Bottom Line: Providential markets

THE MONEY machine that is Provident Financial continues to surprise with its momentum. Pretax profits were up 40 per cent to pounds 30.7m in the six months to June, compared with a year earlier. John van Kuffeler, the chief executive, virtually promised an 18.5p dividend for the year, compared with 16p last year - by saying he hoped to restore the one-third, two-third split between the interim and the final - and the shares rose 18p to 541p.

Provident lends a few hundred pounds at a time to those who do not have easy access to bank and building society credit. The APRs - 100 per cent or more for typical customers - reflect the fact that collection is weekly and door-to- door, using an army of agents.

Provident has been cutting its own costs and reducing borrowings. Collecting and other costs dominate the arithmetic, so loan rates are pretty insensitive to base rates. As this is an expanding market with relatively low bad debts, there is no reason to expect any early end to the growth.

Provident has sold peripheral businesses to focus entirely on credit and its other line, motor insurance, where it has another band of customers who are less price-sensitive than some. This covers women drivers, second cars and third-party cover for older vehicles.

Specialist motor insurance rates may not be immune to the price war in the industry, but that is no reason to spurn the shares.