Provident Financial plc Provident Financial plc Capital Markets Day Capital Markets Day 7 November 2019 We help put people on a path to a better everyday life 1
Provident Financial plc Capital Markets Day Welcome • CEO since Feb-18 • Board member since ’14 • CFO since Nov-18 • Previously Head of • Previously CFO of European Just Group plc Investment Banking at UBS Malcolm Le May Simon Thomas • Vanquis Bank • Moneybarn MD • CCD MD since MD since Apr- since Jan-17 Sep-17 19 • Previously • Previously MD • Previously CEO Moneybarn of 118118 of Shop Direct Commercial Money, Amigo FS and Director and CCD Sainsburys Bank Neil Chandler Shamus Hodgson Chris Gillespie 2
Provident Financial plc Capital Markets Day Today’s presentation Timi ming Session on Present enter er 1.30-1:55 Marketplace and strategy Malcolm Le May 1:55-2.35 Vanquis Bank Neil Chandler 2.35-3.00 Moneybarn Shamus Hodgson 3.00-3.20 Coffee break 3.20-4.00 CCD Chris Gillespie 4.00-4.15 Funding and capital Simon Thomas 4.15-4.30 Investment case Malcolm Le May 3
Provident Financial plc Provident Financial plc Capital Markets Day Marketplace and strategy Malcolm Le May – Chief Executive Officer 4
Provident Financial plc Capital Markets Day Marketplace and strategy Executive summary Who we • Specialist lender for the 1 in 5 UK adults not well served by the mainstream are • Market leader with 2.4m customers across the group • Resilient customers and businesses with counter cyclical opportunity Current • Successfully managing through tougher regulation position • New Blueprint supports sustainable market leadership • Q3 trading in line with internal plans • Substantial opportunities to take the group forward: – Markets, products and digital – Costs, funding and capital Growth ambitions • Clear strategic focus to deliver our “Vision for the Future” • Medium term direction to evolve Vanquis Bank to become a broader bank for the underserved • Group medium term targets: – Receivables growth 5-10% p.a. to c.£3bn – Cost income ratio 38% Financial (Current: £2.1bn) (2018: 43%) targets – ROE 20-25% 1 – Dividend cover ≥ 1.4x (Current: c.18%) (2018: 4.7x) 1 Based on TCR of 25.5% 5
Provident Financial plc Capital Markets Day Marketplace and strategy Putting people on a path to a better everyday life through our market leading businesses Credit cards and personal loans Home credit loans c.1.8m customers 1 c.0.4m customers 1 c.£1,425m receivables 1 c.£190m receivables 1 • Providing financial inclusion for over 135 years • Responsible lender to consumers whose needs are not well served by mainstream lenders • Tailored business models for our customer segments Secured vehicle finance Digital loans c.0.1m customers 1 c.0.1m customers 1 c.£490m receivables 1 c.£45m receivables 1 1 At 30 Sep-19 6
Provident Financial plc Capital Markets Day Marketplace and strategy Specialist lender for the 1 in 5 UK adults not well served by the mainstream Consumers may not be well served by the Significant opportunity to grow remains mainstream for a number of reasons Experienced a signi gnificant nt life event nt e.g. 1.5-2.0m divorce, loss of a job, etc. movement p.a. New to credit in the UK and therefore New have little or no credit history 10-12m adults Looking to build or rebui uild their credit edit outside mainstream rating lenders Managing everyday life on low, , irregul gular ar or aver erage age income mes with no PFG has 2.4m savings customers Have var ariab able income mes e.g. self- 41-43m adults served by employed, a number of part time jobs the mainstream Value ue a more tailor ored ed prod oduc uct and d servic vice Source: PFG analysis of TransUnion data, Oct-16 and Oct-19 7
Provident Financial plc Capital Markets Day Marketplace and strategy Our customers’ typical characteristics Inco come sour ource Not working / benefits / part Full time salaried / 15-20% self- time and casual employed Income me leve vels Below national average (£10-15k) Around national average (£20-30k) Hous using ng Rented accommodation / social housing Renters / c.20% mortgages Typical al age 25-54 years 25-35 years 35-45 years Bank nk account unt >80% 100% 100% 100% Saving avings Limited or no Some savings for specific goals savings 8
