Provident Financial (lon:pfg)
Provident – Massively Over Discounted?

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Provident Financial Share Price
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Title: Provident – Massively Over Discounted?
Company: PFG - Provident Financial
Share Price Then: 803p
Author: Ian Smith
Date: Wed 06 Sep 2017
Comments: Provident were recently hammered twice for two reasons, in July major issues with a new system for payment collection and new loan issuing, they moved from a self employed agent model to a managed employee model.

The FCA is unhappy about the Repayment Option Plan offered on the Vanquis Credit Card.

In August the loan collection and new loan issue was found to be much larger than thought and the share price tumbled to around 800p-900p, So it does sound like it is time to burn the share certificates for heating but I suspect that the market has massively over reacted.

Collection is down massively, from 90% to 57%, clearly this is a massive short term loss, but the re-payments are still due and eventually they will be collected. The reduction in new loans is an issue, but it is unclear how many of these would have been new customers and now many would have been effective roll overs.

The Repayment Option Plan was profitable, but unlike PPI there was an opt in process and as I understand it the card statement included its cost every month as a line item. The FCA’s primary objection seem to be the cost, not the concept so this along with the fact that cost was clearly identified may limit the scope of any compensation package.

I have seen suggestions that Morses, a similar business, will profit from Provident’s grief but I suspect that they will have to move to an employed model to conform to regulatory requirements in the near future.

Provident also have the advantage of being able to move people to their Vanquish Credit card, they also have a more normal loans division as well as specialised car finance.

It would be interesting to see what would happen if Vanquish was tweaked to produce weekly statements and most of the home loan customers offered one. Would the reps then need to visit new customers only?
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