Provident Financial (PFG)

Down
Share Price:
232.60p
Market Cap:
589.91m
Change Today:
-11.20p
Sector:
Financials

Canaccord downgrades Provident Financial to 'sell'

By Michele Maatouk

Date: Tuesday 02 Mar 2021

LONDON (ShareCast) - (Sharecast News) - Canaccord Genuity cut its stance on shares of doorstep lender Provident Financial on Tuesday to 'sell' from 'speculative buy' and reduced its price target to 264p from 290p as it highlighted caution regarding claims.
Canaccord said it was unusual that PFG had not issued a trading update in respect of FY20, with the results delayed until April. In the absence of clarity on the company's actual fourth-quarter performance, Canaccord said the target price cut was justified by a number of factors.

It pointed to downside risk to Vanquis Bank FY21 and FY22 forecasts. "The third ongoing UK national lockdown since mid-December is likely to have pushed out our expectation for a recovery in new customer bookings and average receivables balances," it said.

The broker also said growing claims problems at the consumer credit division (CCD) are likely to compound scale issues.

"It is unlikely that CCD will ever return to meaningful profitability, in our view," it said, adding that the outlook is further hampered by what appears to be a growing claims issue.

"We expect the Financial Ombudsman Service (FOS) data for Q4'20, to be released this month, to show that consumer complaints in the Home Credit sector (+174% Q/Q in Q3'20) and against CCD specifically (+85% H/H in H1'20) remain elevated.

"The uphold rate against CCD also shows a concerning trend, having increased from 38% in H1'18, to 47% in H1'19, to 74% in H1'20."

Canaccord said it's unclear at the moment what level of provisioning is required. It expects more detail on this concurrent with results, but at this stage it flags the "potential liability".

At 1300 GMT, the shares were down 4.9% at 272.40p.

Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are delayed by at least 15 minutes.

 

PFG Market Data

Currency UK Pounds
Price 232.60p
Change Today -11.20p
52 Week High 324.00p
52 Week Low 144.20p
Volume 568,427
Shares Issued 253.62m
Market Cap 589.91m

Performance Indicators

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What The Brokers Say

Strong Buy 5
Buy 0
Neutral 1
Sell 0
Strong Sell 1
Total 7
buy
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