Vanquis Bank fights legal battle against claims management firm in attempt to stem losses
Specialist lender Vanquis Banking Group is involved in legal proceedings against a claims management company that it partially blamed for a profit warning earlier this year.
In March, shares in the London-listed firm fell off a cliff when it told the market it would have to book higher provisions due to mounting costs.
The Bradford-based group said the update was partly triggered by administration expenses tied to a surge in third-party claims, mostly generated by a single complaints management company and predominantly linked to credit cards.
Shares in the lender cratered 50 per cent to their lowest price on record after the warning. Its stock price is still down 55 per cent since the start of 2024, having reported later in March that it swung to a loss of £4.4m last year.
The bank said in a trading update on Wednesday that the volume of “spurious complaints” from the single claims firm remained “unacceptably high” and that it was continuing legal proceedings against the company.
Vanquis Bank was among the most complained about firms to the UK’s financial ombudsman in the second half of last year, according to official figures, with 2,743 cases.
Analysts at Numis noted in March that any ombudsman complaint, “no matter how spurious”, would result in a £750 bill for Vanquis, before slashing their price target on the stock.
Vanquis has since unveiled a new strategy to “reset” the business and return to “modest lending growth” from the start of the second quarter.
The group said on Wednesday that its new customer acquisitions grew in line with expectations in the first three months of 2024.
However, its gross customer interest earning balances fell to £2.22bn from £2.35bn during the quarter.
Vanquis pinned the decline on action it took at the end of last year “to moderate unprofitable lending growth, as well as customers spending less in the current economic environment and paying down more debt than forecast”.
Its net interest margin – a measure of the difference between what banks pay out and receive in interest payments – ticked up to 19.3 per cent from 19 per cent during the period. The firm said the rise was mainly driven by repricing in its cards business at the end of last year.
Vanquis, previously known as Provident Financial, has faced a difficult few years after it withdrew its high-cost consumer credit arm, including its doorstep lending division, in 2021. It now specialises in credit cards and personal loans.
Chief executive Ian McLaughlin, who joined a lossmaking Vanquis last July, laid out plans in October to save around £60m by 2024 via measures including cutting the bank’s workforce by nearly a fifth, some 350 jobs.
McLaughlin said on Wednesday: “We still have challenges to address as we have previously described, but we are making good progress in building our customer proposition and risk management capabilities to meet growing customer needs.”
“In parallel, we are improving operational efficiency and continuing our investment in technology,” he added.