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Provident Financial unveils quarterly trading update with struggling home credit unit in focus

The day ahead includes quarterly trading updates from Provident Financial, Man Group and Ashmore Group
Provident Financial
Provident Financial is trying to turn around its business after two profit warnings

Provident Financial PLC (LON:PFG) publishes its third quarter trading update on Friday in the wake of a profit warning and the departure of its chief executive.

In August the company issued its second profit warning in two months, blaming a “rapid deterioration” in the trading performance of its home collected credit (HCC) business.

The company also said chief executive Peter Crook was stepping down and that it was cancelling its interim dividend to protect its capital base following the slump in trading and in light of a Financial Conduct Authority investigation into its Vanquis Bank over its repayment option plan (ROP).

In response, the group kicked off a review of its HCC performance with the aim of turning around the business.

Investors will be keen to see whether the company has had any progress with the review in the third quarter update.

Numis analyst, James Hamilton, expects Provident will update on the home credit business but believes it will be “too early for any substantial improvement in performance”.  

Still, he thinks HCC is likely to be “off the low point” for collections.

“We believe that evidencing the turn in collections combined with a clear plan for restoring the performance should be taken well by the market,” he said.

Analysts at Liberum said the home credit unit is “permanently damaged” and its car and van credit business, Moneybarn, has been lending “aggressively at the top of the cycle”.  

However, they see an improvement in collections performance in HCC in the third quarter, from the 57% reported in August. They estimate Vanquis and Moneybarn will be “in-line with expectations.”

“The greatest value is clearly in Vanquis, but we are genuinely concerned about underwriting quality,” Liberum said.

“Moreover, we believe the balance sheet needs strengthening and that is before accounting for a yet unquantifiable potential liability for ROP.”

Liberum reiterated a ‘sell’ rating and cut the target price to 483p from 487p.

Specialist emerging markets investment manager, Ashmore group PLC (LON:ASHM), also reports a quarterly trading update with analysts at Numis pencilling in assets under management (AuM) of US$61.9bn and net flows of US$1.0bn.

Sector peer Man Group PLC's (LON:EMG) quarterly trading statement is expected to reveal AuM of US$101.0bn, with quarterly net flows of US$2.2bn, according to Numis.

Announcements due:

Trading updates: Ashmore group PLC (LON:ASHM), Man Group PLC (LON:EMG), Provident Financial PLC (LON:PFG)

Economic data: US consumer price index, US retail sales

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