Release Date: March 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vanquis Banking Group PLC (FPLPF, Financial) achieved GBP64 million in cost savings by the end of 2024, surpassing their original target of GBP60 million.
- The company has a strong retail funding strategy, with retail funding comprising over 92% of total group funding.
- Vanquis Banking Group PLC (FPLPF) has successfully launched a second charge mortgage product, becoming a market leader in this segment.
- The Gateway Technology Transformation Program is on track, expected to deliver GBP23 million to GBP28 million in additional savings.
- The company has improved its Trustpilot scores, indicating strong customer satisfaction, with a score of 4.2 out of 5 for Vanquis and 4.4 out of 5 for Moneybarn.
Negative Points
- Vanquis Banking Group PLC (FPLPF) reported an adjusted loss before tax of GBP34.8 million for 2024.
- Complaint costs were a significant financial drag, with false fees tripling year-over-year to GBP25 million.
- The adjusted return on tangible equity for the year was negative 7%, reflecting a challenging financial performance.
- The company's net interest margin decreased by 20 basis points to 18.4% due to the growth of lower-margin second charge mortgages.
- The vehicle finance segment faced challenges, with gross receivables falling 28% year-on-year due to increased stage 3 charge-offs.
Q & A Highlights
Q: Can you contextualize the growth trajectory of Vanquis Banking Group, considering the market opportunity and the prioritization of second charge mortgages?
A: Dave Watts, CFO, explained that despite a challenging year, the market opportunity remains extensive, with up to 24 million UK customers struggling to access credit from mainstream lenders. Vanquis currently serves about 1.7 million of these customers. The growth in second charge mortgages is attractive due to its low impairment rates and the fact that 60% of customers use them for debt consolidation, aligning with Vanquis's core customer base.
Q: How will Vanquis deliver a compound growth of 14% in receivables, and what factors are influencing the shift in ROE targets?
A: Ian Mclaughlin, CEO, stated that the company has been prudent in ensuring growth is measured and profitable. The shift in ROE targets is influenced by the need to resolve issues from 2024, the IFRS 9 drag, and the transition to statutory reporting. The focus is on sustainable growth and optimizing the customer mix.
Q: Given the current share price and the absence of major uncertainties, is there a consideration for share buybacks?
A: Ian Mclaughlin emphasized that the focus is on deploying capital to serve customer needs and deliver sustainable value. While share buybacks are a consideration, the priority is to execute the growth plan and improve shareholder returns through business performance.
Q: What is the expected split of receivables by 2026, and why not capitalize on the vehicle finance market given the current conditions?
A: Ian Mclaughlin noted that while the mix of receivables will be dynamic, second charge mortgages have shown better-than-expected growth. Vehicle finance is also performing well, and the company is considering capital deployment based on the best returns, with technology improvements expected by mid-2026.
Q: How do you see the cost of complaints developing with the changes in FOS and CMC regulations?
A: Ian Mclaughlin expects the structural changes, including the GBP250 fee for CMCs, to significantly reduce unmerited complaints and associated costs. While there is some uncertainty, the changes are expected to lead to a better cost environment than in 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
