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Provident Financial rallies strongly as City focuses on recovery potential

Shares in the consumer credit lender jumped 39% to 820p

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Right issue will raise £300mln net

Lender Provident Financial PLC (LON:PFG) rallied strongly as its two major shareholders backed a deep-discount right issue.

Shares in the consumer credit lender jumped 39% to 820p as both Invesco and Woodford Investment Management, which speak for 48% of the equity, agreed to back the £331mln funding.

READ: Provident Financial launches big rights issue after £172mln credit card bill

Investors also took heart from an end to the FCA investigation into credit card arm Vanquis, which has agreed to pay £172.1mln in settlements and fines related to its repayment option plan.

That payment comprised a £1.98mln fine imposed by the FCA and £168.8mln in compensation, which relates to interest to be paid back to customers of £11.9mln for 2014-16 insisted upon by the FCA and a £156.9mln voluntary payment for the period 2003-14.

Provident also quantified the likely cost of a separate investigation into dubious lending practices at car finance arm Moneybarn at £20mln.

Broker Liberum said a line had been conclusively drawn under the FCA's investigation into ROP.

The group aims to restore dividends with a nominal dividend for the 2018 financial year, before adopting a progressive policy from the 2019 financial year, added the broker, which removed its 'sell' stance and said 'fair value' was 704p adjusted for the rights issue.

Earlier, Malcolm Le May, chief executive, said: “The recovery in Provident Home Credit is on track with collections performance continuing to improve.”

Terms of the rights issue are 17 for 24 at 315p, with the money to boost Provident's capital buffer to 28.7% and also allow it to inject £50mln of equity into Vanquis Bank.

Quick facts: Provident Financial

Price: 473.4 GBX

LSE:PFG
Market: LSE
Market Cap: £12 m
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