Shares in specialist lender S & U Plc (LON:SUS) jumped higher at the opening bell this morning after it told investors that its Advantage motor finance subsidiary is trading at “record levels”.
New loan transactions are up by 20% year-on-year, while monthly collections from its 49,000 customers hit an all-time high of £10mln in July – a 27% increase on the same month in 2016.
READ: S & U has driven higher over the past month as lender’s motor finance arm goes from strength to strength
Importantly, S&U said that debt quality continues to be good.
Recent reports of stagnating wage growth and a slowing economy had led to worries about higher default rates in the car finance market. This has not been the case for the Birmingham-based group which has seen a steady increase in the number of “quality applications” it receives.
Advantage is not involved in the personal contract purchase (PCP) market which has recently come under public scrutiny, the company added.
It said any deterioration in the PCP market and knock-on effect on residual car values would only have a “marginal impact” on S&U's business as Advantage’s average loan size is just £6,200.
The firm's Aspen Bridging unit is “proceeding cautiously” as it establishes itself in the bridging market, while it is also gaining traction in attracting “good quality deals”.
In terms of funding, S&U said committed medium-term funding facilities have been increased to £95mln since the end of the last financial year (31 January) which should give it “sufficient headroom” for the anticipated growth.
“S&U's performance and prospects remain healthy despite the current sentiment regarding the British consumer and motor finance sector,” said chairman Anthony Coombs.
“Our robust and well established under-writing processes and impeccable 17 year track record at Advantage position us to trade well through any foreseeable macro-economic weakness, whilst allowing us to take advantage of the clear opportunities for steady and sustainable growth which we see at present.”
Shares gained 2.5% in early deals to £19.27.