Shareholders in Cattles could be wiped out after the sub-prime lender revealed it had breached its banking covenants and had suspended its finance director over accounting errors.
Cattles also admitted that it would make a big loss for 2008, just a week after predicting a pre-tax profit. The company will also have to restate its accounts for 2007.
The revelations are the latest bad news for the company, which has been turned down for a banking licence and has found under-reporting of bad debts at its main business, Welcome Financial Services.
James Corr, the finance director, has been suspended along with Ian Cummine, chief operating officer, and Adrian Cummings, head of compliance for Welcome's lending business. The decision follows the suspension of Welcome's three top managers last week.
Cattles' banks may now seek to swap their debt for equity in the company. The shares, which traded at £4 two years ago, fell 14 per cent to 2.1p.
Cattles said on 18 December that trading was in line with expectations for £174m of pre-tax profit last year.
James Hamilton, an analyst at Numis, said: "Something has happened to wipe hundreds of millions off the profit and loss account through no trading period at all.
"Why is the market value still £11m? It is worth zero. There is not an institutional buyer of this share at any price."
Mr Hamilton said the shares were probably being bought by individual investors hoping for a revival of the stock.
Cattles now runs the risk of being crippled by bad debts if its best collection agents leave and customers, who already have bad credit records, are left with no incentive to repay.
In January Cattles' shares fell sharply after the company failed in its attempt to win a banking licence to replace expensive bank funding with retail deposits.
Cattles' problems follow the near-collapse of London Scottish Bank, a rival sub-prime lender, in December.Reuse content