Provident Financial plc Capital Markets Day Marketplace and strategy Our customers’ core needs Our customers tell us what they want from us: I need someon one to say ay yes, , Access and acceptance I need to trus ust you and give e me credit I need my repay ayme ments nts to be It’s the cost per month / week Affordability manage nageab able and affordab able that t is importan tant to me Recogni nise e that at my I need to not feel judge ged or Empathy and flexibility circums umstanc tances es can an change hange patr troni nised ed I need dealing ng with th you u to be Ease and convenience I need simpl mplicity ty quick and easy I need to improve e my credit edit I need the cost t of credit t to Reward score e (build and re-bui uild) reduc uce e ove ver time 9
Provident Financial plc Capital Markets Day Marketplace and strategy Our customers (video) 10
Provident Financial plc Capital Markets Day Marketplace and strategy Resilient customers and business models with counter cyclical opportunity Used to living month to month, on tight budgets and managing • financial bumps along the way, even during economic growth Lower levels of indebtedness versus prime customers (typically not • mortgaged) PFG’s customers More accustomed to job changes or have multiple jobs • Core competencies mean we are well placed should mainstream • lenders tighten credit underwriting and more customers flow into our market Capabilities stronger than they were in 2008 • We have several levers to quickly tighten underwriting if necessary and • protection from strong risk-adjusted margins 11
Provident Financial plc Capital Markets Day Marketplace and strategy Highly regulated landscape with significant ongoing change GDPR (May-18) 18) EU EU PSDI DII (Stage aged to Mar-21) 21) Living ing wage ge and pensi sions ns auto enrolment nt rates (Apr-19) 19) Breathi hing ng space ce (estim imated 2021) 1) UK Gove vernm rnment Gam ambling ling comm mmis issio sion n HMRC C revie iew w of self lf- cons nsult ultatio ion n (pre Apr-20) 20) emplo loyed status us of agent nts SMCR (Dec-19) 19) CCMS MS remed edies ies (e.g. .g. High gh cost st credit it review (CP persi sisten ent debt Q1-20) 20) 18/43 43) Review iew of credit itworthin hiness s Minim imum um payment Review iew of motor r financ nce and lending ing proces cesse ses in FCA / PRA de-anc de ncho horing ring cons nsult ultatio ion n market rket (Mar-19) 19) high h cost st short rt term credit it (Date TBC) (Date e TBC) Duty of care cons nsult ultatio ion n (TBC) Affordability lity guidanc idance (PS18 18/19 /19) ICAA AAP / ILAA AAP CBI Poss ssible ible Irish ish rate cap bill FOS Cust stomer r compla laint ints PFG is working closely with our regulators and successfully managing through increased regulation and the associated business impacts 12
Provident Financial plc Capital Markets Day Marketplace and strategy Our new Blueprint provides sustainable long term direction, customer centricity and unifies colleagues New Blueprint – Springboard for change Increased focus on more sustainable • Purpose: refreshed to unify and models give long term direction • Strategic drivers: critical pillars Increased customer • Behaviours: embedding an centricity improved culture Supported by: • Training and development • Performance management Unifying • KPI measurement colleagues Ensuring sustainable leadership in our sector 13
Provident Financial plc Capital Markets Day Marketplace and strategy Significant opportunities to take the group forward Market and product 1 Growing markets and / or growing market share 2 Expanding product range, distribution and digital • Digital personal loans 3 Moving into other non-mainstream markets • Near prime motor finance Costs, funding and capital 4 Costs, funding and capital opportunities 14
Provident Financial plc Capital Markets Day Marketplace and strategy Medium term – Evolve Vanquis Bank to become a broader bank for the underserved Future bank = Vanquis Bank + Moneybarn Product offering: • Revolving credit (Vanquis cards) • Secured finance (Moneybarn) • Loans (Vanquis loans) Funded through: • Financial Fitness • Retail deposits (fixed term and instant access) • Helping customers save • Securitisation Product offering: CCD • Provident: – Home credit – Provident Direct Funded through: • Satsuma: • RCF – High cost short term credit • Wholesale – Personal loans 15
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