Provident hints at decline in borrowing

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The Independent Online

Provident Financial, the doorstep lender, signalled a further slowdown in the consumer borrowing market yesterday, revealing that new business levels in its UK home credit division had continued to fall over the second quarter of the year.

Provident Financial, the doorstep lender, signalled a further slowdown in the consumer borrowing market yesterday, revealing that new business levels in its UK home credit division had continued to fall over the second quarter of the year.

John van Kuffeler, the group chairman, gave the first indication of a decline at the company's annual meeting in May, announcing that first quarter advances were down 3 per cent on the same time last year.

In a trading statement issued yesterday, the group said that over the first five months, this fall had increased to about 5 per cent, conceding this would also be reflected in a fall in UK profits for the first half of 2004.

Robin Ashton, the chief executive, said the decline was due principally to an increase in competition in the UK small loans market. "That's the reason we've begun to expand internationally," he said.

Shares in the group fell by more than 1.5 per cent on the news - to 610.5p, more than 20 per cent below the three-year highs which were reached shortly after strong full-year results were announced in March.

After falling sharply in reaction to May's trading statement, the shares were hit again this month after the National Consumer Council called on the Office of Fair Trading to carry out a full investigation into the doorstep lending market, in which Provident is the biggest player.

The NCC said such services have a "negative impact on users", due principally to their high charges and the lack of choices available to low earners who use them. Mr Ashton said most of its customers were not just aware of the other options available to them, but also use alternative forms of credit. The OFT has until mid-September to decide whether to instigate a full investigation into the sector.

Aside from Provident Financial's UK home credit business the group said sales continue to look buoyant. Yes Car Creditsaw the number of new customers increase by 22 per cent over the first five months. Costs in the group's motor insurance division were also reported to have come down. Outside the UK, customer numbers were up by 28 per cent on the same period last year.

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