Provident Financial considers dishing out a bumper dividend

Bosses at are mulling over whether to dish out a bumper dividend to their investors amid an upturn in the group’s financial performance. 

The company, which axed its dividend at the height of the pandemic, said it was considering doling out 30 per cent of its profit as dividends if economic conditions continue to improve. 

The subprime lender said customer demand had picked up to pre-pandemic levels in the three months to the end of September.

Provident said that an analysis of its customer data indicated the end of furlough ‘is likely to have a lower impact on unemployment than previously thought.’ 

Customer spending rose 20 per cent from a year earlier and by 5 per cent compared with September 2019, the group said. 

Chief executive Malcolm Le May said: ‘The group’s trading performance during the third quarter improved significantly as a result of more favourable macroeconomic conditions reducing the impact of IFRS 9 accounting combined with customer demand for credit returning to pre-pandemic levels.

‘Subject to these improvements continuing on a similar trajectory until the end of the year, the board would consider declaring an ordinary dividend pay-out of approximately 30% of adjusted ongoing PBT1 in respect of FY’21.’

Analysts at Peel Hunt said: ‘The 3Q21 trading update from Provident Financial Group indicates higher loan demand, better than expected credit trends and enhanced dividend guidance. 

‘We view this update as positive both for profit estimates and the rating of the shares.We will update our views on valuation shortly.’

Shares in Provident Financial are currently up 1.07 per cent or 3.40p to 320.00p at present. A year ago the share price was 203.60p, marking an increase of around 56 per cent in the past year.

In August, Provident said its statutory losses swelled to £44.2million in the first six months of this year.

But, excluding its consumer credit division, the group’s adjusted profit jumped to £63.5million, up from £4.9million the year before.

Over four million customers of the lender can claim compensation after the High Court gave the green light to the group’s repayment plan in August.

Affected Provident customers who were sold unaffordable loans by the sub-prime lender will need to register via an online portal in order to kick off their compensation claims.

Applications for compensation must be made by 5pm on 28 February 2022.

The compensation scheme applies to borrowers who were sold unaffordable loans between 6 April 2007 and 17 December 2020 from one of Provident’s personal credit brands.

They are Provident, Satsuma payday loans, Greenwood, which was a doorstep lender that has been defunct since 2014, and Glo, which is a guarantor loan brand.

In March, Provident announced its Consumer Credit Division’s scheme of arrangement, and in May it announced the closure and managed wind down of the division.