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Sub-prime lender Provident Financial in crisis

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Provident Financial scrapped its interim dividend and said a full-year dividend is also unlikely amid a deterioration in the trading performance of the home credit business and an investigation by the Financial Conduct Authority into Vanquis Bank.

The company “determined that the group must protect its capital base and financial flexibility,” Provident said in the statement.

More follows

More follows indeed.

http://www.telegraph.co.uk/business/2017/08/22/provident-financial-shares-plunge-losses-deepen-boss-quits/

Quote

Provident Financial shares were in freefall this morning, falling 44 per cent in opening trades after the firm announced it had been hit by another profit warning.

And as business spirals downwards, the chief executive has quit with immediate effect.

Over £1.5bn has been wiped off the Neil Woodford-backed firm's market capitalisation in a matter of minutes.

The firm has been struggling to collect debts. It admitted this morning current collections performance is running at 57 per cent, compared with 90 per cent posted in 2016.

http://www.cityam.com/270642/provident-financial-woes-worsen-sub-prime-lender-warns

No need to worry, Mark Carney's been vigilant.

Edited by darkmarket

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3 minutes ago, darkmarket said:

I am taken aback, I thought door step money lenders were banned.

now I find out there's a blue chip FTSE company dong it....is that why it was banned ?

 

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4 minutes ago, darkmarket said:

 

Provident changed how their door to door team was paid and managed back in May see http://www.telegraph.co.uk/business/2017/07/25/provident-financial-profits-hit-painful-salesforce-change/ from July.. Other companies then poached most of the previously self employed workforce resulting in this unavoidable mess. I've been shorting them since May from the time I discovered this story...

 

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1 minute ago, TheCountOfNowhere said:

I've been in 2007 for a decade now.

QE just took a bit longer than expected not to work, what's a decade anyway.

You can relax in the certainty it's just Provident whose debt collections rate is crashing, everything is fine in all other financial institutions.

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8 minutes ago, darkmarket said:

QE just took a bit longer than expected not to work, what's a decade anyway.

You can relax in the certainty it's just Provident whose debt collections rate is crashing, everything is fine in all other financial institutions.

They're only people's lender of last resort.... Imagine the rest. 

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Nothing to see here. Naturally it is all 100% contained.

The rest of the economy is in top condition and everything is fine.

Edited by Errol

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3 minutes ago, Ash4781 said:

Are those collection rate changes sector wide ? Or is it a Provident only issue ?

We'll have to assume for now that it's limited to Provident, and that their risk management is completely unique.

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Most of this was due to poor managers who dont live in the real world.They used self employed collection agents who knew the customers very well.People didnt tend to bump them because they had known the agents years.Managers decided instead to kill this model,and replace with full time employed agents.These agents would cover more people etc.Of course once the old agents left/were sacked everyone decided to bump their debts.After all they werent letting down Jenny,Tom,Pauline anymore who had called for years.

What this shows though is what happens when people decide not to pay (or cant pay).Massive debt deflation.Im sure all the people who piled into Woodfords new income fund are pleased,it was the 4th biggest holding.He was a fantastic deflation manager and spotted that trend early,im not sure his funds are well placed now though.Lots of his holdings have huge debts.

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5 minutes ago, durhamborn said:

What this shows though is what happens when people decide not to pay (or cant pay).

The assumption that of all their debts, people will put their mortgage first seems reasonable but it leaves you in a very fragile situation, especially when so many households have such little margin for error.

That's interesting about debt collection by familiar faces too, all the evidence from online behaviour suggests these kind of social pressures are very influential, you could imagine them having been vastly undervalued due to a lack of supporting evidence. I'm not clear whether the IT failures were part of the collection rate collapse too.

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Just now, darkmarket said:

The assumption that of all their debts, people will put their mortgage first seems reasonable but it leaves you in a very fragile situation, especially when so many households have such little margin for error.

That's interesting about debt collection by familiar faces too, all the evidence from online behaviour suggests these kind of social pressures are very influential, you could imagine them having been vastly undervalued due to a lack of supporting evidence. I'm not clear whether the IT failures were part of the collection rate collapse too.

Exactly.When i was younger a lot of girlfriends families had the Provi.You tended to get one family member (usually the oldest) collect all the books and have them ready for the agent.The knew the agents well and they would put pressure on family members to pay up.Your not bumping Jenny.Plus they would say,can our Susan miss a week Jenny please,yes no problem etc.

Once Jenny goes and some 20 year old in a suit takes over Susan doesnt miss a week,she just bumps the debt.

Firms like the Provi have most of their capital out on loans and can never stop trading.If you stop giving out new loans people wont pay the old.What they did here was give people the green light to stop paying.

