Analysts say ‘Buy’ Vanquis shares after payday loan turnaround
Vanquis shares could finally be about to turn a corner, according to one group of City analysts.
The shares peaked at more than 2,600p in 2015, and have since fallen by more than 96 per cent as Vanquis has endured soaring complaints and regulatory backlash thanks to its sub-prime lending and payday loan market exposure.
But the embattled lender’s fortunes may have turned a corner, according to Panmure Liberum analysts, who have rated the stock ‘Buy’ and stated that there was “value to be had.”
The broker has slapped a price target of 100p on Vanquis shares, which were up over five per cent on Thursday to near 80p.
Vanquis said it had returned to profitability on Wednesday after a 6.7 per cent annual jump to £2bn in net receivables – the total money expected to be repaid to the company by its customers.
“The growth potential at Vanquis remains undimmed, underpinned by its leading market position in the underserved credit market where there is a significant supply-demand imbalance,” analysts Rae Maile, Ross Luckman and James Allen said.
They forecast pre-tax profit to “step up materially” by the end of 2026, driven by “strong loan book growth”.
‘Others’ may recognise Vanquis stock opportunity if investors don’t
Analysts said that, should the market “fail to appropriately recognise the opportunity and the progress made, others may well” indicate that, if investors don’t jump for the stock, Vanquis may be the subject of a strategic acquisition.
“It is crucial for Vanquis, now under a refreshed leadership team, to piece together a series of rather boring updates,” they said, after years of the bank “having surprised investors for all the wrong reasons”.
The group, formerly known as Provident Financial Group, faced scrutiny for its subsidiary Satsuma Loans’ short-term, high-cost credit offering and lending to consumers who could not afford to repay.
A High Court-approved scheme was implemented following backlash, which estimated that up to 30 per cent of the 4.2m customers who had borrowed from the group’s brands between April 2007 and December 2020 might have valid claims.
However, the Financial Conduct Authority (FCA) later slammed the scheme, saying it would provide significantly less compensation than customers were entitled to.
In 2018, Vanquis, then Provident, was fined £2m by the FCA for failing to adequately disclose charges on its repayment option plans, leading to a £169m compensation scheme for affected customers.
A fresh headache came in 2024, when Vanquis complaints costs rocketed 66 per cent to £47.4m and fees to the Financial Ombudsman Service increased to £24.8m.
The firm’s total complaints dwarfed its peers, with Vanquis leading the pack for grievances in the second half of 2024 at 17,614. Newday trailed behind at 8345 and Ford’s FCE bank came in third at 6530.
The spike was driven by a surge in complaints from the Claims Management Company (CMC).
The bank said in its statement on Wednesday: “Legal proceedings are ongoing against the CMC responsible for the highest volume of unmerited claims in recent years.”