Specialist lender S&U fired another salvo at the Financial Conduct Authority today as it blamed regulatory pressure for the “uninspiring performance” of its motor finance business in the first six months of the year.
Pretax profit across the London-listed firm slumped by nearly half to £12.8m for the six months to 31 July, down from £21.4m a year prior.
S&U warned last month that its half-year profit was expected to come in at around £12.8m, below previous forecasts. The firm added that its full-year earnings would also undershoot market expectations.
The 86-year-old lender said on Tuesday that its interim results were dragged down by its motor finance arm, Advantage, which reported a sharp fall in profit from £19.1m to £9.4m.
Its Aspen arm, a bridging loan business, reported a profit of £3.4m, up from £2.4m last year.
Advantage has been roiled by the Financial Conduct Authority’s wide-ranging probe into motor finance firms.
The watchdog has warned companies to hold cash in reserve to settle what is expected to be a hefty compensation bill over historic complaints around the sector.
Since the watchdog announced its probe in January, shares in S&U have slumped around 22 per cent.
S&U criticised FCA’s focus on its division today, saying it has “significantly constrained Advantage’s ability to interact with and manage its traditional customers, with whom it has happily worked for the past 25 years.”
“Happily, patient explanation, better documentation and retraining have now produced a more consistent and stable balance between the FCA’s requirements for customer protection and the commercial risk and reward of supplying motor finance,” said chairman, Anthony Coombs, the former Tory MP, in a statement.
“Recent emphasis by the Chancellor on the importance of promoting a competitive financial services market and supporting financial inclusion, along with an upcoming House of Lords select committee inquiry on the topic, provide grounds for optimism.”
In recent months, S&U has called on the new government to shake up the regulatory regime and bemoaned restrictions on its collections capabilities after the Financial Conduct Authority (FCA) hit it with a section 166 notice.
The notice requires S&U to produce a report by a so-called skilled person tied to the regulator’s Consumer Duty regime and sector-wide Borrowers in Financial Difficulty review.
S&U has previously said that it is not exposed to the FCA’s separate review into discretionary commission arrangements on car loans, which analysts have estimated could cost the sector up to £16bn in compensation fees.