Payday Lender Non-Standard Finance Warns of Profits | Payday loan
One of the largest payday-style lenders to emerge after Wonga’s demise has gotten itself into trouble, warning the stock market of falling earnings and the risks to business of a possible recession.
Shares in non-Standard Finance, which operates under the George Banco, Everyday Loans and Loans at Home brands – and charges interest rates of up to 732% – fell 18% after the profit warning.
NSF added that its chief financial officer, Nick Teunon, will step down early next year.
NSF was a former pick of ailing fund manager Neil Woodford, who at one point held 25% of the shares. The profit warning comes eight months after NSF did a bold offer, backed by Woodford, for its much larger rival Provident Financial. The offer was abandoned in June after a revolt by other shareholders, with the failed transaction costing NSF approximately £ 10 million in fees.
The NSF said the rate of “defaults” on its loan book – the number of borrowers who have defaulted on payments – has remained broadly stable, but is preparing for many more defaults, warning that the economic outlook is worse than that ever before in the last decade.
She has decided to dramatically increase her provision for loans that may turn sour. A message to the stock exchange said: “Due to the increasingly uncertain macroeconomic outlook [and] Due to the negative impact of previous downturns on performance, the Management Board expects an increase in the probability weighting of a stress or downward scenario.
“After the probability weighting was increased from 10% at the beginning of the year in 2018, the Management Board now expects the quota to be increased to 50%.”
In addition, the outlook for future growth has been revised downwards. She warned that the volume in her doorstep Loans at Home could shrink by as much as 5%, compared to previous projections of 2% to 5% per year.
Overall, 2019 earnings will be 10-13% below the current consensus of analyst projections.
NSF’s profit warning comes just weeks after Collapse of QuickQuid, the UK’s largest payday lender, with more than a million customers facing financial uncertainty.
CashEuroNet UK, which operated the QuickQuid and On Stride brands, stopped lending in October after Grant Thornton, the accounting firm, was appointed its administrator. The deal failed a year later Wonga collapsed after an increase in customer claims for damages.
Enova, the Chicago-based owner of CashEuroNet UK, decided to leave the UK after failing to reach an agreement with the UK Finance Ombudsman on how many clients it should settle for past loans.
In early November, CashEuroNet agreed with the Financial Conduct Authority to provide appeals worth £ 1.7 million to nearly 4,000 customers.