Provident Financial slumps the most on record

Provident Financial slumped the most on record as chief executive Peter Crook stepped down and the subprime lender forecast a full-year loss and scrapped its dividend.

The company now expects a pre-exceptional loss for the home credit business of between £80 million and £120 million, it said Tuesday in a statement. It predicted a £60 million profit as recently as June.

Manjit Wolstenholme will become executive chairman, according to the statement. The company’s plan to replace workers with technology backfired and the company issued a profit warning for its consumer credit division in June.

On Tuesday Provident scrapped its interim dividend and said a full-year dividend is also unlikely amid a deterioration in the trading performance of the home credit business and an investigation by the UK regulator into its Vanquis Bank unit.

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The shares were down by 57 per cent in London trading as of 8:35 a.m., valuing the Bradford, UK-based company at £1.12 billion. The stock has fallen 73 per cent this year. The company, built on a model that saw it send self-employed agents to the homes of Britain’s poor, selling loans and often acting as debt collectors, has been struggling since it decided to replace 4,500 self-employed agents with 2,500 iPad-carrying full-time “customer experience managers”.

Provident Financial “determined that the group must protect its capital base and financial flexibility”, according to the statement.

In Ireland, where it charges interest rates of as much as 187 per cent, the company said earlier this year that it had no plans to replace self-employed agents with employed staff.

Reuters