing more cost flexibility.
· Executive Management team reduced from thirteen to nine, with several
strategic hires at senior management level.
· Reduced the Group full time equivalent headcount 18% to 1,215.
· 7 percentage point improvement to 60% in the Great Place To Work
Colleague Engagement Trust Index.
Update on External Factors
Complaints update
· Complaint costs increased 66% to £47.4m, driven by a material
increase in Financial Ombudsman Service (FOS) fees from increased Claims
Management Companies (CMC) complaints, with uphold rates of only 11% (2023:
6%)(13). FOS fees increased three-fold to £24.8m (2023: £8.1m)
representing over half of total complaint costs.
· Vanquis welcomes the enactment of the revised FOS fees charging
proposals, which are expected to reduce unmerited CMC complaint referrals to
the FOS following implementation on 1 April 2025.
o CMCs will be charged an upfront fee of £250 for each claim submitted,
reducing to £75 for upheld cases.
o Lender fees will reduce from £650 per case to £475 for each case not
upheld.
· Continue to engage with regulators to address complaints issues on an
industry wide basis.
· Legal proceedings are ongoing against the CMC responsible for the
most unmerited claims.
Vehicle Finance commission disclosures update
· As previously stated, Vanquis is not subject to the current FCA Motor
Commissions Review that has been focused on DCAs, which Vanquis did not
participate in.
· The future application of the Court of Appeal judgment in Johnson v
Firstrand Bank Ltd, Wrench v Firstrand Bank Ltd, and Hopcraft v Close Brothers
Ltd, relating to motor finance commission disclosure practices, remains highly
uncertain with the Supreme Court having agreed to hear the appeal of the two
lenders involved.
· Vanquis believes its position is differentiated on a number of
grounds versus the three cases subject to the judgment and all customers
signed a pre-contractual document that confirmed a commission 'will' be paid.
· From January 2013 to October 2024, c.10% of the historical Vehicle
Finance commission payments to intermediaries were to dealer brokers, subject
to the judgment, to whom £23m was paid out as commissions.
· In accordance with IAS 37, the Group has not provided for this
matter, but has recognised a contingent liability. For further details refer
to Note 15: Contingent liabilities on page 51.
· The FCA have put in place an extension for handling Vehicle Finance
commission complaints until 4 December 2025 to align with rules for firms
dealing with DCA complaints.
o Vanquis had received c.4,400 complaints related to Vehicle Finance
commission disclosures as at 31 December 2024.
Results webcast
Ian McLaughlin, CEO, and Dave Watts, CFO, will host a results webcast at 09:00
today. To register your attendance, please use this link:
https://webcast.openbriefing.com/vanquis-fy24/
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwebcast.openbriefing.com%2Fvanquis-fy24%2F&data=05%7C02%7CJames.Cranstoun%40vanquis.com%7C4df48dbf5b3c477a1b1208dd52706ef0%7C73984ebf3c4345de900f969cd50a6a65%7C0%7C0%7C638757365384985687%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=Qf8CJHIRUZKutlR9LOID%2Bmd%2BihozVExVR2OYE6nOHIQ%3D&reserved=0)
Materials for the results presentation have been published at:
https://www.vanquisbankinggroup.com/shareholder-hub/results-reports-and-presentations/
(https://www.vanquisbankinggroup.com/shareholder-hub/results-reports-and-presentations/)
Enquiries
Analysts and shareholders
James Cranstoun, Head of Investor Relations
james.cranstoun@vanquis.com
+44 (0) 7766 937 406
Media
Scott Mowbray, Head of External Communications
scott.mowbray@vanquis.com
+44 (0) 7834 843 384
Victoria Ainsworth, Senior Director (Hawthorn Advisors)
vanquis@hawthornadvisors.com
+44 (0) 7894 995 886
Footnotes
1. The presentation of the income statement in this report is
consistent with that in the Annual Report and Accounts for 31 December 2023,
with the exception of the impact of the Vehicle Finance Stage 3 receivables
review and the representation of fraud costs from impairment to adjusted
operating costs.
2. Adjusted performance and metrics exclude exceptional costs,
amortisation of acquisition intangibles and goodwill write-off.
3. Asset yield is calculated as interest income received from
customers for the period as a percentage of average gross customer interest
earning balances for the 12 months ended 31 December using a 13 point month
end average.
4. Net interest margin is calculated as interest income less interest
expense for the period as a percentage of average gross customer interest
earning balances for the 12 months ended 31 December using a 13 point month
end average.
5. Total income margin is calculated as total income for the period as
a percentage of average gross customer interest earning balances for the 12
months ended 31 December using a 13 point month end average.
6. Cost of risk is calculated as impairment charges for the period as
a percentage of average gross customer interest earning balances for the 12
months ended 31 December using a 13 point month end average.
7. Risk-adjusted margin is defined as risk-adjusted income for the
period as a percentage of average gross customer interest earning balances for
the 12 months ended 31 December using a 13 point month end average.
8. Cost: income ratio is calculated as operating costs as a percentage
of total income for the 12 months ended 31 December.
9. ROTE is calculated as profit after tax net of fair value gains for
the 12 months ended 31 December as a percentage of average adjusted tangible
equity for the 12 months ended 31 December. Adjusted tangible equity is stated
as equity after deducting the Group's pension asset, net of deferred tax, the
fair value of derivative financial instruments, net of deferred tax, less
intangible assets and goodwill.
10. Adjusted basic earnings per share is calculated as adjusted profit after
tax for the 12 months ended 31 December, divided by the weighted average
number of shares in issue.
11. TNAV per share is calculated as closing adjusted tangible net asset
value, divided by the period end number of shares in issue. Adjusted
tangible net asset value is stated as equity after deducting the Group's
pension asset, net of deferred tax, the fair value of derivative financial
instruments, net of deferred tax, less intangible assets and goodwill.
12. The Tier 1 ratio is calculated as the ratio of the Group's Tier 1
capital as a percentage of the Group's risk-weighted exposures measured in
accordance with the CRR.
13. 11% uphold rate of FOS referrals are higher than prior year due to
elevated complaints handling back log in early 2024, which meant that
complaints were not considered before being referred to FOS.
Forward looking statements
This report may contain certain "forward looking statements" regarding the
financial position, business strategy or plans for future operations of
Vanquis Banking Group. All statements other than statements of historical fact
included in this document may be forward looking statements. Forward looking
statements also often use words such as "believe", "expect", "estimate",
"intend", "anticipate" and words of a similar meaning. By their nature,
forward looking statements involve risk and uncertainty that could cause
actual results to differ from those suggested by them. Much of the risk and
uncertainty relates to factors that are beyond Vanquis Banking Group's ability
to control or estimate precisely, such as future market conditions and the
behaviours of other market participants, and therefore undue reliance should
not be placed on such statements which speak only as at the date of this
report. Vanquis Banking Group does not assume any obligation to, and does not
intend to, revise or update these forward-looking statements, except as
required pursuant to applicable law or regulation. No statement in this
announcement is intended as a profit forecast or estimate for any period. No
statement in this announcement should be interpreted to indicate a particular
level of profit and, as a consequence, it should not be possible to derive a
profit figure for any future period from this report.
Financial review
Group performance
The Group's 2024 results are as follows:
2024 2023 (Restated) Change
£m
£m
%
Interest income 565.4 556.0 2
Interest expense (145.4) (113.4) (28)
Net interest income 420.0 442.6 (5)
Non-interest income 38.5 46.2 (17)
Total income 458.5 488.8 (6)
Impairment charges (191.0) (165.5) (15)
Risk-adjusted income 267.5 323.3 (17)
Operating costs (403.8) (335.3) (20)
Statutory loss before tax (136.3) (12.0)
Tax credit 17.0 0.3
Statutory loss after tax (119.3) (11.7)
Add back:
Tax credit (17.0) (0.3)
Exceptional costs 24.1 21.4 (12)
Amortisation of acquisition intangibles 6.2 7.9 22
Goodwill write-off 71.2 - (100)
Adjusted (loss)/profit before tax (34.8) 17.3
Adjusted operating costs (302.3) (306.0) 1
Income
Total income reduced 6% to £458.5m, driven by 4% lower gross customer
interest earning balances at £2,308m and higher funding costs, partially
offset by the benefit of repricing initiatives in Credit Cards and Vehicle
Finance, and increased Liquid Asset Buffer income.
Net interest income decreased 5% to £420.0m. Within this, interest income
increased 2% to £565.4m driven by repricing initiatives in Credit Cards and
Vehicle Finance, and increased Liquid Asset Buffer income. This was partially
offset by lower gross customer interest earning balances and the mix effect of
growing lower-risk and lower-margin Second Charge Mortgages. Interest
expense increased 28% to £145.4m, as maturing fixed term deposits were
refinanced at higher current market rates.
NIM, calculated as net interest income as a percentage of average gross
interest earning receivables, decreased to 18.4% (2023: 18.6%). Excluding
Second Charge Mortgages, NIM was 18.9% (2023:18.6%), reflecting the benefit of
the repricing initiatives.
Non-interest income reduced 17% to £38.5m reflecting lower fee and commission
income.
Impairment
Impairment charges increased 15% to £191.0m reflecting the impact of the
Vehicle Finance Stage 3 receivables review and the non-repeat of impairment
releases in 2023. Credit risk remained broadly stable in the underlying book.
Impairment charges driven by originations were £44.7m lower year-on-year in
line with reduced new business volumes and credit risk in the underlying book
improved £27.7m driven by positive stage migrations.
2023 benefited from post model adjustment and other model redevelopment
releases of £74.5m, which did not repeat in 2024. This included provisions
no longer required in Credit Cards and Vehicle Finance, arising from IFRS 9
model refinements of £57.7m, and the full release of the cost-of-living
post-model adjustment of £10.8m.
The Vehicle Finance Stage 3 receivables review reduced derecognition of Stage
3 interest by £17.6m and increased write-offs by £21.9m following
establishment of Vehicle Finance post-charge-off asset policy, resulting in a
much better performing portfolio.
The macroeconomic environment, the minimal impact of the cost-of-living crisis
and the growth in lower-risk customer and product segments, such as Second
Charge Mortgages, meant underlying impairment remained benign, with credit
quality and delinquency trends broadly stable.
Cost of risk, calculated as impairment charges as a percentage of average
gross customer interest earning balances, increased to 8.4% (2023:7.0%).
Risk-adjusted margin, calculated as risk-adjusted income as a percentage of
average gross customer interest earning balances, decreased to 11.7% (2023:
13.6%) as a result of the reduced NIM and higher cost of risk.
Operating Costs
Operating costs increased 20% to £403.8m including goodwill write-off of
£71.2m relating to the Moneybarn business, as the Group prioritises capital
deployment for growth into Second Charge Mortgages and Credit Cards in the
near-term.
Exceptional costs were £24.1m (2023: £21.4m), including transformation costs
of £21.1m (2023: £17.0m), comprising redundancy and outsourcing costs of
£9.7m (2023: £9.4m), property exit costs of £3.5m (2023: £4.1m) and
strategic consultancy costs of £7.9m (2023: £3.5m).
Amortisation of acquisition intangibles reduced to £6.2m (2023: £7.9m)
following the completion of the Moneybarn intangibles amortisation in August
2024.
Excluding exceptional costs, amortisation of acquisition intangibles and
goodwill write-off described above, adjusted operating costs decreased 1% to
£302.3m. This delivered an adjusted cost: income ratio of 65.9% (2023:
62.6%).
An additional £48.9m of transformation cost savings were delivered in 2024.
When coupled with 2023 transformation cost savings of £15.4m, £64.3m of
savings were delivered by the end of 2024, exceeding the £60m commitment.
These savings were largely offset by increased complaint costs driven by
higher FOS fees due to an increase in unmerited claims received from CMCs,
one-off items linked to the comprehensive balance sheet review of £10.2m, and
increased costs linked to growth initiatives and inflation.
The Group has continued investment in the diversification of customer
propositions, and the technology and operations investment associated with the
Gateway technology transformation programme. Cost management has been embedded
as a core discipline throughout the Group with the transformation cost saving
commitment increased from £60m by the end of 2024 to £75m by the end of
2025, reflecting an additional £15m of committed savings in 2025, and
£23m-£28m of savings through the Gateway programme in 2026 and 2027.
Loss before tax
The Group's statutory loss before tax was £(136.3)m (2023: £(12.0)m).
The Group's adjusted loss before tax, excluding adjusting items of exceptional
costs, amortisation of acquisition intangibles and goodwill write-off, was
£(34.8)m (2023: adjusted profit of £17.3m).
Tax
The tax credit of £17.0m (2023: tax credit of £0.3m) broadly reflects the
mainstream corporation tax rate of 25.0% (2023: 23.5%) on the loss before tax
of £(65.1)m excluding the goodwill write-off of £(71.2)m, which was non-tax
deductible.
The Group's adjusted loss before tax generated a tax credit of £10.0m (2023:
tax charge of £5.9m), exceptional costs generated a tax credit of £5.4m
(2023: tax credit of £4.3m) and amortisation of acquisition intangibles
generated a tax credit of £1.6m (2023: tax credit of £1.9m).
