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Non-Standard Finance shares plunge 26 per cent as FCA raises concerns

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The pay of FTSE 100 chief executives surged by 16 per cent in 2022, outpacing the struggling wages of most workers, according to a new report by UK think tank, the High Pay Centre (HPC).
The pay of FTSE 100 chief executives surged by 16 per cent in 2022, outpacing the struggling wages of most workers, according to a new report by UK think tank, the High Pay Centre (HPC).

Shares in sub-prime lender Non-Standard Finance (NSF) have plunged 26 per cent after the UK’s financial watchdog raised concerns about its guarantor loans division, causing the firm to put a share issue on hold.

Non-Standard Finance said in a statement today that the Financial Conduct Authority (FCA) had “raised a number of concerns regarding certain aspects of the operating procedures and processes at the [guarantor loans] division”.

The FCA has recently taken an interest in guarantor loans – unsecured lending which requires a “guarantor” to sign up to repay the debt should the original borrower default.

In March it carried out a multi-firm review of the sector. It also looked at Amigo, the largest provider of guarantor loans.

NSF did not disclose the exact nature of the FCA’s concerns with its guarantor division. But it said it is “now conducting an in-depth review”.

The lender added that it is “working closely with the FCA to clarify the scope and scale of its concerns and to develop a possible redress methodology”. It will “make a further announcement in due course”.

Non-Standard Finance equity issue put on hold

NSF’s shares tanked after it said the FCA’s concerns meant “a possible equity issue has been put on hold for the time being”. They were down 26.1 per cent at 3.9p approaching midday.

It is the latest blow for NFS, whose shares have plunged around 80 per cent this year. In June the lender warned that it may not be able to keep operating after the coronavirus crisis caused it to breach some of its debt agreements.

NSF said at the time that it may need an equity raise to bolster the balance sheet and support future loan book growth.

Yet the lender today stressed that its main shareholder Alchemy, which owns 30 per cent of the firm, remains supportive.

Shore Capital analyst Gary Greenwood said he still thought NSF would manage balance sheet growth to ensure it stays within its main lending covenant.

“However, we reflect that this announcement increases risk to the downside,” he added.