Andrew Bailey: Head of Financial Conduct Authority
The value of Provident Financial shares has fallen to a 22 year low, following reports it is attempting to raise £500 million to pay for the fallout from a mis-selling scandal and boost its balance sheet.
The lender will reveal its annual results tomorrow, at a time when investors are keen on receiving information on two separate probes by financial regulators.
One of the investigations revolves around an alleged mis-selling of a PPI-style product called repayment option plan.
Rebecca O’Keeffe, head of investment at Interactive Investor commenting on the expected results said: ‘Ahead of its results tomorrow, Provident Financial shares are spiralling lower.
‘Two separate investigations by regulators are likely to result in significant fines for the company, but today’s move follows weekend reports that it may be planning a huge rights issue to try and get the company back on track.’
The Financial Conduct Authority (FCA) investigation will focus on processes applied to customer affordability assessments for car finance and the treatment of consumers in financial difficulties.
There are concerns the lender which provides loans above the interest rates for those who struggle to secure mainstream credit, subprime loans, could receive fines in excess of more than £300 million.
Numis analyst James Hamilton said: ‘While we believe it is possible that Provident could secure a contingent capital facility from shareholders, if there is a capital raise we believe a firm outcome from the FCA is required so that the quantum of any customer redress can be known.’
Cazenove and Barclays are expected to be chief underwriters if the £500 million cash call goes ahead.
As part of efforts to shore up the business, Provident launched a new home credit model in July, with the aim of moving from self-employed door-to-door agents to full-time ‘customer experience managers’.
The company also revealed this month that Malcolm Le May had joined as chief executive following stints at Barclays and UBS.
Despite the groups adjustments its stock market value is two-thirds of what it was a year ago.