Loss after tax
The Group's statutory loss after tax, including adjusting items of exceptional
costs, amortisation of acquisition intangibles and goodwill write-off, was
£(119.3)m (2023: £(11.7)m).
The Group's adjusted loss after tax was £(24.8)m (2023: adjusted profit of
£11.5m).
Adjusted ROTE and EPS
The Group's adjusted ROTE decreased to (7.0)% (2023: 1.9%) and the adjusted
basic EPS decreased to (9.7)p (2023: 4.5p) per share, reflecting the adjusted
loss before tax.
Balance sheet
2024 2023 (Restated) Change
£m £m
%
Assets
Cash and balances at central banks 1,004 743 35
Amounts receivable from customers1 2,154 2,156 -
Pension asset 28 38 (26)
Goodwill and other intangibles 63 147 (57)
Other assets 126 111 14
3,375 3,195 6
Liabilities
Retail deposits 2,428 1,951 24
Bank and other borrowings2 410 583 (30)
Trade and other payables 46 44 5
Other liabilities 50 48 4
2,934 2,626 12
(1) Amounts receivable from customers are presented net of £1m (2023: £3m)
fair value adjustment for portfolio hedged risk. Underlying net receivables
were £2,155m (2023: £2,159m).
(2) Bank and other borrowings in 2024 are presented net of £3m (2023: £1m)
fair value adjustment for hedged risk. Underlying bank and other borrowings
were £413m (2023: £584m).
Assets increased 6% to £3,375m driven by a 35% increase in cash and balances
at central banks to £1,004m, of which £947m (December 2023: £682m)
represented high quality liquid assets (HQLA) placed with the Bank of
England. This was partially offset by a 57% reduction in goodwill and other
intangibles to £63m, driven by the goodwill write-off of £(71.2)m relating
to the Moneybarn business, as the Group prioritises capital deployment for
growth into Second Charge Mortgages and Credit Cards in the near-term.
Amounts receivable from customers were stable at £2,154m (December 2023:
£2,156m), as a 12% reduction in gross receivables to £2,416m driven by the
Vehicle Finance Stage 3 receivables review was offset by a commensurate
reduction in Expected Credit Losses (ECL) to £262m (December 2023: £580m).
Gross customer interest earning balances decreased 4% to £2,308m, as
reductions in Credit Cards, Vehicle Finance and Personal Loans balances were
partially offset by growth in Second Charge Mortgages.
Liabilities increased 12% to £2,934m, as retail deposits increased by 24% to
£2,428m driven by growth in more flexible retail notice and easy access
accounts, partially offset by a reduction in fixed-term products. This was
partially offset by a 30% reduction in bank and other borrowings to £410m
driven by the full repayment of Term Funding for SMEs (TFSME) early given the
strength of the deposit franchise.
Liquidity and funding
HQLA of £947m (December 2023: £682m) was almost entirely held in the Bank of
England reserve account. This represented significant level of excess
liquidity and a liquidity coverage ratio of 359% (December 2023: 1,263%).
Retail deposit funding increased 25% to £2,399m and was able to deliver the
required funding base at an attractive cost compared to wholesale
alternatives. Within the retail deposit base, fixed-term products reduced
25% to £1,415m and were replaced by retail notice accounts of £608m
(December 2023: £42m) and easy access accounts of £376m (December 2023:
£nil). The Group is now significantly funded by retail deposits, at 92.1%
(December 2023: 83.7%) of total funding.
Ongoing funding diversification is provided by modest levels of private
securitisation and Bank of England funding collateralised by both Vehicle
Finance and Credit Card assets. The Group has no senior unsecured wholesale
funding, although maintains access to the wholesale markets via a £2bn
Euro Medium Term Note programme.
The Group's cost of funds rose to 5.1% (December 2023: 4.4%), as maturing
fixed-term products, although reducing, were refinanced at higher rates.
Capital
The Group maintains a robust capital position with a Tier 1 ratio of 18.8%
(December 2023: 19.9%). This represents a surplus of £99m of Tier 1 capital
above the Group's Tier 1 capital requirement and regulatory combined buffers
of 13.4%. The 1.1% reduction in the Tier 1 ratio in 2024 was driven by the
statutory loss after tax for the year after adjusting for goodwill and
intangibles write-off and intangibles amortisation, which are deducted from
capital.
Risk weighted assets (RWAs) decreased to £1,835m (December 2023: £1,976m),
primarily reflecting the stable net receivables balance being driven by lower
risk weight density Second Charge Mortgages, more than offset by reductions in
RWAs of higher risk weight density Credit Cards, Vehicle Finance and Personal
Loans receivables.
The Group's leverage ratio of 13.9% (December 2023: 15.9%) remains comfortably
above the minimum requirement.
Operating review
Product trading performance
Segment analysis - Adjusted product contribution
2024 £m Credit Cards Vehicle Finance Second Charge Mortgages Personal Loans Corporate Centre incl. Snoop Total
Interest income 406.3 133.1 4.8 15.4 5.8 565.4
Interest expense (79.6) (38.5) (2.9) (3.4) (21.0) (145.4)
Net interest income 326.7 94.6 1.9 12.0 (15.2) 420.0
Non-interest income 35.3 - - - 3.2 38.5
Total income 362.0 94.6 1.9 12.0 (12.0) 458.5
Impairment charges (123.9) (60.4) (0.2) (5.7) (0.8) (191.0)
Risk-adjusted income 238.1 34.2 1.7 6.3 (12.8) 267.5
Adjusted operating costs (185.3) (42.2) (0.2) (10.5) (64.1) (302.3)
Adjusted PBT / (LBT) 52.8 (8.0) 1.5 (4.2) (76.9) (34.8)
2023 (Restated) £m Credit Cards Vehicle Finance Second Charge Mortgages Personal Loans Corporate Centre incl. Snoop Total
Interest income 371.0 150.3 0.4 25.9 8.4 556.0
Interest expense (51.6) (28.7) (0.2) (4.0) (28.9) (113.4)
Net interest income 319.4 121.6 0.2 21.9 (20.5) 442.6
Non-interest income 43.8 2.0 - - 0.4 46.2
Total income 363.2 123.6 0.2 21.9 (20.1) 488.8
Impairment charges (125.5) (20.4) - (19.6) - (165.5)
Risk-adjusted income 237.7 103.2 0.2 2.3 (20.1) 323.3
Adjusted operating costs (172.3) (51.9) (0.7) (17.3) (63.8) (306.0)
Adjusted PBT / (LBT) 65.4 51.3 (0.5) (15.0) (83.9) 17.3
(1) Adjusted operating costs are stated before exceptional items,
amortisation of acquisition intangibles and goodwill write-off.
Credit Cards - Proactive volume management in 2024. Positioned for
profitable growth in 2025
Twelve months ended 31 December 2024 2023 Change
£m (Restated) %
£m
Total customer numbers ('000) 1,267 1,376 (8)
Gross customer interest earning balances 1,278 1,424 (10)
Average gross customer interest earning balances(1) 1,313 1,416 (7)
Gross receivables 1,310 1,475 (11)
Net receivables 1,150 1,278 (10)
Interest income 406.3 371.0 10
Interest expense (79.6) (51.6) (54)
Net interest income 326.7 319.4 2
Non-interest income 35.3 43.8 (19)
Total income 362.0 363.2 -
Impairment charges (123.9) (125.5) 1
Risk adjusted income 238.1 237.7 -
Adjusted operating costs (2) (185.3) (172.3) (8)
Adjusted PBT contribution (3) 52.8 65.4 (19)
Asset yield (%) (4) 27.9 24.7 3.2
Net interest margin (%) (5) 24.9 22.6 2.3
Total income margin (%) (6) 27.6 25.7 1.9
Cost of risk (%) (7) (9.4) (8.9) (0.5)
Risk adjusted margin (%) (8) 18.1 16.8 1.3
(1) Average of gross customer interest earning balances for the 12 months
ended 31 December using a 13-point month end average.
(2) Adjusted operating costs are stated before exceptional items and
amortisation of acquisition intangibles.
(3) Adjusted PBT contribution is stated as profit before tax before
exceptional items and amortisation of acquisition intangibles.
(4) Interest income from customer receivables for the 12 months ended 31
December as a percentage of average gross customer interest earning
receivables.
(5) Net interest income for the 12 months ended 31 December as a percentage
of average gross customer interest earning receivables.
(6) Total income for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(7) Impairment charges for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(8) Total income less impairment charges for the 12 months ended 31 December
as a percentage of average gross customer interest earning receivables.
Total customer numbers decreased 8% to 1,267k reflecting a comprehensive
review of customer cohorts by risk profile, vintage and acquisition channel.
This review drove proactive volume management and as a result, growth actions
were moderated to ensure the future sustainable profitability of the
portfolio.
Period-end gross customer interest earning balances decreased 10% to £1,278m
and period-end net receivables decreased 10% to £1,150m.
Total income was stable at £362.0m (2023: £363.2m), with net interest income
increasing 2% to £326.7m and non-interest income decreasing 19% to £35.3m.
Net interest margin increased 2.3% to 24.9% and total income margin increased
1.9% to 27.6%.
Interest income increased 10% to £406.3m driven by the improvement in asset
yield from repricing initiatives, which increased 3.2% to 27.9%, and increased
Liquid Asset Buffer income. This was partially offset by the reduction in
gross customer interest earning balances.
Interest expense increased 54% to £79.6m, as market savings rates remained
elevated and customers with maturing fixed-term products moved onto higher
yielding products, impacting the Group's funding cost.
Impairment charges reduced marginally to £123.9m (2023: £125.5m), reflecting
lower origination charges in line with reduced new business volumes.
Underlying credit quality improved year-on-year. Impairments in 2023 benefited
from a £17.0m release of post model adjustments following IFRS 9 model
enhancements and the full release of the £10m cost of living post model
adjustment. Cost of risk increased to 9.4% (2023: 8.9%).
Risk adjusted income was stable at £238.1m (2023: £237.7m) with an increased
risk adjusted margin of 18.1% (2023: 16.8%).
Adjusted operating costs increased 8% to £185.3m, driven by the significant
increase in complaint costs from FOS fees related to a rise in unmerited
claims from CMCs. Transformation savings were partially offset by inflation
and investment in the business.
Adjusted PBT contribution was £52.8m (2023: £65.4m).
Vehicle Finance - 2024 results impacted by Stage 3 receivables review,
enabling future optimisation of the portfolio
Twelve months ended 31 December 2024 2023 Change
£m (Restated) %
£m
Total customer numbers ('000) 110 112 (2)
Gross customer interest earning balances 765 859 (11)
Average gross customer interest earning balances(1) 825 836 (1)
Gross receivables 832 1,144 (27)
Net receivables 735 776 (5)
Interest income 133.1 150.3 (11)
Interest expense (38.5) (28.7) (34)
Net interest income 94.6 121.6 (22)
Non-interest income - 2.0 (100)
Total income 94.6 123.6 (23)
Impairment charges (60.4) (20.4) (196)
Risk adjusted income 34.2 103.2 (67)
Adjusted operating costs (2) (42.2) (51.9) 19
Adjusted (LBT)/PBT contribution (3) (8.0) 51.3
Asset yield (%) (4) 16.1 18.0 (1.9)
Net interest margin (%) (5) 11.5 14.5 (3.0)
Total income margin (%) (6) 11.5 14.8 (3.3)
Cost of risk (%) (7) (7.3) (2.4) (4.9)
Risk adjusted margin (%) (8) 4.1 12.3 (8.2)
(1) Average of gross customer interest earning balances for the 12 months
ended 31 December using a 13-point month end average.
(2) Adjusted operating costs are stated before exceptional items and
amortisation of acquisition intangibles.
(3) Adjusted PBT contribution is stated as profit before tax before
exceptional items and amortisation of acquisition intangibles.
(4) Interest income from customer receivables for the 12 months ended 31
December as a percentage of average gross customer interest earning
receivables.
(5) Net interest income for the 12 months ended 31 December as a percentage
of average gross customer interest earning receivables.
(6) Total income for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(7) Impairment charges for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(8) Total income less impairment charges for the 12 months ended 31 December
as a percentage of average gross customer interest earning receivables.
Total customer numbers decreased 2% to 110k driven by repricing and credit
tightening initiatives. A new Vehicle Finance lending decision engine was
introduced in 2024 enabling a more granular level of portfolio segmentation
and delivering a stronger platform to optimise higher-margin customer segments
in 2025.
Following the Stage 3 receivables review, period-end gross customer interest
earning balances decreased 11% to £765m driven by an updated charge-off
policy reclassifying Stage 3 impaired loans to post-charge-off assets. This
resulted in a clearer cost of risk outlook for the portfolio.
Period end gross receivables reduced 27% to £832m, as in addition to the
reduction in customer interest earning balances, shortfall debt of £230m was
removed and replaced with a post-charge-off asset population in 1H24. This
refined the approach to write-offs and a debt sales programme was launched,
with two debt sales completed in 2H24.
