REG - Vanquis Banking Grp - First quarter trading statement

Vanquis BankingAnnouncement

14/05/2025 07:00

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RNS Number : 5227I  Vanquis Banking Group PLC  14 May 2025

 

 

 

 

 

 

First quarter 2025 trading statement

Return to profit

 

London - 14 May 2025 - Vanquis Banking Group plc ('the Group' or 'Vanquis'),
the specialist bank, today published its first quarter trading statement for
the three months to 31 March 2025.

 

Ian McLaughlin, Chief Executive Officer, commented: "Vanquis' strategic
delivery remains on track. The Group returned to profitability and grew gross
customer interest earning balances, building on the momentum shown during 4Q
2024.

 

"Operating costs remained well controlled and credit quality was robust, with
our customers continuing to show financial resilience. Our technology
transformation programme, Gateway, is progressing as planned, enhancing our
efficiency, scalability, and unlocking further long-term cost benefits.

 

"We welcome the revised Financial Ombudsman Service (FOS) fee structure
implemented on 1 April, which has led to a reduction in unmerited Claims
Management Company (CMC) complaint referrals to the FOS since its
introduction. Complaint costs were in line with expectations in the first
quarter.

 

"Vanquis plays an important role in UK banking, and I am pleased with the
momentum we are building. We remain focused on supporting our customers while
delivering sustainable and profitable growth for all stakeholders."

 

Key metrics

 Three months ending                                  31 Mar 25  31 Dec 24  QoQ % Change  31 Mar 24(4)  YoY % Change
 Gross customer interest earning balances(1)          2,313      2,308      0.2%          2,273         1.8%
 -      Excluding Personal Loan portfolio sale        2,313      2,259      2.4%          2,180         6.1%
 Net receivables                                      2,176      2,155      1.0%          2,039         6.7%
 -      Excluding Personal Loans portfolio sale       2,176      2,111      3.1%          1,957         11.2%
 Net interest margin (NIM)(2)                         17.8%      17.8%      -             18.9%         (1.1%)
 Tier 1 capital ratio(3)                              18.8%      18.8%      -             19.6%         (0.8%)

 

Financial highlights

·    Gross customer interest earning balances grew 0.2% in the quarter to
£2,313m, or 2.4% excluding the Personal Loan portfolio sale announced with
FY24 results.

o  Credit Card balances were broadly stable. The Group delivered successful
new product launches in the quarter and remains committed to a measured
approach to growth in 2025 through deeper customer engagement and retention
strategies.

o  Vehicle Finance portfolio performance outpaced expectations, and an
additional debt sale was completed in the quarter. However, with planned
measured new business growth ahead of the new Gateway IT platform launch in
mid-2026, balances declined 2%.

o  Second Charge Mortgage balances continued to grow at a steady monthly
rate, reaching nearly £300m by the end of 1Q25.

o  The Personal Loan portfolio sale completed at quarter-end, generating a
small gain, and reducing gross customer interest-earning balances by £49m and
net receivables by £44m.

·    Net receivables grew 1.0% in the quarter to £2,176m, or 3.1%
excluding the Personal Loan portfolio sale, reflecting interest-earning
balance growth, lower impairment coverage required on lower-risk Second Charge
Mortgages, and robust credit performance in Credit Cards and Vehicle Finance.

·    NIM was flat quarter-on-quarter at 17.8%.

·    The Tier 1 capital ratio remained stable at 18.8%. The Personal Loan
portfolio sale contributed c.25bps to the ratio from the removal of associated
Risk Weighted Assets (RWAs). Excluding this, RWAs increased, reflecting higher
receivables.

 

Strengthening our platform: customer, operations, technology

·    A new IT platform now centralises customer data, improving service,
cutting costs and boosting efficiency. The platform enables faster, more
personalised service by giving teams a complete view of each customer's
history and preferences.

·    Active Snoop users rose 10% to 322k, with Vanquis customers using
Snoop increasing by 15% to 46k. Snoop remains a cost-effective acquisition
channel, with origination costs around 10% of other channels, while providing
valuable money management tools for customers.

·    The Gateway transformation remains on track for mid-2026 completion.

o  A new mobile app and new Credit Card onboarding and decisioning platform
is expected to go live in the coming quarters.

 

Complaints

·    Complaint costs were in line with expectations in 1Q25 and the Group
did not experience a significant spike in complaint volumes submitted to the
FOS ahead of the revised fee structure implemented on 1 April 2025. Since
then, the Group has seen a meaningful reduction in complaints referred to the
FOS, as expected, although it is too early to determine the full impact of the
revised fee structure.

·    Vanquis continues to engage with regulators to address industry-wide
complaint challenges.

·    Legal proceedings are ongoing against the CMC responsible for the
highest volume of unmerited claims in recent years.

 

Motor Finance commission disclosures

·    The Supreme Court appeal outcome with respect to
the judgment regarding motor finance commission disclosure practices is not
expected before July 2025, with no further update at this time.

·    Vanquis believes its position is materially different from
the cases subject to the ruling, with all customers signing a
pre-contractual document confirming a commission will be paid.

·    The judgment relates to dealer broker commissions. Only c.10% of
Vanquis' Vehicle Finance commission payments between January 2013 and October
2024 were made to dealer brokers, representing £23m in commissions.

·    In accordance with IAS 37, the Group has not made a provision for
this matter but has recognised a contingent liability.

·    As previously stated, Vanquis is not subject to the FCA's ongoing
Motor Commission Review, which is focused on Discretionary Commission
Arrangements (DCAs). Vanquis did not participate in DCAs.

 

Footnotes

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

2.      Net interest margin (NIM) is calculated as Interest income less
interest expense for the three months period to 31 March and 31 December
respectively, as a percentage of average gross customer interest earning
balances for the three months to the period end, using a 4-point month end
average. 1Q25 NIM excluding Personal Loans would have been 17.9%.

3.      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 assets measured in
accordance with the UK Capital Requirements Regulation. If 1Q25 profits had
been verified the Tier 1 ratio would have increased to 19.0%.

4.      Key metrics for the three months ending 31 March 2024 have been
restated to reflect the impact of the Vehicle Finance Stage 3 receivables
review.

 

Enquiries

Analysts and shareholders

James Cranstoun, Head of Investor Relations

james.cranstoun@vanquis.com

+44 (0) 7766 937 406

 

Media

Scott Mowbray, Head of Group 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

 

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.

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