November 15, 2019 / 7:34 AM / 25 days ago

NSF shares slide to record low after profit warning

(Reuters) - Non-Standard Finance (NSF.L) on Friday warned that annual profit would miss market expectations and downgraded its loan book growth targets, highlighting the lender’s struggles in going solo after its failed bid for Provident Financial.

NSF shares, which have plunged 50% this year due to the failed takeover attempt and its impact on the company’s half-year results, slumped 17.3% to their lowest on record at 27 pence.

The UK subprime lender said its trading had been softer than expected in the three months to September, with lower volumes in guarantor loans, and that the UK economic outlook is more uncertain than at any point in the last decade.

NSF now expects its normalised operating profit for 2019 to be 10%-13% lower than market expectations, though still higher than last year.

It also lowered its medium-term loan book growth outlook for branch-based lending to 10%-15% from 20%.

Chief Executive John van Kuffeler told Reuters the growth target revisions were the result of NSF’s preparation for any future recession, and reflect changes to provisioning policy rather than current market conditions.

As Brexit looms, companies as well as consumers have been cautious on taking out loans or committing to investments.

“We have eight years of economic growth. The average economic cycle rarely exceeds 10 years of economic growth,” Kuffeler said.

“It is important to think when the next downturn (or)recession is going to come along, and the law of averages would dictate that it is possibly (in) a couple of years or sooner.”

A global slowdown has hit a number of key economies, with Hong Kong slipping into recession and Germany narrowly avoiding the same outcome. The Bank of England recently softened monetary policy, with two of its bankers voting for an interest rate cut.

NSF, which dropped an unsolicited 1.3 billion pound ($1.66 billion) bid for larger rival Provident in June, also cut the forecast loan book growth in its home credit business to between -5% and +5% in the medium term from a 2%-5% rise previously.

Kuffeler said there has been no increase in loans in default or close to being in default.

“Growth targets have looked overly ambitious for some time and a more conservative provisioning policy signals a more realistic stance,” Peel Hunt analysts wrote.

(Graphic: nsf link: here)

Reporting by Muvija M in Bengaluru; Editing by Shailesh Kuber, Sherry Jacob-Phillips and Jan Harvey

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