REG - Vanquis Banking Grp - Update ahead of Interim Results

Vanquis BankingAnnouncement

16/07/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240716:nRSP4939Wa&default-theme=true

RNS Number : 4939W  Vanquis Banking Group PLC  16 July 2024

 

 

 

 

 

 

Update ahead of Interim Results for the six months ended 30 June 2024

 

This announcement contains inside information.

 

London - 16 July 2024 - Vanquis Banking Group plc ('the Group' or 'Vanquis'),
the specialist bank, makes the following market update ahead of its Interim
Results on 1 August 2024.

 

Ian McLaughlin, Chief Executive Officer, commented: "We have been carrying out
a comprehensive review of our balance sheet and this has led to the
revaluation of some historic balances. While finding these one-off items is
disappointing, it does mean that our financial position is now clearer and
more stable. Our trading performance towards the end of the first half of 2024
was encouraging, with year-to-date growth in customer numbers, at better
margins, and a return to growth in receivables in June."

 

Trading update

 

Trading performance began to recover towards the end of the first half,
reflecting progress with the Group's business transformation strategy
announced on 27 March 2024.

 

·    The first quarter decline in receivables moderated in April and May
and a marginal increase in receivables was seen in June.

·    Gross customer interest-earning balances however ended the period 6%
below 31 December 2023.

·    New customer volumes for 1H24 were ahead of plan.

·    New bookings in second charge mortgages exceeded expectations,
following the launch of Interbridge Mortgages on 16 May and an expanded
forward flow agreement with Selina Finance.

·    Net interest income was stable compared to 1H23, with re-pricing
initiatives now complete.

·    Underlying credit quality remained stable.

 

Technology transformation and operational efficiency projects are progressing
as planned. Vanquis remains on track to deliver c.£60m of committed cost
savings by the end of 2024. Complaint costs remain within previously guided
levels and industry-wide initiatives to act against spurious complaints
continue.

 

One-off items

 

At its full year results on 27 March 2024, Vanquis Management committed to
address its growing Vehicle Finance Stage 3 receivables. This review resulted
in a c.£29m downward revaluation of Stage 3 balances and charged off assets
in the Vehicle Finance portfolio(4). Of the c.£29m, c.£16m represents a
restatement of the Group's prior years' results. The balance has been
recognised in the six months period to 30 June 2024.

 

Management has now undertaken a full review of the balance sheet. This
identified a further c.£11m of one-off items related to the write-down of
development costs for a now redundant mobile app, property dilapidations and
other sundry balances.

 

Some of these write-downs, notably the revaluation of Stage 3 balances in the
Vehicle Finance portfolio, impact the Group's capital position, resulting in a
Tier 1 ratio of 19.7% at 30 June 2024.

 

 

Outlook

 

Following today's announcement, Vanquis does not expect to meet its FY24
guidance of low single digit ROTE. While the Group will remain well above its
regulatory capital requirement, it expects to end the year below the target
Tier 1 ratio range of 19.5% - 20.5% set by the Board on 27 March,
notwithstanding any capital optimisation initiatives such as AT1 issuance.

 

The Group's financial position is now clearer and more stable, with focus now
on deploying capital for profitable receivables growth. A further update will
be provided at the Group's Interim Results on 1 August 2024.

 

 

Key metrics

                                              30 June 24  31 Dec 23 (restated)(4)  31 Dec 23

                                                                                   (as reported)
 Gross customer interest earning balances(1)  £2,254.2m   £2,402.8m                £2,351.2m
 Net interest margin(2)                       18.8%       18.6%                    19.0%
 Tier 1 ratio(3)                              19.7%       20.0%                    20.5%
 Retail funding                               86.4%       83.7%                    83.7%

 

Footnotes

 

1.    Gross customer interest earning balances excludes post charge off
assets and deferred acquisition costs, which are included in Gross
Receivables.

2.     Net interest margin is calculated as interest income less interest
expense for the 6 months period to 30 June 2024 and the 12 months period to 31
December 2023, as a percentage of average gross receivables for the 7 and 13
months to the period end respectively.

3.      Tier 1 ratio is defined as the ratio of the Group's Tier 1
capital resources to the Group's risk-weighted assets measured in accordance
with the UK Capital Requirements Regulation. The Vehicle Finance Stage 3
portfolio review resulted in a prior period restatement.

4.    As part of the review of the Vehicle Finance Stage 3 portfolio, it was
identified that gross customer interest earning balances were understated by
£51.6m. This has been represented in the numbers above.

In addition, it was identified that cash flows expected to be received from
contracts identified for debt sale were being included beyond the expected
sale date. This led to a lower core model provision being recognised.  As a
result, Management consider that a prior period restatement is appropriate and
has retrospectively restated its results. In 2023, this has resulted in an
increase in the Group statutory loss before tax of c.£8m, a decrease in the
tax charge of c.£2m and a reduction in Vehicle Finance net receivables of
c.£16m. The adjustment to the opening balance sheet as at 1 January 2023
amounted to c.£7m reduction in retained earnings, a £2m increase in the
corporation tax asset and £9m reduction in net receivables. There were no
changes to gross customer interest earning balances as a result of this
change.

The 31 March 2024 CET1 ratio disclosed at 20.8% in the first quarter trading
statement is 19.6% on a restated basis.

 

The numbers within this statement are subject to review by external auditors.
The reviewed condensed interim financial statements will be presented within
the interim results on 1 August 2024.

 

Enquiries

 

Analysts and shareholders

 

Miriam McKay, Interim Head of Investor Relations

miriam.mckay@vanquis.com (mailto:miriam.mckay@vanquis.com)

07577 390666

 

 

Media

 

Simone Selzer, Nick Cosgrove - Brunswick

vanquisbankinggroup@brunswickgroup.com

0207 4045959

 

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.

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  TSTRAMBTMTTBTII