Payday Loan Lender Non-Standard Finance Issues Profit Warning
18 Nov 2019
Approx Reading time: 3 minutes
- Payday loan lender Non-standard Finance announce a decline in operating profits
- NSF expects a decline in growth of medium-term loan book growth to between 10% and 15%
- NSF profit warning comes weeks after the collapse of payday lender QuickQuid
Payday loan lender, Non-Standard Finance shares, tumbled after the company cut its profits projections. Thus is the biggest payday loan lender that had emerged following the collapse of Wonga. The lender has warned of a decline of profits and other risks to the business as recession seems imminent.
Payday loan lender NSF warns of a drop in profits
Following the announcement, the company's shares dropped by 18%. The firm which runs under the George Banco, Everyday Loans and Loans at Home blamed one of its offices for the dismal performance. The payday loan company cited uninspiring performance from the Buckinghamshire offices for the drop in profits. The company now expects its operating profits to miss market projections and will be around 10% and 13%.
The news comes at the back of a failed attempt to acquire Provident Financial at the beginning of this year. NSF’s bid to acquire its larger rival backfired following backlash from shareholders. The failed deal could have cost the lender around £10 million in fees. The company is now looking at the consolidation of its guarantor division activities to Trowbridge.
NSF lowers its medium-term loan growth
The payday loan lender indicated that its delinquency rate in the loan books is currently stable. However, NSF is bracing itself for more defaults considering the economic outlook has been worse relative to any time since 2008. NSF has reduced its short-term loan book growth from 20% to between 10% and 15%. The outlook revisions are a result of the company preparing for an impending recession. Therefore this is a reflection of changes in the provisioning policy instead of the present market situation.
The company has chosen to increase the provisioning for loans that could go sour. The company cited uncertainty in the macroeconomic outlook as the reasons for the possibility of having a downside situation.
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There has been some exaggeration of growth targets, and therefore, a conservative provisioning policy indicates a realistic stand. Equally, the company has now reduced its growth prospects. It has warned that the volume of Loans at Home segment could decrease by 5%. Previously the company had expected a decrease in growth of between 2% and 5%.
Collapse of QuickQuid
The profit warning from NSF comes weeks after UK's largest payday loan lender QuickQuid collapsed. The collapse of the lender left over one million consumers in financial uncertainty. The lender went into administration, and in October, it stopped lending. Accountancy firm Grant Thornton has been appointed as the administrator of the lender. Last year another payday loan lender Wonga collapsed after an increase in compensation claims.
QuickQuid’s parent company chose to quite the UK market after it failed to reach an agreement with the ombudsman. The firm was facing several compensation claims and could not agree with the ombudsman on how to compensate them.