No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Vanquis Banking Group - formerly Provident Financial - tumbled on Thursday after it pushed back its targets for return on tangible equity again.
The company said it now expects a low single digit return on tangible equity in 2026, a low double digit return in 2027 and a mid-teens return in 2028. Vanquis had previously said it was expecting a low double-digit statutory ROTE for 2026. In addition, the company had already pushed back its target for mid-teens ROTE from FY26 to FY27.
In its results for the six months to the end of June, Vanquis said statutory pre-tax profit increased 44% to 8.9m, exceeding the group's full-year 2025 figure of 8.3m despite absorbing a significant increase in macroeconomic impairment provision.
Net interest income rose 8% from the same period a year earlier to 218.1m.
Chief executive Ian McLaughlin said: "Our transformation reached another important milestone. We successfully migrated all Credit Card customers to our new, award-winning, mobile app. This provides a stronger platform for customer engagement, improved operational efficiency and future scalability. The build of our technology transformation programme, Gateway, remains on track for completion in 2026.
"We continue to invest in a disciplined way, driving further automation and the expanded use of AI. We now expect to deliver approximately 30-35 million of transformation cost savings, ahead of our previous guidance of 23-28 million."
McLaughlin said that while new lending volumes remained resilient overall, with particularly strong growth in Second Charge Mortgages, an uncertain macroeconomic backdrop resulted in more cautious consumer behaviour. This led to lower-than-expected spending and utilisation from existing credit card customers.
"This meant a greater proportion of our growth came from new customer acquisition than anticipated, which reduced asset yields in the near term. While uncertain, for now we are assuming this spending caution persists and we therefore intend to continue to drive greater volume of high quality balance growth through new customer acquisition," he said.
"This will moderate returns in 2026 and 2027, but position the group for stronger profitability beyond the near term impact."
At 1435 BST, the shares were down 22% at 90p.
Broker Shore Capital, which previously had a 'buy' rating on the stock but has now put it 'under review', said a second postponement of its targets for ROTE "inevitably raises questions around execution credibility".
Shore said the key issue is returns rather than growth. "While group profitability improved, the increase was driven primarily by a step-up in Second Charge Mortgage earnings, helping offset higher central costs, with Credit Card and Vehicle Finance profits broadly unchanged year-on-year, albeit the later recovered from a H2 loss.
"The reduction in RoTE guidance reflects two factors. The smaller impact is higher unemployment assumptions, which have driven additional IFRS 9 provisioning. The larger impact is weaker-than-expected Credit Card spend. Importantly, customer spending is still growing and has outperformed the wider market, but not by as much as management had anticipated. As a result, growth is being driven increasingly through new customer acquisition.
"While these cohorts are performing well and offer attractive lifetime economics, they typically take 2-3 years to become profitable, creating a near-term drag on returns."
See latest RNS on Investegate