Period-end net receivables decreased 5% to £735m, as a 74% reduction in
expected credit losses (ECL) to £96m partially offset the reduction in gross
receivables. Stage 3 ECL reduced £268m to £57m driven by the reduction in
Stage 3 balances and a revised definition of default reclassifying £127m of
balances from Stage 3 to Stage 1.
Total income decreased 24% to £94.6m, which represented all net interest
income. Net interest margin and total income margin decreased 3.0% and 3.3%
respectively to 11.5%.
Interest income decreased 11% to £133.1m driven by the reduction in gross
customer interest earning balances. The asset yield decreased 1.9% to 16.1%,
reflecting reduced higher-margin Stage 3 and credit tightening, partially
offset by repricing initiatives.
Interest expense increased 34% to £38.5m, as market savings rates remained
elevated and customers with maturing fixed rate savings products moved onto
higher yielding products, impacting the Group's funding cost.
Risk adjusted income fell 67% to £34.2m, as a result of impairment charges
rising to £60.4m (2023: £20.4m), including the impact of the Stage 3
receivables review. Impairments in 2023 benefited from a £47.0m release of
provisions no longer required following IFRS 9 model refinements and
recalibration. Underlying credit quality improved year-on-year. Cost of risk
increased 4.9% to 7.3% and risk adjusted margin fell 8.2% to 4.1%.
Adjusted operating costs decreased 19% to £42.2m, driven by transformation
savings partially offset by investment in the business.
Adjusted LBT contribution was £(8.0)m (2023: PBT contribution of £51.3m).
Second Charge Mortgages - Strong growth in a growing market, following
successful launch in May 2024
Twelve months ended 31 December 2024 2023
£m £m
Total customer numbers ('000) 3.7 0.1
Gross customer interest earning balances 217 2.7
Average gross customer interest earning balances(1) 69 0.4
Gross receivables 226 2.8
Net receivables 225 2.8
Interest income 4.8 0.4
Interest expense (2.9) (0.2)
Net interest income 1.9 0.2
Total income 1.9 0.2
Impairment charges (0.2) -
Risk adjusted income 1.7 0.2
Adjusted operating costs (2) (0.2) (0.7)
Adjusted PBT/(LBT) contribution (3) 1.5 (0.5)
Asset yield (%) (4) 7.0
Net interest margin (%) (5) 2.8
Total income margin (%) (6) 2.8
Cost of risk (%) (7) (0.3)
Risk adjusted margin (%) (8) 2.5
( )
(1) Average of gross customer interest earning balances for the 12 months
ended 31 December using a 13-point month end average.
(2) Adjusted operating costs are stated before exceptional items and
amortisation of acquisition intangibles.
(3) Adjusted PBT contribution is stated as profit before tax before
exceptional items and amortisation of acquisition intangibles.
(4) Interest income from customer receivables for the 12 months ended 31
December as a percentage of average gross customer interest earning
receivables.
(5) Net interest income for the 12 months ended 31 December as a percentage
of average gross customer interest earning receivables.
(6) Total income for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(7) Impairment charges for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(8) Total income less impairment charges for the 12 months ended 31 December
as a percentage of average gross customer interest earning receivables.
Total customer numbers increased to 3.7k (December 2023: 0.1k) following the
successful launch of the forward flow agreement with Interbridge Mortgages and
an expanded partnership with Selina Finance.
Period-end gross customer interest earning balances were £217m (December
2023: £2.7m) and period-end net receivables were £225m (December 2023:
£2.8m), which includes deferred acquisition costs.
Total income increased to £1.9m (2023: £0.2m), which represented all net
interest income. Net interest margin and total income margin was 2.8%.
Interest income was £4.8m (2023: £0.4m) with an asset yield of 7.0%.
Interest expense was £2.9m (2023: £0.2m).
Risk adjusted income was £1.7m (2023: £0.2m), including impairment charges
of £0.2m (2023: £0.0m). Cost of risk was 0.3% and risk adjusted margin was
2.5%.
Adjusted operating costs were £0.2m (2023: £0.7m), reflecting the limited
fixed costs associated with the business given the origination partnership
arrangements in place.
Adjusted PBT contribution was £1.5m (2023: LBT contribution of £(0.5)m).
Personal Loans - Reduced balances in 2024
Twelve months ended 31 December 2024 2023 Change
£m (Restated) %
£m
Total customer numbers ('000) 24 44 (45)
Gross customer interest earning balances 49 116 (58)
Average gross customer interest earning balances(1) 79 123 (36)
Gross receivables 49 117 (58)
Net receivables 44 102 (57)
Interest income 15.4 25.9 (41)
Interest expense (3.4) (4.0) 15
Net interest income 12.0 21.9 (45)
Total income 12.0 21.9 (45)
Impairment charges (5.7) (19.6) 71
Risk-adjusted income 6.3 2.3 174
Adjusted operating costs (2) (10.5) (17.3) 39
Adjusted LBT contribution (3) (4.2) (15.0) 72.0
Asset yield (%) (4) 19.5 21.0 (1.5)
Net interest margin (%) (5) 15.2 17.8 (2.6)
Total income margin (%) (6) 15.2 17.8 (2.6)
Cost of risk (%) (7) (7.2) (15.9) 8.7
Risk adjusted margin (%) (8) 8.0 1.9 6.1
(1) Average of gross customer interest earning balances for the 12 months
ended 31 December using a 13-point month end average.
(2) Adjusted operating costs are stated before exceptional items and
amortisation of acquisition intangibles.
(3) Adjusted PBT contribution is stated as profit before tax before
exceptional items and amortisation of acquisition intangibles.
(4) Interest income from customer receivables for the 12 months ended 31
December as a percentage of average gross customer interest earning
receivables.
(5) Net interest income for the 12 months ended 31 December as a percentage
of average gross customer interest earning receivables.
(6) Total income for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(7) Impairment charges for the 12 months ended 31 December as a percentage of
average gross customer interest earning receivables.
(8) Total income less impairment charges for the 12 months ended 31 December
as a percentage of average gross customer interest earning receivables.
Total customer numbers decreased 45% to 24k driven by the run-off of the
existing book.
Period-end gross customer interest earning balances decreased 58% to £49m and
period-end net receivables decreased 57% to £44m.
Total income decreased 45% to £12.0m, which represented all net interest
income. Net interest margin and total income margin was 15.2%.
Interest income decreased 41% to £15.4m driven by the reduction in gross
customer interest earning balances. The asset yield decreased 1.5% to 19.5%.
Interest expense decreased 15% to £3.4m.
Risk adjusted income increased to £6.3m (2023: £2.3m), as a result of
impairment charges reducing 71% to £5.7m. Cost of risk reduced to 7.2% (2023:
15.9%) and risk adjusted margin increased to 8.0% (2023: 1.9%).
Adjusted operating costs decreased 39% to £10.5m in line with the reduced
size of the business.
Adjusted LBT contribution was £(4.2)m (2023: £(15.0)m).
Corporate Centre including Snoop
Twelve months ended 31 December 2024 2023 Change
£m £m %
Interest income 5.8 8.4 (31)
Interest expense (21.0) (28.9) (27)
Net interest income (15.2) (20.5) 26
Non-interest income 3.2 0.4
Total income (12.0) (20.1) 40
Impairment charges (0.8) - (100)
Risk adjusted income (12.8) (20.1) 36
Adjusted operating costs (64.1) (63.8) -
Adjusted LBT contribution (76.9) (83.9) 8
Exceptional costs (24.1) (21.4) (13)
Amortisation of acquisition intangibles (6.2) (7.9) 22
Goodwill write-down (71.2) - (100)
Statutory LBT contribution (178.4) (113.2) (58)
Total income was a net expense of £(12.0)m (2023: £(20.1)m), with net
interest income improving to a net expense of £(15.2)m (2023: £(20.5)m) and
non-interest income increasing to £3.2m (2023: £0.4m) driven by fees and
commissions income from Snoop.
Interest income of £5.8m (2023: £8.4m) represented interest on cash reserves
in the Bank of England reserve account.
Interest expense of £21.0m (2023: £28.9m) represented residual funding costs
not allocated to the respective businesses.
Adjusted operating costs include operations, technology and support functions
which collectively serve the needs of the wider Group, in addition to Snoop
costs. These costs, excluding exceptional costs, amortisation of acquisition
intangibles and goodwill write-down, were broadly flat at £64.1m (2023:
£63.8m), reflecting a full year of Snoop costs, which was acquired in August
2023.
Adjusted LBT contribution was £(76.9)m (2023: £(83.9)m).
Half-yearly financial results
Group
2H24 1H24 2H23 1H23
Interest income 280.2 285.2 291.2 264.8
Interest expense (74.7) (70.7) (63.1) (50.3)
Net interest income 205.5 214.5 228.1 214.5
Non-interest income 19.0 19.5 23.6 22.6
Total income 224.5 234.0 251.7 237.1
Impairment charges (93.2) (97.8) (74.7) (90.8)
Risk-adjusted income 131.3 136.2 177.0 146.3
Adjusted operating costs (139.3) (163.0) (146.8) (159.2)
Adjusted (loss)/profit before tax (8.0) (26.8) 30.2 (12.9)
Exceptional costs (8.6) (15.5) (16.1) (5.3)
Amortisation of acquisition intangibles (2.0) (4.2) (4.2) (3.7)
Goodwill write-off (71.2) - - -
Statutory (loss)/profit before tax (89.8) (46.5) 9.9 (21.9)
Tax credit/(charge) 6.3 10.7 (5.7) 6.0
Statutory (loss)/profit after tax (83.5) (35.8) 4.2 (15.9)
Balance Sheet Dec-2024 Jun-2024 Dec-2023 Jun-2023
Gross customer interest earning balances 2,308 2,252 2,401 2,369
Average gross customer interest earning balances 2,271 2,296 2,433 2,318
Gross receivables 2,416 2,361 2,739 2,695
Net receivables 2,155 2,010 2,159 2,102
Closing TNAV 359 378 394 417
Average tangible equity 367 387 399 437
Selected key metrics 2H24 1H24 2H23 1H23
Asset yield 22.3% 23.1% 22.4% 21.9%
Net interest margin (NIM) 18.0% 18.8% 18.6% 18.7%
Total income margin 19.7% 20.5% 20.5% 20.6%
Cost of risk (8.6)% (8.6)% (6.1)% (7.9)%
Risk-adjusted margin (RAM) 11.8% 11.9% 14.4% 12.7%
Adjusted cost: income ratio 62.1% 69.6% 58.3% 67.1%
Statutory cost: income ratio 100.1% 78.0% 66.4% 70.9%
Adjusted ROTE (2.4)% (11.5)% 9.4% (5.1)%
Statutory ROTE (45.3)% (18.6)% 2.1% (7.3)%
Selected per share metrics
Adjusted loss per share (p) (1.4) (8.3) 8.1 (3.6)
Dividend per share (p) - - 1.0 5.0
TNAV per share (p) 140 148 155 166
Capital, liquidity and funding metrics Dec-2024 Jun-2024 Dec-2023 Jun-2023
Tier 1 ratio 18.8% 19.8% 19.9% 21.1%
Risk weighted exposures (RWE) 1,836 1,813 1,975 1,940
High quality liquid assets (HQLA) 947 717 682 386
Liquidity Coverage ratio (LCR) 359% 557% 1,263% 429%
Retail deposits 2,396 1,912 1,925 1,430
Retail funding (% of all funding) 92.1% 86.5% 83.7% 74.7%
Credit Cards
Six months ended (£m) Dec-2024 Jun-2024 Dec-2023 Jun-2023
Total customer numbers ('000) 1,267 1,321 1,376 1,617
Gross customer interest earning balances 1,277 1,295 1,423 1,375
Average gross customer interest earning balances 1,284 1,339 1,426 1,400
Gross receivables 1,310 1,331 1,475 1,439
Net receivables 1,150 1,151 1,278 1,224
Interest income 203.7 202.6 195.9 175.1
Interest expense (41.2) (38.4) (30.9) (20.7)
Net interest income 162.5 164.2 165.0 154.4
Non-interest income 16.8 18.5 22.8 21.0
Total income 179.3 182.7 187.8 175.4
Impairment charges (60.4) (63.5) (71.7) (53.8)
Risk adjusted income 118.9 119.2 116.1 121.6
Adjusted operating costs (86.3) (99.0) (84.6) (87.7)
Adjusted PBT contribution 32.6 20.2 31.5 33.9
Asset yield (%) 28.3 27.6 25.5 24.0
Net interest margin (%) 25.2 24.7 23.0 22.2
Total income margin (%) 27.8 27.4 26.1 25.3
Cost of risk (%) (9.4) (9.5) (10.0) (7.7)
Risk adjusted margin (%) 18.4 17.9 16.2 17.5
Vehicle Finance
Six months ended (£m) Dec-2024 Jun-2024 Dec-2023 Jun-2023
Total customer numbers ('000) 110 110 112 111
Gross customer interest earning balances 765 850 859 855
Average gross customer interest earning balances 803 851 873 802
Gross receivables 832 921 1,144 1,114
Net receivables 735 760 776 748
Interest income 63.3 69.8 77.5 72.8
Interest expense (18.6) (19.9) (16.4) (12.3)
Net interest income 44.7 49.9 61.1 60.5
Non-interest income - - 0.4 1.6
Total income 44.7 49.9 61.5 62.1
Impairment charges (30.9) (29.5) 6.2 (26.6)
Risk adjusted income 13.8 20.4 67.7 35.5
