Vanquis Banking slumps on loss

Vanquis Banking Group (LON: VANQ) has been hit by higher costs and a reduced interest rate margin. The shares are the largest fallers on the Main Market with a decline of 32.9% to 121.7p.

Vanquis Banking reported an underlying loss of £5.5m in the first half, compared with a profit of £54.3m, according to Shore Capital. The net interest margin fell from 21% to 18%, while the impairment charge increased from £38.5m to £85.6m. The interim dividend has been maintained at 5p/share.

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Net receivables increased by 11% over the six-month period and are 26% higher than one year ago. The quality of the loan book appears to be improving and management is likely to be cautious due to the economic uncertainty, which will slow the rate of growth.

Shore Capital has put its forecasts under review, but it expects to cut its 2023 pre-tax profit forecast from £80.8m to £45m, and Peel Hunt is yet to update its estimates.

The estimated asset value of Vanquis Banking is around 179p, so the shares are trading at a near-one-third discount to this. The bank is in a transitional phase and is yet to see the benefit of the move to being a mid-cost credit provider.

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