Vanquis Banking Group has revealed that it is involved in legal proceedings against a claims management company.
Back in March, shares in the lender fell off a cliff when it told the market it would have to book higher provisions due to mounting legal costs.
The Bradford-based bank’s profit warning was triggered by administration costs tied to a surge in third-party claims, mainly from a single complaints management company, relating to Vanquis’ credit card business.
Shares in the specialist lender cratered as much as 45 per cent after the warning, and later that month, it reported that it had swung to an annual loss of £4.4m. Its stock price is still down 55 per cent since the start of 2024.
The bank said in a trading update on Wednesday that the volume of “spurious complaints” from the single claims firm remained “unacceptably high” and that it was continuing legal proceedings against the company.
Vanquis Bank was among the most complained about firms to the financial ombudsman in the second half of last year, according to official figures, with 2,743 complaints.
Analysts at Numis pointed out in March that any Financial Ombudsman complaint, “no matter how spurious”, would result in a £750 bill for Vanquis.
Vanquis has since unveiled a new strategy to “reset” the business and return to “modest lending growth” from the start of the second quarter.
The bank said on Wednesday that its new customer acquisitions grew in line with expectations in the first three months of 2024.
However, its gross customer interest earning balances fell to £2.22bn from £2.35bn during the quarter.
Vanquis pinned the decline on “action taken at the end of 2023 to moderate unprofitable lending growth, as well as customers spending less in the current economic environment and paying down more debt than forecast”.
Its net interest margin (NIM), a measure of the difference between what banks pay out and receive in interest payments, ticked up to 19.3 per cent from 19 per cent during the period.
The increase differs from many of Vanquis’ larger rivals, which have seen their margins squeezed in recent months by intense competition and looming base rate cuts from the Bank of England. Vanquis said the rise in its NIM was mainly driven by repricing in its cards business at the end of last year.
Vanquis, previously known as Provident Financial, has faced a difficult few years after it withdrew its high-cost consumer credit arm, including its doorstep lending division, in 2021. It now specialises in credit cards and personal loans.
Chief executive Ian McLaughlin, who joined a lossmaking Vanquis last July, laid out plans in October to save around £60m by 2024 via measures including cutting the bank’s workforce by nearly a fifth, some 350 jobs.
McLaughlin said on Wednesday: “Since launching our new strategy on 27 March we have moved at pace from strategy definition to implementation of key initiatives. We still have challenges to address as we have previously described, but we are making good progress in building our customer proposition and risk management capabilities to meet growing customer needs.
“In parallel, we are improving operational efficiency and continuing our investment in technology. I am pleased with the way colleagues have embraced our new strategy and committed to realising the potential of our business.”