Adjusted operating costs (18.5) (23.7) (24.6) (27.3)
Adjusted PBT contribution (4.7) (3.3) 43.1 8.2
Asset yield (%) 15.7 16.5 17.6 18.3
Net interest margin (%) 11.1 11.8 13.9 15.2
Total income margin (%) 11.1 11.8 14.0 15.6
Cost of risk (%) (7.7) (7.0) 1.4 (6.7)
Risk adjusted margin (%) 3.4 4.8 15.4 8.9
Second Charge Mortgages
Six months ended (£m) Dec-2024 Jun-2024 Dec-2023 Jun-2023
Total customer numbers ('000) 3.7 0.6 0.1 -
Gross customer interest earning balances 217 30 2.7 -
Average gross customer interest earning balances 121 11 0.7 -
Gross receivables 226 32 2.8 -
Net receivables 225 32 2.8 -
Interest income 3.8 1.0 0.4 -
Interest expense (2.5) (0.4) (0.2) -
Net interest income 1.3 0.6 0.2 -
Total income 1.3 0.6 0.2 -
Impairment charges (0.2) - - -
Risk adjusted income 1.1 0.6 0.2 -
Adjusted operating costs - (0.2) (0.4) (0.3)
Adjusted PBT contribution 1.1 0.4 (0.2) (0.3)
Asset yield (%) 6.2 17.6 120.1 -
Net interest margin (%) 2.1 10.6 60.1 -
Total income margin (%) 2.1 10.6 60.1 -
Cost of risk (%) (0.3) (0.0) (0.0) -
Risk adjusted margin (%) 1.8 10.6 60.1 -
Personal Loans
Six months ended (£m) Dec-2024 Jun-2024 Dec-2023 Jun-2023
Total customer numbers ('000) 24 33 44 50
Gross customer interest earning balances 49 77 116 140
Average gross customer interest earning balances 63 95 133 116
Gross receivables 49 78 117 142
Net receivables 44 68 102 130
Interest income 6.2 9.2 13.6 12.3
Interest expense (1.4) (2.0) (2.1) (1.9)
Net interest income 4.8 7.2 11.5 10.4
Total income 4.8 7.2 11.5 10.4
Impairment charges (0.9) (4.8) (9.2) (10.4)
Risk adjusted income 3.9 2.4 2.3 -
Operating costs (4.3) (6.2) (8.0) (9.3)
LBT contribution (0.4) (3.8) (5.7) (9.3)
Asset yield (%) 19.6 19.5 20.3 21.5
Net interest margin (%) 15.2 15.2 17.1 18.2
Total income margin (%) 15.2 15.2 17.1 18.2
Cost of risk (%) (2.8) (10.2) (13.7) (18.2)
Risk adjusted margin (%) 12.3 5.1 3.4 0.0
Corporate Centre incl. Snoop
Six months ended (£m) Dec-2024 Jun-2024 Dec-2023 Jun-2023
Interest income 3.2 2.6 3.8 4.6
Interest expense (11.0) (10.0) (13.5) (15.4)
Net interest income (7.8) (7.4) (9.7) (10.8)
Non-interest income 2.2 1.0 0.4 -
Total income (5.6) (6.4) (9.8) (10.8)
Impairment charges (0.8) - - -
Risk adjusted income (6.4) (6.4) (9.3) (10.8)
Adjusted operating costs (30.2) (33.9) (29.2) (34.6)
Adjusted LBT contribution (36.6) (40.3) (38.5) (45.4)
Exceptional costs (8.7) (15.5) (16.1) (5.3)
Amortisation of acquisition intangibles (2.0) (4.2) (4.2) (3.7)
Goodwill write-off (71.2) - - -
Statutory LBT contribution (118.5) (60.0) (58.8) (54.4)
Principal Risks and Uncertainties
The Group's Principal Risks are those most critical to the alignment and
delivery of its Strategy. Principal risk categories and associated risk
appetite statements, metrics and thresholds are reviewed and approved by the
Board on an annual basis, effectively defining the Group's overall risk
appetite.
Customer Risk
This is defined as the risk that failing to understand or address customer
needs could lead to dissatisfaction, poor customer outcomes, reduced loyalty
and reputational damage, impacting revenue and long-term business
sustainability. The Group closely monitors customer outcomes to ensure the
fair treatment of customers, particularly for customers requiring early
intervention strategies or those with vulnerable characteristics, and address
customer detriment.
Regulatory Risk
This is defined as the risk that non-compliance with all regulatory and legal
requirements and expectations could lead to financial penalties, legal action,
operational disruptions and long-term damage to reputation. The Group aims to
avoid material regulatory breaches and, in the event that they do occur, they
are promptly corrected and lessons learned from mistakes made. Strong and
proactive regulatory relationships are in place with the FCA and PRA, who
remain up to date with the Group's strategic initiatives, key risk management
activities and responses to regulatory developments.
Financial Crime Risk
This is defined as the risk that failure to detect and prevent financial crime
and fraud could result in customer detriment, regulatory fines, reputational
damage and financial loss. The Group operates a strong and risk-proportionate
set of systems and controls to detect and prevent financial crime. The Group
is committed to complying with applicable legislation for the effective
management of financial crime risk, ensuring that it meets the minimum
requirements and expectations of the regulatory bodies and those set by
legislation to protect itself and its customers from financial crime and
fraud.
Capital Risk
This is defined as the risk that inadequate capital resources or poor capital
planning could result in an inability to meet financial obligations,
regulatory breaches and financial instability, potentially threatening the
long-term viability of the Group. The Group and Bank operate within a defined
capital risk appetite, with performance and capital position reported to and
closely monitored by the Board. Sufficient capital resources, both in terms
of amount and quality, are maintained to support the business strategy and
meet the stressed scenarios identified in the Internal Capital Adequacy
Assessment Process (ICAAP). The Group and Bank have remained above
regulatory buffer requirements throughout 2024.
Funding and Liquidity Risk
This is defined as the risk that the Group has insufficient financial
resources to meet its obligations (cash or collateral requirements) as they
fall due, resulting in the failure to meet regulatory liquidity requirements,
or is only able to secure such resources at excessive cost. Funding and
liquidity metrics are monitored through daily liquidity reporting and reported
to the Board. The Group's current funding strategy seeks to maintain a
secure and diverse funding structure by maintaining access to the liquid
retail deposits market and committed facilities to meet the Group's liquidity
and funding requirements.
Market Risk
This is defined as the risk that fluctuations in market prices, such as
interest rates, could negatively impact the Group's financial performance,
resulting in losses or disruptions. The Group's corporate policies do not
permit it to undertake significant unmatched positions or operate trading
books and therefore it does not do so. Market risk appetite metrics include
the risk under different interest rate risk scenarios, as prescribed by
regulation, which are reported to the Board.
Credit Risk
This is defined as the risk that customers may default on their obligations,
leading to financial losses, impaired asset quality and reputational damage.
The Credit Committee meets monthly to oversee portfolio performance against
key credit risk metrics and progress against the credit risk programme
initiated during 2024 to strengthen the Group's credit decisioning capability
and affordability strategy. Regular reporting is in place which allows daily
monitoring of new business quality, collections performance and concentration
analysis.
Operational Risk
This is defined as the risk that failures in processes, systems or human error
could result in business disruptions, financial loss, regulatory action, poor
customer outcomes and reputational damage. The three lines of defence model
throughout the Group ensures there are clear lines of accountability between
management who own the risks, oversight by the Risk function and independent
assurance provided by Internal Audit. The application of the integrated
assurance framework seeks to complement the assurance activities of each line
of defence.
Technology and Information Security Risk
This is defined as the risk that inadequate technological, security and data
infrastructure and failure to upgrade systems could lead to operational
inefficiencies, data breaches, service disruptions, a lack of scalability and
reputational damage. This risk is managed in conjunction with Operational Risk
with additional and particular focus on technology infrastructure, including
technological advancements such as artificial intelligence and machine
learning, information security and data management. The Group's technology
and information security risk is being significantly strengthened through the
delivery of the Gateway technology transformation programme.
People Risk
This is defined as the risk that poor recruitment practices, insufficient
employee training or low engagement levels caused by poor culture and
compliance could lead to operational inefficiencies and reputational damage.
To effectively manage people risk, adequate controls exist across the
colleague lifecycle covering onboarding, development and management of our
colleagues. This extends to ensuring the Group has sufficient operational
capacity and colleagues with the right skills to meet the Group's financial,
customer and regulatory responsibilities. The Colleague Survey provides
insight into colleague engagement and wellbeing to address and advocate the
Group as a great place to work.
Model Risk
This is defined as the risk that incorrect assumptions, poor design or
outdated data within models used for decision making could lead to unintended
outcomes, financial loss or operational inefficiencies. The Group model
inventory has been strengthened through clear model ownership, which has been
used to inform model tiering. A level 1 model risk classification is in
place and mapped to the PRA's Model Risk Management Principles with clear
delineation across the three lines of defence to improve ownership and
oversight. The model risk management framework, policy and standards continue
to be updated to align to the PRA's expectations.
Business Performance Risk
This is defined as the risk that poor performance of key business processes,
such as financial management, operations or customer service, could lead to
financial losses, reduced market share, threat to the Group's long-term
viability and reputational damage. To effectively and sustainably grow the
business, an effective risk management and strong risk culture are critical to
both the delivery of our strategic priorities and maintaining our existing
commitments in a safe and controlled way. The Board Governance Manual and
Delegated Authorities Matrix are in place to provide a framework for key
decision making at all levels across the Group. Executive Director scorecards
are in place with reward incentives based on a combination of financial and
non-financial measures.
Consolidated financial statements
Consolidated income statement for the year ended 31 December
Note 2024 2023
(restated)(1)
£m £m
Interest income 3 565.4 556.0
Interest expense (145.4) (113.4)
Net interest income 420.0 442.6
Fee and commission income 4 38.3 44.2
Fee and commission expense (1.9) (1.7)
Net fee and commission income 36.4 42.5
Other income and net fair value gains 2.1 3.7
Total income 458.5 488.8
Impairment charges 9 (191.0) (165.5)
Risk-adjusted income 267.5 323.3
Operating costs (403.8) (335.3)
Statutory loss before taxation 4 (136.3) (12.0)
Tax credit 17.0 0.3
Statutory loss for the year attributable to equity shareholders (119.3) (11.7)
Add back:
Tax credit (17.0) (0.3)
Amortisation of acquisition intangibles 6.2 7.9
Exceptional items 24.1 21.4
Goodwill write off 71.2 -
Adjusted (loss)/profit before tax (34.8) 17.3
Consolidated statement of comprehensive income for the year ended 31 December
2024 2023
Note (restated)(1)
£m £m
Loss for the year attributable to equity shareholders (119.3) (11.7)
Items that will not be reclassified subsequently to the income statement:
- actuarial movements on retirement benefit asset 13 (11.6) 6.4
- tax on items taken directly to other comprehensive income 6 2.9 (1.5)
- impact of change in UK tax rate on items in other comprehensive income 6 - (0.1)
Other comprehensive (expense)/income for the year (8.7) 4.8
Total comprehensive expense for the year (128.0) (6.9)
Loss per share
Note 2024 2023
(restated)(1)
pence pence
Basic 7 (46.7) (4.6)
Diluted 7 (46.7) (4.6)
Dividends per share
Note 2024 2023
pence pence
Interim 8 - 5.0
dividend
Final dividend 8 - 1.0
The total cost of dividends paid in the year was £2.5m (2023: £38.4m).
