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 portfolio4. 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
balances1
|
£2,254.2m
|
£2,402.8m
|
£2,351.2m
|
|
Net interest
margin2
|
18.8%
|
18.6%
|
19.0%
|
|
Tier 1 ratio3
|
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
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.