Barclays has downgraded accident-prone doorstep lender Provident Financial PLC (LON:PFG), fearing that more bad news could be on the way.
The shares plummeted from 1,745p to 589.5p on 22 August after it warned on profits for the second time in two months and parted company with chief executive Peter Crook.
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Since then, the shares have rallied to 795.72p “on no further good news”, according to Barclays, which wonders aloud whether this Friday's trading update could see confirmation of the old adage: bad news comes in threes.
“The Q3 trading update is on 13 Oct 2017. We are cautious on the shares given our lack of confidence for a turnaround of the Home Credit business and the unquantifiable size of potential FCA redress,”the bank said.
“We perceive further tail risks of PFG not being able to meet its Oct-19 debt obligation, breaching of debt covenants and the impact of IFRS9 accounting. These assumptions are not baked into our base case but we believe could have a meaningful impact on earnings and cost of funding,” it added.
READ: Provident Financial chief executive resigns as it cancels interim dividend and issues profit warning
The price target has been cut to 584p and the shares downgraded to 'underweight'.