(1) Refer to accounting policies for detail of restatement
Consolidated balance sheets
Note 31 December 31 December 2023 (restated)(1) 1 January 2023 (restated)(1)
2024
£m £m £m
ASSETS
Cash and cash equivalents 1,003.9 743.3 464.9
Amounts receivable from customers 9 2,153.7 2,155.8 1,896.9
Trade and other receivables 72.5 55.9 50.6
Investments held at fair value through profit and loss 11 2.3 5.4 10.7
Current tax asset 3.9 8.3 0.2
Property, plant and equipment 7.1 8.1 8.3
Right of use assets 16.4 23.2 32.4
Goodwill 10 1.2 72.4 71.2
Other intangible assets 12 61.5 74.4 63.3
Retirement benefit asset 13 27.8 38.2 30.7
Derivative financial instruments - 1.3 11.3
Deferred tax assets 6 25.0 8.4 14.5
TOTAL ASSETS 4 3,375.3 3,194.7 2,655.0
LIABILITIES AND EQUITY
Liabilities
Trade and other payables 46.1 44.1 62.8
Provisions 14 15.5 5.8 5.2
Lease liabilities 32.5 40.9 49.3
Retail deposits 2,428.2 1,950.5 1,100.6
Bank and other borrowings 410.0 582.5 815.4
Derivative financial instruments 1.8 1.8 15.3
Total liabilities 2,934.1 2,625.6 2,048.6
Equity attributable to owners of the parent
Share capital 53.2 53.2 52.6
Share premium 276.3 276.3 273.5
Merger reserve 278.2 278.2 278.2
Other reserves 10.8 12.1 12.4
Retained earnings (177.3) (50.7) (10.3)
Total equity 4 441.2 569.1 606.4
TOTAL LIABILITIES AND EQUITY 3,375.3 3,194.7 2,655.0
(1) Refer to accounting policies for detail of restatement.
Consolidated statement of changes in shareholders' equity
Share Share Merger reserve Other Retained
capital premium £m reserves earnings Total
£m £m £m £m £m
At 31 December 2022 52.6 273.5 278.2 12.4 (2.0) 614.7
Prior year adjustment(1) - - - - (8.3) (8.3)
At 1 January 2023 52.6 273.5 278.2 12.4 (10.3) 606.4
Loss for the year - - - - (11.7) (11.7)
Other comprehensive (expense)/income:
- actuarial movements on retirement benefit asset (note 13) - - - 6.4 6.4
-
- tax on items taken directly to other - - (1.5) (1.5)
comprehensive income (note 6) -
- impact of change in UK tax rate (note 6) - - - - (0.1) (0.1)
Other comprehensive (expense) for the year - - - 4.8 4.8
Total comprehensive income for the year - - - (6.9) (6.9)
Dividends - - - - (38.4) (38.4)
Issue of share capital 0.6 2.8 - - - 3.4
Share-based payment charge - - - 4.6 - 4.6
Transfer of share-based payment reserve on vesting of share awards - - (4.9) 4.9 -
-
At 31 December 2023 53.2 276.3 278.2 12.1 (50.7) 569.1
At 1 January 2024 53.2 276.3 278.2 12.1 (50.7) 569.1
Loss for the year - - - - (119.3) (119.3)
Other comprehensive income/(expense):
- actuarial movements on retirement benefit asset (note 13) - - - - (11.6) (11.6)
- tax on items taken directly to other - - - - 2.9 2.9
comprehensive income (note 6)
- impact of change in UK tax rate (note 6) - - - - - -
Other comprehensive income for the year - - - - (8.7) (8.7)
Total comprehensive expense for the year - - - - (128.0) (128.0)
Dividends - - - - (2.5) (2.5)
Issue of share capital - - - - - -
Share-based payment charge - - - 2.7 - 2.7
Transfer of share-based payment reserve on vesting of share awards - - - (4.0) 4.0 -
Purchase of shares for share awards - - - - (0.1) (0.1)
At 31 December 2024 53.2 276.3 278.2 10.8 (177.3) 441.2
(1) Refer to accounting policies for detail of restatement.
The full merger reserve is considered distributable.
Consolidated statement of cash flows for the year ended 31 December
Note 2024 2023
£m £m
Cash flows from operating activities
Cash generated from operations 15 483.8 640.2
Finance costs paid (103.0) (76.1)
Finance income received 51.2 26.6
Tax received / (paid) 8.2 (6.0)
Net cash generated from operating activities 440.2 584.7
Cash flows from investing activities
Purchase of intangible assets 12 - (19.0)
Purchase of property, plant and equipment (2.2) (3.3)
Proceeds from sale of available for sale investment 4.3 6.4
Acquisition of a subsidiary - (2.9)
Net cash generated from/(used in) investing activities 2.1 (18.8)
Cash flows from financing activities
Proceeds from bank and other borrowings 5.0 -
Repayment of bank and other borrowings (174.0) (238.5)
Payment of lease liabilities (9.7) (11.2)
Dividends paid to Company shareholders (2.5) (38.4)
Purchase of own shares for share awards (0.1) -
Proceeds from issue of share capital - 0.1
Net cash used in financing activities (181.3) (288.0)
Net increase in cash, cash equivalents and overdrafts 261.0 277.9
Cash, cash equivalents and overdrafts at beginning of year 741.8 463.9
Cash, cash equivalents and overdrafts at end of year 1,002.8 741.8
Cash, cash equivalents and overdrafts at end of year comprise:
Cash at bank and in hand 1,003.9 743.3
Overdrafts (held in bank and other borrowings) (1.1) (1.5)
Total cash, cash equivalents and overdrafts 1,002.8 741.8
( )
Cash generated from operations in 2023 has been represented to include
movement in retail deposits which is no longer considered a financing cash
flow.
Cash at bank and in hand includes £948.7m (2023: £681.5m) in respect of the
liquid assets buffer, including other liquidity
resources, held by Vanquis Bank Limited in accordance with the PRA's liquidity
regime.
Notes to the financial information
1. Basis of preparation
The financial information has been prepared in accordance with the Listing
Rules of the FCA and is based on the 2024 financial statements which have been
prepared under International Financial Reporting Standards (IFRS) as adopted
by the UK, International Financial Reporting Interpretations Committee (IFRIC)
interpretations and the Companies Act 2006.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the year ended 31 December 2024 or the year
ended 31 December 2023 but is derived from those accounts. Statutory accounts
for the year ended 31 December 2023 have been delivered to the Registrar of
Companies, and those for the year ended 31 December 2024 will be delivered to
the Registrar of Companies before the Company's annual general meeting. The
auditors have reported on those accounts: their reports were unqualified, did
not draw attention to any matters by way of emphasis and did not contain
statements under s498(2) or (3) of the Companies Act 2006.
The statutory financial statements have been prepared on a going concern basis
under the historical cost convention, as modified by the revaluation of
derivative financial instruments and investments held at fair value through
profit and loss.
In assessing whether the Group is a going concern, the directors' review has
been made on the basis that the Group continues to operate for the twelve
months from the date of the approval of the financial statements. The
directors considered the appropriateness of the going concern basis, the
period of assessment, any reporting requirements, and solvency and liquidity
risks, and included a variety of factors - forecasts and budgets, timing of
cashflows and funding, the Group's primary market and any contingent
liabilities. When considering the appropriateness of going concern the
directors have also considered the Group's ability to meets its regulatory
requirements (both capital and liquidity) at all times and not just a positive
net asset measure.
The assessment of going concern for the Group for the purposes of the Annual
Report and Financial Statements considered the following factors:
· The Group's corporate plan as approved in December 2024, which
sets out financial, capital, liquidity and funding projections, together with
an overview of relevant risks;
· The principal and emerging risks which could impact the
performance of the Group, with a focus on capital and liquidity;
· In recognition of the waiver received in November 2022, which
allows Vanquis Bank Limited to fund the vehicle finance business, we have
considered that the waiver is due to be renewed for a further three years in
October 2025;
· The severe but plausible downside scenario, which is designed to
assess the potential impact of certain underlying risks on the Group's capital
and funding resources, together with the availability and effectiveness of
mitigating actions;
· Reverse stress testing analysis, which is designed to assess the
point at which the Group is no longer a going concern; and
· The outcome of the pending Court of Appeal hearing on Vehicle
Finance Commission scheduled for 1-3 April 2025 which remains uncertain. A
possible scenario has been considered as part of the stress testing. This
shows that the Group is able to maintain sufficient capital headroom above
minimum requirements in such a scenario.
Having considered the Group's forecasts, the regulatory capital and liquidity
of the Group, the regulatory outlook and the impact of the outcome of the
Court of Appeal hearing on Vehicle Finance commission, the directors have a
reasonable expectation that the Group will continue as a going concern for a
period of at least 12 months from the date of approving these financial
statements. Accordingly, the financial statements of the Group have been
prepared on the going concern basis.
2. Accounting policies
Group principal accounting policies under IFRS have been consistently applied
to all the years presented, expect where set out below.
Prior year restatement
In the current year, as part of the Group's review into Vehicle Finance Stage
3 assets, it was identified that cash flows expected to be received from
contracts projected to be received from customers on contracts identified for
debt sale were being included beyond the expected sale date in addition to the
cash flows from the debt sale. This led to a lower ECL provision being
recognised. As a result, Management consider that a prior period restatement
is appropriate and has retrospectively restated its results.
Change in presentation of income statement
As part of the work performed on the stage 3 assets and review of our internal
management reporting, it was identified that the presentation of vehicle
finance gross customer interest earning balances were being incorrectly
reduced by £51.6m. KPIs using this metric have therefore been retrospectively
represented for all periods presented in this report. There was no impact to
net receivables or on the reported balance sheet or income statement numbers
as a result of this change.
In addition, fraud costs have been represented from impairment to within
operating costs in 2024 and the comparative numbers for 2023 restated. As part
of this change, the reduction in customer receivables for Cards for fraud
accounts has been represented from allowance account to gross receivables.
There was no impact on net receivables as a result of this change. These
changes do not constitute a change in accounting policy and there is no impact
on recognition, measurement or profit and loss in any year presented in this
report.
All periods presented in this report have been retrospectively re-presented.
This change does not constitute a change in accounting policy and there is no
impact on recognition, measurement or profit and loss in any period presented
in this report.
3. Interest income
Interest receivable from: 2024 2023
£m £m
Customer receivables 518.2 525.7
Cash balances held on deposit and other interest 44.9 25.6
Net fair value gains on derivative financial instruments 2.3 4.7
Total income 565.4 556.0
4. Segment reporting
Second Charge Mortgages
Credit Cards Vehicle Finance Corporate Centre
Loans Total
2024 2024 2024 2024 2024 2024
£m £m £m £m £m £m
Interest income 406.3 133.1 4.8 15.4 5.8 565.4
Interest expense (79.6) (38.5) (2.9) (3.4) (21.0) (145.4)
Net interest income 326.7 94.6 1.9 12.0 (15.2) 420.0
Fee and commission income 36.8 - - - 1.5 38.3
Fee and commission expense (1.7) - - - (0.2) (1.9)
Net fee and commission income 35.1 - - - 1.3 36.4
Other income 0.2 - - - 1.9 2.1
Total income 362.0 94.6 1.9 12.0 (12.0) 458.5
Impairment charges (123.9) (60.4) (0.2) (5.7) (0.8) (191.0)
Risk-adjusted income 238.1 34.2 1.7 6.3 (12.8) 267.5
Adjusted operating costs (185.3) (42.2) (0.2) (10.5) (64.1) (302.3)
Adjusted PBT/(LBT) 52.8 (8.0) 1.5 (4.2) (76.9) (34.8)
Exceptional items (95.3) (95.3)
Amortisation of acquisition intangibles
(6.2) (6.2)
Statutory loss before taxation
(178.4) (136.3)
Tax credit
17.0
Statutory loss for the year attributable to equity shareholders
(119.3)
Exceptional items includes goodwill write off of £71.2m.
4. Segment reporting (continued)
Second Charge Mortgages
Credit Cards Vehicle Finance Corporate Centre
Loans Total
2023 2023 2023 2023 2023 2023
(restated)(1) (restated)(1)
£m £m £m £m £m £m
Interest income 371.0 150.3 0.4 25.9 8.4 556.0
Interest expense (51.6) (28.7) (0.2) (4.0) (28.9) (113.4)
Net interest income 319.4 121.6 0.2 21.9 (20.5) 442.6
Fee and commission income 44.2 - - - - 44.2
Fee and commission expense (1.7) - - - - (1.7)
Net fee and commission income 42.5 - - - - 42.5
Other income 1.3 2.0 - - 0.4 3.7
Total income 363.2 123.6 0.2 21.9 20.1 488.8
Impairment charges (125.5) (20.4) - (19.6) - (165.5)
Risk-adjusted income 237.7 103.2 0.2 2.3 (20.1) 323.3
Adjusted operating costs (172.3) (51.9) (0.7) (17.3) (63.8) (306.0)
Adjusted PBT/(LBT) 65.4 51.3 (0.5) (15.0) (83.9) 17.3
Exceptional items (21.4) (21.4)
Amortisation of acquisition intangibles (7.9) (7.9)
Statutory loss before taxation (113.2) (12.0)
Tax credit 0.3
Statutory loss for the year attributable to equity shareholders (11.7)
(1) Refer to accounting policies for detail of restatement.
Acquisition intangibles represent the fair value of the broker relationships
of £75.0m, which arose on the acquisition of Moneybarn in 2014; the fair
value of intangible assets of £10.1m; and the brand name of £1.0m, arising
on the acquisition of Snoop in 2023. The Moneybarn broker relationship
intangible was fully amortised during the year. The amortisation charge in
2024 amounted to £6.2m (2023: £7.9m).
Revenue between business segments is not material.
