Provident lifted by rush to plastic in loans freeze

Cash-strapped consumers found solace in Provident Financial’s credit cards during the first half of the year as mainstream lenders continued to freeze them out.

The subprime lender saw its pre-tax profits jump 25% to £90.1 million as the amount of people using its cards rose 17% to just under 1.2 million. Profits in its traditional doorstep lending business were also up after stripping out costs.

“It’s difficult to operate without a credit card and lots of people are being rejected by banks,” said Peter Crook, chief executive.

“Our typical customer has an average income but may have had difficulties with credit in the past or no credit history. We have maintained tight credit standards, though, even as demand continues to grow.”

Provident geared up for an assault on the payday lending market through its Satsuma loans business, which it reckons will be an antidote to payday loans, despite offering an annualised rate of interest of 792%. Since its launch in November, it has attracted 11,000 customers.

Crook added: “The online loans market, in which payday lending is the most significant participant at present, is estimated to be some four times the size of the home credit market and is growing as customer preferences change.

“Demand for the product is strong and the continued dislocation caused by the regulatory changes to the payday loans market provides an excellent opportunity to develop a sustainable business with a strong market position.”