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1 hour ago, TheCountOfNowhere said:

I am taken aback, I thought door step money lenders were banned.

now I find out there's a blue chip FTSE company dong it....is that why it was banned ?

 

They are. Thats why the cant get customers to pay back.

Lending to people with no money is a stupid fkcing idea.

It doesnt natter if the apr is 2000% - youre not going to see it.

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2 minutes ago, durhamborn said:

Exactly.When i was younger a lot of girlfriends families had the Provi.You tended to get one family member (usually the oldest) collect all the books and have them ready for the agent.The knew the agents well and they would put pressure on family members to pay up.Your not bumping Jenny.Plus they would say,can our Susan miss a week Jenny please,yes no problem etc.

Once Jenny goes and some 20 year old in a suit takes over Susan doesnt miss a week,she just bumps the debt.

Firms like the Provi have most of their capital out on loans and can never stop trading.If you stop giving out new loans people wont pay the old.What they did here was give people the green light to stop paying.

Thats that bangladeshi award winning micro credit  strategy in a nushell. Grameen.

And they gave him  a nobel prize (medal) for it.

Dumbfcks.

Bet an econmist devised provis new business model.

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3 minutes ago, spyguy said:

They are. Thats why the cant get customers to pay back.

Lending to people with no money is a stupid fkcing idea.

It doesnt natter if the apr is 2000% - youre not going to see it.

 

isn't that our entire money system? perpetually expanding DEBTmoney which can never be repaid

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3 minutes ago, thewig said:

 

isn't that our entire money system? perpetually expanding DEBTmoney which can never be repaid

Sadly, yes.

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8 minutes ago, durhamborn said:

Firms like the Provi have most of their capital out on loans and can never stop trading.If you stop giving out new loans people wont pay the old.What they did here was give people the green light to stop paying.

The pressures causing Provident borrowers to default must be having an impact elsewhere, perhaps not enough to cause mass defaults like this without rates even rising, but a similar impact nevertheless.

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6 minutes ago, spyguy said:

They are. Thats why the cant get customers to pay back.

Lending to people with no money is a stupid fkcing idea.

It doesnt natter if the apr is 2000% - youre not going to see it.

Most of their customers are on the edge of Society and they are used to receiving benefits but not the discipline of commitments.

I think there had been a change in attitude in the underclass because the model survived the financial crisis. 

I know a Prov customer, she has a victim mentality now and not a cat in hell's chance of ever repaying anything.

A shopping trip to new New York courtesy of Prov and then f**k em. 

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1 minute ago, crashmonitor said:

Most of their customers are on the edge of Society and they are used to receiving benefits but not the discipline of commitments.

I think there had been a change in attitude in the underclass because the model survived the financial crisis. 

I know a Prov customer, she has a victim mentality now and not a cat in hell's chance of ever repaying anything.

A shopping trip to new New York courtesy of Prov and then f**k em. 

smart girl, if everyone took that attitude towards DEBT they'd have to think of a new control mechanism

 

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5 minutes ago, crashmonitor said:

Most of their customers are on the edge of Society and they are used to receiving benefits but not the discipline of commitments.

I think there had been a change in attitude in the underclass because the model survived the financial crisis. 

I know a Prov customer, she has a victim mentality now and not a cat in hell's chance of ever repaying anything.

A shopping trip to new New York courtesy of Prov and then f**k em. 

Almost every customer bumps them in the end,it was part of the model.Getting rid of the agents though has meant everyone bumps them at once.A business model with hundreds of thousands of individual customers is pretty hard to break in one go.Prov have managed it.There should be some kind of award.The fact Woodford had 20% of the business says he didnt spot the massive mistake they were making.

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1 hour ago, darkmarket said:

http://www.cityam.com/270642/provident-financial-woes-worsen-sub-prime-lender-warns

No need to worry, Mark Carney's been vigilant.

'The firm has been struggling to collect debts. It admitted this morning current collections performance is running at 57 per cent, compared with 90 per cent posted in 2016. '

 

Yikes.......

1 hour ago, Houdini said:

 

Provident changed how their door to door team was paid and managed back in May see http://www.telegraph.co.uk/business/2017/07/25/provident-financial-profits-hit-painful-salesforce-change/ from July.. Other companies then poached most of the previously self employed workforce resulting in this unavoidable mess. I've been shorting them since May from the time I discovered this story...

 

Nice spot.

1 hour ago, darkmarket said:

QE just took a bit longer than expected not to work, what's a decade anyway.

You can relax in the certainty it's just Provident whose debt collections rate is crashing, everything is fine in all other financial institutions.

I suspect it's a small iceberg they've hit.Our economy is unsinkable.

1 hour ago, Ash4781 said:

Are those collection rate changes sector wide ? Or is it a Provident only issue ?

Provident is a door step lender.Not many of those left.

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