Exceptional items represent a net exceptional charge of £24.1m in 2024 (2023:
£21.4m) and comprise:
2024 2023
£m £m
Strategy consultancy costs 7.9 3.5
Redundancy - outsourcing and other staff exits 6.2 7.2
Other outsourcing costs 3.5 2.2
Property exit costs 3.5 4.1
Total transformation costs 21.1 17.0
Other exceptional costs:
Snoop acquisition costs 1.7 3.0
Legal and other advice 0.8 1.0
Repayment Option Plan (ROP) provision release - (2.0)
CCD liquidation/scheme costs (0.9) 2.4
Third party settlement 1.4 -
Total exceptional items 24.1 21.4
4. Segment reporting (continued)
Net
Segment assets Segment liabilities assets/(liabilities)
2024 2023 2024 2023 2024 2023
(restated)(1) (restated)(1)
£m £m £m £m £m £m
Credit Cards, Personal Loans and Second Charge Mortgages 2,514.8 2,195.7 353.0 393.7
(2,161.8) (1,802.0)
Vehicle Finance 775.5 882.1 (646.4) (683.2) 129.1 198.9
Central (2.6) 41.2 (38.3) (64.7) (40.9) (23.5)
Total before intra-group elimination 3,287.7 3,119.0 441.2 569.1
(2,846.5) (2,549.9)
Intra-group elimination 87.6 75.7 (87.6) (75.7) - -
Total Group 3,375.3 3,194.7 (2,934.1) (2,625.6) 441.2 569.1
(1) Refer to accounting policies for details of restatement.
The presentation of segment net assets reflects the statutory assets,
liabilities and net assets of each of the Group's divisions. This results in
an intra-group elimination reflecting the difference between the central
intercompany funding provided to the divisions and the external funding raised
centrally. Credit Cards, Personal Loans and Second Charge Mortgages are
recognised within Vanquis Bank Limited and are therefore combined for balance
sheet reporting purposes.
5. Tax credit
The tax credit in the income statement is as follows:
2024 2023
Tax (charge) / credit in the income statement £m £m
Current tax 3.3 2.0
Deferred tax 13.7 (0.4)
Impact of change of UK tax rate - (1.3)
Total tax credit 17.0 0.3
2024
Adjusted PBT Exceptional items Goodwill write off Total
Amortisation
£m £m £m £m £m
Loss on ordinary activities before tax (34.8) (24.1) (6.2) (71.2) (136.3)
Loss before tax multiplied by standard rate of corporation tax in the UK of 8.7 34.1
25%
6.0 1.6 17.8
Effects of:
- impact of change in UK tax rate (note (a)) - - - - -
- write off of deferred tax assets (note (b)) (0.3) - - - (0.3)
- adjustments in respect of prior years (note (c)) 1.3 - - - 1.3
- non-deductible asset write off (note (d)) (0.6) (0.2) - (0.8)
- non-deductible general expenses (note (e)) (0.2) (0.4) - (17.8) (18.4)
- benefit of capital losses (note (f)) 1.1 - - - 1.1
- impact of bank corporation tax surcharge (note (g)) - - - - -
Total tax credit 10.0 5.4 1.6 - 17.0
5. Tax credit (continued)
2023 (restated)(1)
Adjusted PBT Exceptional items Total
Amortisation
£m £m £m £m
Profit/(loss) on ordinary activities before tax 17.3 (12.0)
(21.4) (7.9)
Profit/(loss) before tax multiplied by standard rate of corporation tax in the (4.0) 5.0 1.9 2.9
UK of 23.5%
Effects of:
- impact of change in UK tax rate (note (a)) (1.3) - - (1.3)
- write off of deferred tax assets (note (b)) (0.3) - - (0.3)
- adjustments in respect of prior years (note (c)) (1.5) - (1.5)
- non-deductible general expenses (note (e)) (0.2) (0.7) - (0.9)
- benefit of capital losses (note f) 1.4 - - 1.4
- impact of bank corporation tax surcharge (note (g)) - - - -
Total tax charge/(credit) (5.9) 4.3 1.9 0.3
(1) Refer to accounting policies for details of restatement
(a) Impact of change of UK tax rate
In 2021, changes were enacted to increase the mainstream corporation tax rate
from 19% to 25% with effect from 1 April 2023. In 2022, further changes were
enacted which, with effect from 1 April 2023, reduced the bank corporation tax
surcharge rate from 8% to 3% and increased the bank corporation tax surcharge
allowance, being the threshold below which banking profits are not subject to
the surcharge, from £25m to £100m.
To the extent the temporary differences on which deferred tax has been
calculated were expected to reverse after 1 April 2023, deferred tax balances
at 31 December 2022 were re-measured at 25% and, in the case of credit cards
and loans, at the combined mainstream corporation tax rate (25%) and bank
corporation tax surcharge rate (3%) of 28%, except to the extent the temporary
differences reverse when profits from credit cards and loans were expected to
be below the bank surcharge threshold, in which case deferred tax balances
were measured at the combined rate of 25%. At 31 December 2023, deferred tax
balances in respect of cards and loans and movements in deferred tax balances
during the year were further re-measured at 25% to the extent that the related
temporary differences reverse when profits from cards and loans are expected
to be below the surcharge threshold.
A tax charge of £nil (2023: charge of £1.3m) represents the income statement
adjustment to deferred tax as a result of these changes.
(b) Write off of deferred tax assets
The tax charge in respect of deferred tax assets written off of £0.3m (2023:
£0.3m) relates to share schemes awards where future deductions are expected
to be lower (2023: lower) than previously anticipated and other deferred tax
assets which have not been recognised.
(c) Adjustment in respect of prior years
In 2024, the tax credit of £1.3m (2023: tax charge of £1.5m) in respect of
prior years comprises: (a) a £0.9m reinstatement of deferred tax assets in
respect of tax losses of discontinued operations previously written off which
have now been used to shelter prior year tax liabilities; (b) a £0.8m tax
credit from claiming capital allowances super deductions in prior years; (c) a
tax charge of £0.8m due to lower tax deductions in respect of share scheme
awards as a result of a lower than anticipated share price on vesting; and (d)
a tax credit of £0.4m related to the finalisation of tax liabilities for
prior periods.
In 2023, the tax charge of £1.5m in respect of prior years was due to lower
tax deductions in respect of share scheme awards as a result of a lower than
anticipated share price on vesting and adjustments to prior year deferred tax
assets which were no longer supportable.
5. Tax credit (continued)
(d) Non-deductible asset write-offs
A tax charge of £0.8m (2023: £nil) arises in respect of some of the write
offs of various assets and balance sheet items which are non-deductible for
tax purposes.
(e) Non-deductible asset general expenses
In 2024, these primarily relate to the write off of goodwill on consolidation
and the exceptional adjustment to the consideration in respect of the
acquisition of Snoop neither of which are deductible for tax purposes.
In 2023, these primarily comprised exceptional costs in respect of the
acquisition of Snoop.
(f) Benefit of capital losses
The conversion and subsequent sales in 2024 and 2023 of further tranches of
the preferred stock in VISA Inc gave rise to capital gains which have been
significantly offset by brought forward capital losses in respect of which a
deferred tax asset was not previously recognised. This gives rise to a
beneficial impact on the tax charge in 2024 of £1.1m (2023: £1.4m).
(g) Impact of bank corporation tax surcharge
The adverse impact of the bank corporation tax surcharge amounts to £nil
(2023: £nil) as the taxable profits of credit cards and Personal Loans are
below the annual threshold (£25m to 31 March 2023; £100m thereafter) below
which banking profits are not subject to the surcharge.
The tax credit/(charge) on items taken directly to other comprehensive income
is as follows:
2024 2023
Tax credit on items taken directly to other comprehensive income £m £m
Deferred tax credit/(charge) on actuarial movements on retirement benefit 2.9 (1.5)
asset
Impact of change in UK tax rate - (0.1)
Total tax credit/(charge) on items taken directly to other comprehensive 2.9 (1.6)
income
The movement in the deferred tax balance during the year can be analysed as
follows:
2024 2023
Asset £m £m
At 1 January 8.4 14.5
Credit/(charge) to the income statement 13.7 (0.4)
Acquisition of Snoop - (2.8)
Credit/(charge) on other comprehensive income prior to impact of change in UK 2.9 (1.5)
tax rate
Impact of change in UK tax rate:
- charge to the income statement - (1.3)
- charge to other comprehensive income - (0.1)
At 31 December 25.0 8.4
6. (Loss)/earnings per share
Basic (loss)/earnings per share (L)/EPS is calculated by dividing the
(loss)/profit for the year attributable to equity shareholders by the weighted
average number of ordinary shares outstanding during the year less the number
of shares held by the Employee Benefit Trust which are used to satisfy the
share awards such as DBP, PSP, LTIS, RSP and CSOP.
Diluted (L)/EPS calculates the effect on (L)/EPS assuming conversion of all
dilutive potential ordinary shares. Dilutive potential ordinary shares are
calculated as follows:
(i) For share awards outstanding under performance-related share incentive
schemes such as the Deferred Bonus Plan (DBP) (previously the Performance
Share Plan (PSP)), the Long Term Incentive Scheme (LTIS), the Restricted Share
Plan (RSP) and the Company Share Option Plan (CSOP), the number of dilutive
potential ordinary shares is calculated based on the number of shares which
would be issuable if: (i) the end of the reporting period is assumed to be the
end of the schemes' performance period; and (ii) the performance targets have
been met as at that date.
6. (Loss)/earnings per share (continued)
(ii) For share options outstanding under non-performance-related schemes such
as the Save As You Earn scheme (SAYE), a calculation is performed to determine
the number of shares that could have been acquired at fair value (determined
as the average annual market share price of the Company's shares) based on the
monetary value of the subscription rights attached to outstanding share
options. The number of shares calculated is compared with the number of share
options outstanding, with the difference being the dilutive potential ordinary
shares. The Group also presents an adjusted EPS, prior to the amortisation of
acquisition intangibles, exceptional items and goodwill write off.
Potential ordinary shares are treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or increase
loss per share.
Reconciliations of basic and diluted (L)/EPS for the Group are set out below:
2024 2023
(restated)(1)
Weighted average Weighted average
number Per number Per
of shares share of shares share
Earnings amount Earnings amount
£m m pence £m m pence
Basic loss per share (119.3) 255.5 (46.7) (11.7) 253.0 (4.6)
Dilutive effect of share options and awards - - - - - -
Diluted loss per share (119.3) 255.5 (46.7) (11.7) 253.0 (4.6)
(1) Refer to accounting policies for details of restatement
The directors have elected to show an adjusted earnings per share prior to the
amortisation of acquisition intangibles which and prior to exceptional items
(see note 3) and goodwill write off (see note 10). This is presented to show
the adjusted earnings per share generated by the Group. A reconciliation of
Group basic/diluted (loss)/earnings per share to adjusted basic and diluted
(loss)/earnings per share is as follows:
2024 2023
(restated)(1)
Weighted Weighted
average Per average Per
number share number share
Earnings of shares amount Earnings of shares amount
£m m pence £m m pence
Basic (loss)/earnings per share (119.3) 255.5 (46.7) (11.7) 253.0 (4.6)
Amortisation of acquisition intangibles, net of tax 4.6 - 1.8 6.1 - 2.3
Exceptional items, net of tax 18.7 - 7.3 17.1 - 6.8
Goodwill write off, net of tax 71.2 - 27.9 - - -
Adjusted basic earnings per share (24.8) 255.5 (9.7) 11.5 253.0 4.5
Diluted (loss)/earnings per share (119.3) 255.5 (46.7) (11.7) 253.0 (4.6)
Amortisation of acquisition intangibles, net of tax 4.6 - 1.8 6.1 - 2.3
Exceptional items, net of tax 18.7 - 7.3 17.1 - 6.7
Goodwill write off, net of tax 71.2 - 27.9 - - -
Adjusted diluted earnings per share (24.8) 255.5 (9.7) 11.5 262.8 4.4
(1) Refer to accounting policies for details of restatement
2023 weighted average number of shares of 253.0m has been adjusted by the
dilutive effect of share options of 9.8m when calculating the adjusted
dilutive earnings per share.
7. Dividends
2024 2023
£m £m
2022 final - 10.3p per - 25.7
share
2023 interim - 5.0p per - 12.7
share
2023 final - 1.0p per share 2.5 -
2.5 38.4
The directors are not recommending a final dividend in respect of the
financial year ended 31 December 2024.
8. Amounts receivable from customers
2024 2023 (restated)(1)
£m £m
Credit Cards 1,149.9 1,277.7
Vehicle Finance 735.4 776.1
Second Charge Mortgages 225.3 2.8
Personal Loans 44.0 102.4
Total 2,154.6 2,159.0
Fair value adjustment for portfolio hedged risk (0.9) (3.2)
Total group 2,153.7 2,155.8
( )
(1) Refer to accounting policies for details of restatement
The fair value adjustment for the portfolio hedge risk relates to the
unamortised hedged accounting adjustment in relation to the balance guaranteed
swap, where hedge accounting has been discontinued.
