Provident Financial PLC (LON:PFG) was a big faller on Monday morning after media reports over the weekend suggested the troubled doorstep lender is in discussions with investors over a £500mln rescue rights issue
By 8.40am, the FTSE 250-listed firm’s shares were down 8.6% at 600.4p, with investors also nervous ahead of the group’s full-year results, due on Tuesday.
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In a note to clients, analysts at Liberum Capital repeated a ‘sell’ rating and 483p price target on Provident Financial.
Noting the report in the Telegraph newspaper, they said: “We have been expecting PFG to have to raise at least £235m, enough to cover the potential funding shortfall at the end of 2019, plus enough to cover the potential fine & redress relating to the ROP product on top of this.
“The timing is interesting in our view, since there has been no communication from the FCA on the investigation into the ROP product as yet.”
The analysts added: “We believe the discussion of a rights issue indicates that the company is expecting to pay a fine and compensation and likely a solution to a weakened balance sheet – we believe results on Tuesday will reveal poor balance sheet metrics.”
Traders also highlighted a report in The Times newspaper on Monday that said the finance head of Provident Financial’s troubled consumer credit division has left, citing an internal memo.
In August last year, Provident Financial warned its consumer credit division would sink to a pre-exceptional loss of between £80mln to £120mln in 2017, against previous forecasts for a £60mln profit as a result of the unsuccessful transition of its home credit sales force from part-time self-employed agents to full time employees.