Amigo pledges to fight ‘urban myths’ as regulatory pressure rises

Financial regulators threaten crackdown on high interest rate guarantor lending sector

Amigo’s revenues in the 12 months  to March 31st rose  28 per cent to £271 million, while pretax profits jumped 68 per cent to £111 million. Photograph: Leonhard Foeger

Amigo’s revenues in the 12 months to March 31st rose 28 per cent to £271 million, while pretax profits jumped 68 per cent to £111 million. Photograph: Leonhard Foeger

 

The chairman of Amigo Loans said the company would fight back against “urban myths” about its business after financial regulators threatened a crackdown on the guarantor lending sector which it dominates.

Amigo lends to people who struggle to borrow from mainstream banks by getting friends or family members to guarantee the loans. The sector has grown rapidly in recent years, with Amigo joining the FTSE 250 shortly after its initial public offering last year.

However, the Financial Conduct Authority has repeatedly raised concerns about the business in recent months, suggesting that many guarantors don’t fully understand the risk of the product, that too many of them end up paying part of the loan, and that interest rates – which in Amigo’s case are 49.9 per cent – may be too high.

Stephan Wilcke, Amigo chairman, said: “Arguably, Amigo being a public listed company has raised the profile of the guarantor loan product and fuelled some urban myths about us and our customers. In future we will work harder to dispel those myths and take the time to ensure our evolving stakeholder universe fully understands the service we offer.”

Pretax profit surge

Mr Wilcke’s comments came as Amigo reported its first set of full-year results since joining the stock exchange last year. Revenues in the 12 months to March 31st increased by 28 per cent to £271 million, while pretax profits jumped 68 per cent to £111 million.

The company also announced a total annual dividend of 9.32p, equivalent to half of its statutory profit and a higher payout rate than it outlined ahead of its IPO.

Mr Wilcke said: “I am pleased to report that the business has been able to deliver on our principal IPO commitments this year and propose a larger-than-expected full-year dividend of 9.32p due to our increased balance sheet flexibility. This was all delivered against a challenging external environment and much internal change.” – Copyright The Financial Times Limited 2019