An analysis of receivables by IFRS 9 stages is set out below:
2024
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross receivables
Credit Cards 1,136.6 99.8 73.5 1,309.9
Vehicle Finance 606.3 120.1 105.5 831.9
Second Charge Mortgages 224.2 1.2 0.1 225.5
Personal Loans 44.2 2.4 2.5 49.1
Total group 2,011.3 223.5 181.6 2,416.4
Allowance account
Credit Cards (73.3) (44.7) (42.0) (160.0)
Vehicle Finance (18.2) (21.5) (56.8) (96.5)
Second Charge Mortgages (0.1) (0.1) - (0.2)
Personal Loans (2.8) (0.9) (1.4) (5.1)
Total group (94.4) (67.2) (100.2) (261.8)
Net receivables
Credit Cards 1,063.3 55.1 31.5 1,149.9
Vehicle Finance 588.1 98.6 48.7 735.4
Second Charge Mortgages 224.1 1.1 0.1 225.3
Personal Loans 41.4 1.5 1.1 44.0
Total group 1,916.9 156.3 81.4 2,154.6
8. Amounts receivable from customers (continued)
2023 (restated)(1)
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross receivables
Credit Cards 1,199.5 161.2 114.1 1,474.8
Vehicle Finance 391.7 224.8 527.7 1,144.2
Second Charge Mortgages 2.8 - - 2.8
Personal Loans 104.1 5.5 7.9 117.5
Total group 1,698.1 391.5 649.7 2,739.3
Allowance account
Credit Cards (84.7) (57.5) (54.9) (197.1)
Vehicle Finance (18.2) (27.0) (322.9) (368.1)
Second Charge Mortgages - - - -
Personal Loans (6.3) (2.4) (6.4) (15.1)
Total group (109.2) (86.9) (384.2) (580.3)
Net receivables
Credit Cards 1,114.8 103.7 59.2 1,277.7
Vehicle Finance 373.5 197.8 204.8 776.1
Second Charge Mortgages 2.8 - - 2.8
Personal Loans 97.8 3.1 1.5 102.4
Total group 1,588.9 304.6 265.5 2,159.0
(1) Refer to accounting policies for detail of restatement
A breakdown of the in-model and post-model overlays for Credit Cards is shown
below:
Credit Cards 2024 2023
restated
£m £m
Core model 155.6 209.4
New Model underlays (note (a)) - (12.7)
Post Model overlays 4.4 0.4
Total allowance account 160.0 197.1
2024 2023
£m restated
£m
Post model (under)/overlays:
Macroeconomic model redevelopment (note (b)) 4.0 -
Other (note (c)) 0.4 0.4
Total post model (under)/overlays 4.4 0.4
Total (under)/overlays 4.4 (12.3)
8. Amounts receivable from customers (continued)
2023 numbers have been represented for fraud, refer to accounting policies for
detail.
(a) New model underlay
Throughout 2023 the Group, in line with its ongoing commitment to continue to
enhance the quality and accuracy of expected credit loss modelling, took steps
to refine and re-calibrate the IFRS 9 model suite across Credit Cards, Vehicle
Finance and Personal Loans resulting in a release of £57.7m across all
portfolios. Enhanced segmentation, refreshed data calibration, and a
refinement to model input parameters indicated the need for a model rebuild
underlay at 31 December 2023 and a PMA reflected to address this. The PMA was
released in 2024 when the refinements to the models were fully embedded,
removing the requirement for the underlay.
(b) Macroeconomic model redevelopment
The macroeconomic model was considered in 2023 as part of the wider model
development, however due to volatility in the output, the model was not
implemented. The model has been redeveloped in 2024 using an external third
party macroeconomic data provider. As it was not fully embedded at the year
end, a PMA has been recognised reflecting the difference between the incumbent
macroeconomic model and the new output. Further work is expected in 2025 to
develop a more suitable, internally built model and remove the requirement for
the PMA.
c) Other
Other includes adjustment for fraud and one-day interest adjustment due to
known model deficiencies.
A breakdown of the in-model and post-model overlays for vehicle finance is
shown below:
Vehicle Finance 2024 2023
£m (restated)(1)
£m
Core model 93.3 414.3
New Model (under)/overlays (note (a)) - (47.0)
Post Model (under)/overlays 3.2 0.8
Total allowance account 96.5 368.1
2024 2023
£m (restated)(1)
£m
Post-model overlays:
Borrowers in financial difficulty (note (f)) - 0.8
12-month PD (note (b)) 2.8 -
Macro LGD(note (c)) (0.9) -
Macroeconomic model redevelopment (note (d)) 1.4 -
LGD recalibration (note (e) (0.6) -
Other 0.5 -
Total post model (under)/overlays 3.2 0.8
Total (under)/overlays 3.2 (46.2)
( )
(1) Refer to accounting policies for details of restatement
(a) Model overlay
Relates to new model development executed in 2023. Refer to Credit Cards
section for further details.
8. Amounts receivable from customers (continued)
(b) 12 month PD recalibration
Monitoring of the 12 month PD model indicated a recalibration was required for
the 'up to date' segment. A PMA has been recognised until the model can be
updated in 2025.
(c) Macroeconomic LGD implementation
Refinements have been made to the macroeconomic LGD model implementation to;
(i) reflect an upside scenario; (ii) refine the shape of the scenarios; and
(iii) enhance how the scenarios were being applied. A PMA has been recognised
until the model can be updated in 2025.
(d) Macroeconomic model redevelopment
Refer to Cards section for details.
(e) LGD recalibration
Following the introduction of the charge off process and the revised
definition of default during 2024 calibrations were required to components of
the LGD model. A PMA has been recognised until the model can be updated in
2025.
(f) Borrowers in financial difficulty
An overlay was recognised for a selection of customer accounts that were
deemed to be borrowers in financial difficulty. This was released in 2024.
The fraud overlay has been represented within the core model, refer to
accounting policies for further detail.
A breakdown of the in-model and post-model overlays for Personal Loans is
shown below:
Personal Loans 2024 2023
£m £m
Core model 5.1 13.1
New Model (under)/overlays (note (a)) - 2.0
Post Model (under)/overlays - -
Total allowance account 5.1 15.1
(a) Model overlay
Relates to new model development executed in 2023. Refer to Credit Cards
section for further details.
There are no post-model overlays for second charge mortgages in the current or
prior year.
The impairment charge in respect of amounts receivable from customers can be
analysed as follows:
2024 2023
(restated)(1)
£m £m
Credit Cards 123.9 125.5
Vehicle Finance 60.0 20.4
Second charge mortgages 0.2 -
Personal Loans 5.7 19.6
Total impairment charge 189.8 165.5
(1) Refer to accounting policies for details of restatement
The impairment in the income statement of £191.0m includes £1.2m in relation
to loans held within trade and other receivables.
8. Amounts receivable from customers (continued)
The movement in directly attributable acquisition costs included within
amounts receivable from customers can be analysed as follows:
2024 2023
Credit Cards Vehicle Finance Second Charge Mortgages Loans Total Credit Cards Vehicle Finance Second Charge Mortgages Loans Group
£m £m £m £m £m £m £m £m £m Total
Brought forward 32.3 56.0 0.1 1.2 89.6 30.3 44.3 - 1.3 75.9
Capitalised 5.8 31.6 9.2 - 46.6 15.1 37.6 0.1 1.5 54.3
Amortised (12.6) (31.4) (0.9) (0.8) (45.7) (13.1) (25.9) - (1.6) (40.6)
Written off - (6.5) - - (6.5) - - - - -
Carried forward 25.5 49.7 8.4 0.4 84.0 32.3 56.0 0.1 1.2 89.6
9. Acquisition of Snoop
The Group completed the acquisition of the entire share capital of Usnoop
Limited, which trades as Snoop, on 7 August 2023 for consideration of £8.7m.
Snoop is a money-saving financial technology company with customers across the
UK. Goodwill of £1.2m was recognised in relation to the acquisition.
Costs of £3.0m associated with the acquisition including due diligence,
legal, advisory and tax fees were charged as an exceptional cost in the prior
year.
An assessment of the fair values of the identifiable assets and liabilities of
Snoop as at the acquisition date was performed and there has been no change in
the fair values in 2024.
Snoop generated revenues of £0.4m and losses of £2.5m in the period from
acquisition to 31 December 2023, which were included in the consolidated
statement of comprehensive income in 2023.
If Snoop had been part of the Group for the 12 months to 31 December 2023,
Group total income would be £489.6m and the statutory loss before tax would
be £16.8m. In 2024, the terms of certain post consideration benefits were
updated and a resulting cost of £1.7m recognised as an exceptional item.
10. Goodwill
2024 2023
£m £m
Cost
At 1 January 74.5 73.3
Additions - 1.2
Write off (71.2) -
At 31 December 3.3 74.5
Accumulated impairment
At 1 January and 31 December 2.1 2.1
Net book value at 31 December 1.2 72.4
Net book value at 1 January 72.4 71.2
Goodwill with a net book value of £71.2m in 2023 related to the acquisition
of Moneybarn in August 2014. The addition in 2023 related to the acquisition
of Usnoop Limited (see note 9).
10. Goodwill (continued)
Goodwill is tested annually for impairment, or more frequently if there are
any indications that goodwill might be impaired. The recoverable amount is
determined from a value in use calculation. The key assumptions used in the
value in use calculation relate to the cash flows of the cash generating unit,
discount rates and growth rates adopted.
Management adopts pre-tax discount rates which reflect the time value of money
and the risks specific to the business.
The cash flow forecasts are based on the most recent financial budgets
approved by the Group Board for the next five years and extrapolate cash flows
for the following five years using a terminal growth rate of 2% (2023: 2%).
The rate used to discount the forecast cash flows is 13.5% (2023: 11.0%); this
represents the Company's risk-adjusted cost of capital.
Moneybarn goodwill was impaired in full in 2024 due to lower cash flows in the
latest budget as the Group prioritises capital deployment for growth into
Second Charge Mortgages and Credit Cards in the near-term.
11. Other intangible assets
2024 2023
Acquisition intangibles Computer software Total Acquisition intangibles Computer software Total
£m £m £m £m £m £m
Cost
At 1 January 86.1 85.1 171.2 75.0 68.5 143.5
Additions - 12.5 12.5 11.1 19.0 30.1
Disposals - (15.5) (15.5) - (2.4) (2.4)
At 31 December 86.1 82.1 168.2 86.1 85.1 171.2
Accumulated amortisation and impairment
At 1 January 70.4 26.4 96.8 62.5 17.7 80.2
Charged to the income statement - depreciation 6.2 10.7 16.9 7.9 10.6 18.5
Charged to the income statement - impairment - 8.5 8.5 - - -
Disposals - (15.5) (15.5) - (1.9) (1.9)
At 31 December 76.6 30.1 106.7 70.4 26.4 96.8
Net book value
At 31 December 9.5 52.0 61.5 15.7 58.7 74.4
At 1 January 15.7 58.7 74.4 12.5 50.8 63.3
Acquisition intangibles represent the fair value of the broker relationships
arising on the acquisition of Moneybarn in August 2014 and Snoop in 2023.
The Moneybarn intangible asset was being amortised over an estimated useful
life of 10 years, the asset was fully amortised in 2024.
The Snoop intangible asset comprised £10.1m of internally generated core
platform and technology, and £1.0m in relation to the 'Snoop' brand name
arising on the acquisition of Snoop in 2023. These are being amortised over 9
and 5 years respectively.
12. Retirement benefit asset
The Group operates a defined benefit scheme: the Provident Financial Staff
Pension Scheme. The scheme is of the funded, defined benefit type. It is now
also closed to future accrual.
The scheme provides pension benefits which were accrued on a final salary and,
more recently, on a cash balance basis. With effect from 1 August 2021, it was
fully closed to future accrual and benefits are no longer linked to final
salary, although accrued benefits are subject to statutory inflationary
increases.
The scheme is a UK registered pension scheme under UK legislation. The scheme
is governed by a Trust Deed and Rules, with trustees responsible for the
operation and governance of the scheme. The trustees work closely with the
Group on
funding and investment strategy decisions. The most recent actuarial valuation
of the scheme was carried out as at 1 June 2021 by a qualified independent
actuary. The valuation used for the purposes of IAS 19 'Employee Benefits' has
been based on the results of the 2021 valuation to take account of the
requirements of IAS 19 in order to assess the liabilities of the scheme at the
balance sheet date. Scheme assets are stated at fair value as at the balance
sheet.
The Group is entitled to a refund of any surplus, subject to tax, if the
scheme winds up after all benefits have been paid. As a result, the Group
recognises surplus assets under IAS 19.
The Group is exposed to a number of risks, the most significant of which are
as follows:
- Investment risk - the liabilities for IAS 19 purposes are
calculated using a discount rate set with reference to corporate bond yields.
If the assets underperform this yield a deficit will arise. The scheme has a
long-term objective to reduce the level of investment risk by investing in
assets that better match liabilities.
- Change in bond yields - a decrease in corporate bond yields will
increase the liabilities, although this will be partly offset by an increase
in matching assets.
