Provident Financial, the door-to-door credit and insurance company, yesterday unveiled a modest increase in bad debts as a proportion of loans made.
The company, which specialises in higher risk lending, said bad debts as a percentage of credit issued jumped to 9.7 per cent from 9.2 per cent at its home credit business, which offers customers with poor credit history or low incomes loans of a few hundred pounds. Provident's shares slipped 7p to 638p.
Motor insurance, another division, also struggled, with policyholders falling 21 per cent since last June as a result of Provident refusing to cut prices in line with the rest of the industry. Pre-tax profits from the division fell £3.3m to £18m.
The company said pricing conditions remained "competitive" and that average premiums were "flat". But at the same time the costs of claims have risen by 6 to 7 per cent a year.
The company said it was not concerned by the rise in bad debts, and denied it was a sign of tougher economic conditions which could hit its business in the coming months.
Provident's profits before tax and exceptional items increased 10 per cent to £82m in the six months to 30 June. It boosted customer numbers in its door-to-door loans business by 2 per cent to 1.6 million, against a backdrop of intense competition in the "sub-prime" loans sector.
The company expanded last year by buying a business to finance car purchase, and has set up loans businesses in Poland, Hungary and the Czech Republic. It said it would trial a new business in Mexico this year.
John van Kuffeler, chairman of Provident, said: "Provident Financial is increasingly becoming an established international business with a broadening portfolio of popular products that meets the needs of over three million customers."
Provident Financial has dipped a toe into the competitive arena of UK credit cards, rolling out Vanquis Bank, its brand in the market, to a few thousand customers so far.
Lending to low-income customers or people with unusual income streams, such as the self-employed, has become a boom business in recent years as firms struggled to find growth in the saturated UK high street banking industry. On average, customers who borrow £100 from Provident would have to pay back about £165.Reuse content