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Provident Financial tumbles on fresh FCA probe

Financial Conduct Authority adds to woes of lender held by Woodford and Barnett by launching investigation into its car financing arm.

 
Provident Financial tumbles on fresh FCA probe
 

Shares in Provident Financial (PFG) have tumbled after the troubled lender announced the Financial Conduct Authority (FCA) had launched a second investigation into its business.

The stock fell to the bottom of the FTSE 250, down 13.6% at 760p, after the company announced the FCA had launched an investigation into Moneybarn, its car and van financing arm.

That follows August's revelation that the FCA was probing the repayment option plan product sold by the lender's Vanquis bank, news that, coupled with a profit warning on its home credit division and the scrapping of its dividend, saw the shares plunge 70% in a single day.

The news has delivered another blow to the company's biggest backers, Neil Woodford and his successor at Invesco Perpetual, Mark Barnett.

Invesco Perpetual and Woodford Investment Management own more than 40% of the company's shares between them.

Provident Financial said the FCA investigation related to 'the processes applied to customer affordability assessments for vehicle finance and the treatment of customers in financial difficulties'.

Shore Capital analyst Gary Greenwood downgraded the stock to 'hold', from 'buy', on the news.

'For some companies, it never rains but pours and this seems to be the case for Provident at present,' he said.

Greenwood pointed to the FCA investigations into Moneybarn and the repayment option plan, the badly handled restructuring of its home credit division and vacancies in its senior management team following the resignation of chief executive Peter Crook and the death of executive chairman Manjit Wolstenholme.

'There is now simply too much uncertainty to justify us maintaining a positive stance on the shares,' he said.

Liberum analyst Portia Patel said the news reinforced her 'sell' stance on the shares.

'While Moneybarn is only a small part of Provident's business and therefore not critical to the overall financial health of the group, today's news does add credence to our view that we are right to be concerned about underwriting standards across the business, particularly at Vanquis,' she said.

'We previously flagged our concern that Moneybarn has been lending aggressively at the top of the cycle which has been evident in rapidly rising impairment rates within the business,' she added.

'Separately, the FCA continues to investigate Vanquis's repayment option plan product and we see no evidence as yet to change our view that the home credit business has been permanently damaged. We remain convinced that the balance sheet needs strengthening and that is before accounting for a yet unquantifiable potential liability for the repayment option plan.'

5 comments so far. Why not have your say?

richard tomkin

Dec 05, 2017 at 17:26

More like Moneyburn,it seems.

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Philip Pound

Dec 05, 2017 at 19:39

Good to see that the FCA is probing bad practice in the financial services sector. Still struggling to understand why PROOF of AEGON compliance breaches and bullying of staff who reported breaches and bullying to AEGON has been IGNORED by the FCA. Is it because the FCA Practitioner Panel Member Adrian Grace is AEGON UK CEO and the FCA has proof of his condoning the bullying and of having executive authority of firms involved in compliance breaches? Or is because the Approved Persons running those AEGON firms were appointed by the FCA when the people at the FCA who appointed them already knew of the involvement of those people in financial crimes under the FSA rules?

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Dibbs

Dec 05, 2017 at 20:03

I had to laugh that despite all the negative points the Shore Capital analyst mentions he still gives a hold rating and not a sell! I sometimes wonder how bad things need to be in order for some brokers to adopt a sell stance.

Shore Capital analyst Gary Greenwood downgraded the stock to 'hold', from 'buy', on the news.

'For some companies, it never rains but pours and this seems to be the case for Provident at present,' he said.

Greenwood pointed to the FCA investigations into Moneybarn and the repayment option plan, the badly handled restructuring of its home credit division and vacancies in its senior management team following the resignation of chief executive Peter Crook and the death of executive chairman Manjit Wolstenholme.

'There is now simply too much uncertainty to justify us maintaining a positive stance on the shares,' he said.

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Philip Pound

Dec 05, 2017 at 20:09

Resignation of Peter Crook who had also held the position of FCA Practitioner Panel Member.

A pattern emerges. Adrian Grace was a Director of the AEGON owned Scottish Equitable when it was fined by the FSA for NINE years wrongdoing and made to make a customer redress of SIXTY MILLION POUNDS.

Yet the FCA made Adrian Grace an FCA Practitioner Panel Member to "advise" the FCA. You could not make it up!!!!!!

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Tony Airey

Dec 05, 2017 at 22:16

@Dibbs Excvellent use of cut and paste. Sadly, limited new insight.

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