- Inflation risk - some of the liabilities are linked to inflation.
If inflation increases then liabilities will increase, although this will be
partly offset by an increase in assets. As part of a long-term de-risking
strategy, the scheme has increased its portfolio in inflation matched assets.
- Life expectancies - the scheme's final salary benefits provide
pensions for the rest of members' lives (and for their spouses' lives). If
members live longer than assumed, then the liabilities in respect of final
salary benefits increase.
The net retirement benefit asset recognised in the balance sheet of the Group
is as follows:
2024 2023
£m £m
Fair value of scheme assets 453.7 512.9
Present value of defined benefit obligation (425.9) (474.7)
9B9BNet retirement benefit asset recognised in the balance sheet 27.8 38.2
The amounts recognised in the income statement were as follows:
2024 2023
£m £m
Administration costs and taxes (1.3) (1.1)
Interest on scheme liabilities (21.7) (23.0)
Interest on scheme assets 23.4 24.4
Net credit recognised in the income statement 0.4 0.3
The net credit recognised in the income statement has been included within
operating costs.
12. Retirement benefit asset (continued)
Movements in the fair value of scheme assets were as follows:
2024 2023
£m £m
Fair value of scheme assets at 1 January 512.9 520.7
Interest on scheme assets 23.4 24.4
Actuarial movements on scheme assets (54.6) (7.8)
Contributions by the Group 0.8 0.8
Net benefits paid out (28.8) (25.2)
Fair value of scheme assets at 31 December 453.7 512.9
Movements in the present value of the defined benefit obligation were as
follows:
2024 2023
£m £m
Present value of defined benefit obligation at 1 January (474.7) (490.0)
Current service cost (1.3) (1.1)
Interest on scheme liabilities (21.7) (23.0)
Actuarial movement - experience 0.2 1.2
Actuarial movement - demographic assumptions (0.9) 19.3
Actuarial movement - financial assumptions 43.7 (6.3)
Net benefits paid out 28.8 25.2
Present value of defined benefit obligation at 31 December (425.9) (474.7)
The principal actuarial assumptions used at the balance sheet date were as
follows:
2024 2023
% %
Price inflation - RPI 3.20 3.10
Price inflation - CPI 2.75 2.60
Rate of increase to pensions in payment 3.00 2.95
Inflationary increases to pensions in deferment 2.75 2.60
Discount rate 5.55 4.65
The pension increase assumption shown above applies to pensions increasing in
payment each year in line with RPI up to 5%. Pensions accrued prior to 2000
are substantially subject to fixed 5% increases each year. In deferment
increases prior to retirement are linked to CPI.
The mortality assumptions are based on the self-administered pension scheme
(SAPS) series 3 tables (2023: SAPS series 3 tables):
- female non-pensioners: 105% of the 'Middle' table (2023: 105% of
the 'Middle' table);
- male non-pensioners: 105% of the 'Middle' table (2023: 105% of the
'Middle' table);
- female pensioners: 102% of the 'Middle' table (2023: 102% of the
'Middle' table); and
- male pensioners: 99% of the 'All' table (2023: 99% of the 'All'
table).
The above multipliers and table types were chosen following a study of the
scheme's membership. Where the multiplier is greater than 100%, this reflects
a shorter life expectancy within the scheme compared to average pension
schemes, with the opposite being true where the multiplier is less than 100%.
Also, the use of the 'Middle' table typically leads to slightly lower life
expectancy compared to using the corresponding 'All' table.
Future improvements in mortality are based on the Continuous Mortality
Investigation (CMI) 2023 model with a long‑term trend of 1.00% pa, the core
parameters for the initial addition and smoothing parameter but with a
weighting of 0%, 0%, 25% and 25% on 2020, 2021, 2022 and 2023 experiences
respectively. All other available parameters for the mortality improvements
model were adopted at the default (core) level. Under these mortality
assumptions, the life expectancies of members are as follows:
12. Retirement benefit asset (continued)
Male Female
2024 2023 2024 2023
years years years years
Current pensioner aged 65 21.2 21.2 23 22.9
Current member aged 45 from age 65 21.2 21.1 24 23.8
If the discount rate decreased by 0.5% (2023: 0.5%), the net retirement
benefit asset would have been increased by approximately £24m (2023: £31m).
An analysis of amounts recognised in the statement of comprehensive income is
set out below:
2024 2023
£m £m
Actuarial movements on scheme assets (54.6) (7.8)
Actuarial movements on scheme liabilities 43.0 14.2
Total movement recognised in other comprehensive income in the year (11.6) 6.4
Cumulative movement recognised in other comprehensive income (159.9) (148.3)
13. Provisions
2024
Customer compliance Dilapidation Scheme Redundancy Others Settlement Total
£m £m £m £m £m £m £m
At 1 January 3.5 0.2 1.0 - 1.1 - 5.8
Created in the year 16.0 6.2 - 6.2 0.1 1.5 30.0
Reclassified in the year - - - - - (1.4) (1.4)
Utilised in the year (12.1) - - (4.9) (0.6) - (17.6)
Released in the year - - (1.0) - (0.2) (0.1) (1.3)
At 31 December 7.4 6.4 - 1.3 0.4 - 15.5
2023
Scheme ROP Customer compliance Others Total
£m £m £m £m £m
At 1 January 1.2 2.0 1.4 0.6 5.2
Created in the year - - 10.7 0.3 11.0
Reclassified in the year - - - 0.6 0.6
Utilised in the year (0.2) - (8.4) (0.2) (8.8)
Released in the year - (2.0) (0.2) - (2.2)
At 31 December 1.0 - 3.5 1.3 5.8
Customer compliance: £7.4m (2023: £3.5m)
The customer remediation provision relates to general customer compliance
matters. This includes the costs of processing a temporary uplift in unmerited
customer claims from CMCs (uphold rate only 6%). An amount for expected FOS
fees is also included in the provision.
Dilapidations: £6.4m (2023: £0.2m)
Additional dilapidations costs recognised in 2024 and provisions now being
held for all properties.
13. Provisions (continued)
The Scheme of Arrangement (the Scheme): Group: £nil (2023: £1.0m)
The Scheme of Arrangement was sanctioned on 30 July 2021 with the objective to
ensure all customers with redress claims are treated fairly and outstanding
claims are treated consistently for all customers who submit a claim under the
Scheme.
Customer settlements in relation to the Scheme of Arrangement commenced in
2022. All remaining provision was released through exceptionals in 2024 and
the Scheme closed.
Redundancy £1.3m (2023: £nil)
Costs expected to be paid out as part of redundancy programmes during the
year.
Legal settlement £nil (2023: £nil)
Amounts were recognised in the year for an expected settlement with a third
party. The amount was agreed and the provision transferred to accruals in
advance of being settled in early 2025.
Other: £0.4m (2023: £1.1m)
This predominantly relates to smaller provisions held.
14. Reconciliation of loss after tax to cash (used
in)/generated from operations
2024 2023
(restated)(1)
£m £m
Loss after taxation (119.3) (11.7)
Adjusted for:
- tax credit (17.0) (0.3)
- finance costs 145.4 113.4
- finance Income (47.2) (30.3)
- share-based payment charge 2.7 4.6
- retirement benefit charge (0.4) (0.3)
- internally generated intangible assets (12.5) -
- amortisation of intangible assets 16.9 18.5
- impairment of intangible assets 8.5 -
- provisions created in the year 30.0 11.0
- provisions released in the year (0.3) (0.2)
- exceptional release of provisions (1.0) (2.0)
- provisions utilised in the year (17.6) (8.8)
- depreciation of property, plant and equipment and right of use assets 7.5 9.1
- exceptional impairment of ROU asset 3.5 4.1
- loss on disposal of property, plant and equipment 0.3 1.3
- loss on disposal of intangible assets - 0.5
- hedge ineffectiveness 1.2 -
- fair value movements on Visa shares (1.2) (1.1)
- contributions into the retirement benefit scheme (0.8) (0.8)
- goodwill write off 71.2 -
Changes in operating assets and liabilities:
- amounts receivable from customers 4.4 (254.2)
- trade and other receivables (16.9) (5.8)
- trade and other payables 0.6 (22.0)
- movement in retail deposits(2) 425.8 815.2
Cash generated from operations 483.8 640.2
(1) Refer to accounting policies for detail of restatement
(2) The classification of certain cash flows has been represented in 2023,
impacting £1,100.0m in proceeds and £284.8m in repayments related to bank
and other borrowings. These amounts, which are no longer considered to be
financing cashflows, are now reported within cash generated from operations as
a £815.2m movement in retail deposits.
15. Contingent liabilities
During the ordinary course of business the Group is subject to other
complaints and threatened or actual legal proceedings (including class or
group action claims) brought by or on behalf of current or former employees,
customers, investors or third parties. This extends to legal and regulatory
reviews, challenges, investigations and enforcement actions combined with tax
authorities taking a view that is different to the view the Group has taken on
the tax treatment in its tax returns. It also extends to tax authorities
taking the view that VAT exempt supplies received by the Group from UK-based
suppliers should be subject to VAT.
Vehicle Finance Commissions
On 25 October 2024, the Court of Appeal ruled against two other lenders in
three cases involving commission disclosure payments to motor finance dealers.
The judgment redefined the legal duties of dealers acting as credit brokers,
requiring clear disclosure of, and consent to, the existence, nature and
amount of any commission paid. The lenders successfully applied for permission
to appeal to the Supreme Court, which is due to be heard in early April 2025.
Timing of the outcome is uncertain.
Our Vehicle Finance division, Moneybarn, offers motor finance through
intermediaries. The majority of these intermediaries are independent credit
brokers. From the period January 2013 to October 2024, it wrote £3.0bn of
loans of which 10% were written via dealers acting as credit brokers, upon
which £23m was paid out as commission.
As previously stated, the Group has never entered into any discretionary
commission arrangements on our Vehicle Finance products. The Group is
therefore not subject to the FCA's Motor Commissions Review which has been
focused to date on discretionary commission arrangements.
Following the Court of Appeal ruling the Group reviewed its lending practices
and has assessed that there are material factors distinguishing the Moneybarn
book from the cases in the Court of Appeal judgment (including the commission
disclosures provided to customers). The Group has assessed the requirement for
a provision and as at 31 December 2024 no amounts have been recognised as it
is only possible that Moneybarn would be found liable in a claim based on the
Court of Appeal's ruling. This is due primarily to the conclusion of the
aforementioned review but also the uncertainty of the outcome of the Supreme
Court appeal and/or any further judicial or regulatory intervention and other
mitigating factors which would need to be considered to reliably measure any
provision required under IAS 37. Notwithstanding this, it has enhanced its
customer-facing documentation and is updating its intermediary agreements. The
Group has also considered the c.4,400 motor finance commission complaints it
had received as at 31 December 2024 which have been ringfenced and paused in
line with the FCA's current guidance. No provision has been recognised for
these complaints, pending the ruling from the Supreme Court and/or any further
judicial or regulatory intervention.
16. Post Balance Sheet events
The Group has agreed the sale of its Personal Loan portfolio. As at 31
December 2024, the portfolio consisted of £49m of gross customer interest
earning balances and £44m of net receivables. The transaction is expected to
generate a small gain on sale, with a proforma Tier 1 capital ratio benefit of
c.25bps in 1Q25.
Directors' responsibility statement
Each of Sir Peter Estlin, Chairman; Ian McLaughlin, Chief Executive Officer;
Dave Watts, Chief Finance Officer; Graham Lindsay, Non-Executive Director;
Michele Greene, Non-Executive Director; Karen Briggs, Non-Executive Director,
Oliver Laird, Non-Executive Director; and Jackie Noakes, Non-Executive
Director confirms that, to the best of his or her knowledge that:
(i) the group financial statements which have been prepared in accordance
with IFRS as adopted by the UK, give a true and fair view of the assets,
liabilities, financial position and profit of the group, the company and the
undertakings included in the consolidation taken as a whole; and
(ii) the Strategic Report contained in the 2024 Annual Report and Financial
Statements includes a fair review of the development and performance of the
business and the position of the company and group, and the undertakings
included in the consolidation taken as a whole, and a description of the
principal risks and uncertainties they face.
Information for shareholders
1. The 2024 Annual Report and Financial Statements together with the
notice of the annual general meeting will be posted to shareholders on or
around 27 March 2025.
2. The annual general meeting will be held on 14 May 2025 at 13:00 at
the offices of Clifford Chance LLP, 10 Upper Bank Street, Canary Wharf,
London, E14 5JJ.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR PKNBPCBKDBNDRecent news on Vanquis Banking
See all newsREG - Vanquis Banking Grp - Total Voting Rights
AnnouncementREG - Vanquis Banking Grp - Director/PDMR Shareholding
AnnouncementREG - Oban Cards 2021-1 - Statement re - Deferral of Series
AnnouncementREG - Vanquis Banking Grp Schroders PLC - Holding(s) in Company
AnnouncementREG - Vanquis Banking Grp - Total Voting Rights
Announcement